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Cash or accrual: What basis for small and medium-sized charities' accounting?

Third Sector Review
Volume 20 Issue 2 (Dec 2014)

Abstract: Charities regulators and standard setters mainly focus on large entities and the needs of sophisticated preparers and users; thus, they mandate accrual accounting. Regulators allow smaller charities to use cash-based reporting, as, despite its disadvantages, the alternative (accrual-based reporting) can be costly and consume smaller charities' few resources. Nevertheless, all charities receive tax exemptions, making them financially accountable to government; their other stakeholders also use financial reports to assess accountability and to make decisions about providing further resources. Should regulatory agencies require accrual-based reporting for all charities, or only for some? This research examines New Zealand charities' financial reporting practices and evaluates the drivers for cash and accrual reporting. The research finds that the absolute size of charities is not the only driver to charities reporting on a cash or accrual basis, but that resource dependency (especially on goods and services and on rental) and the assistance of qualified accountants are also factors.

To cite this article: Cordery, Carolyn J and Sim, Dalice. Cash or accrual: What basis for small and medium-sized charities' accounting? [online]. Third Sector Review, Vol. 20, No. 2, Dec 2014: 79-105. Availability: <http://search.informit.com.au/documentSummary;dn=956719725392483;res=IELAPA> ISSN: 1323-9163. [cited 25 Apr 17].

Personal Author: Cordery, Carolyn J; Sim, Dalice; Source: Third Sector Review, Vol. 20, No. 2, Dec 2014: 79-105 DOI: Document Type: Journal Article ISSN: 1323-9163 Subject: Charities--Accounting--Standards; Nonprofit organizations--Accounting; Research--Methodology; Charities--Philosophy; Peer Reviewed: Yes

Database: APAFT