A Comparative Study on the Impact of Revised SORP 2 on British and Irish Charities

Charities constitute an important sector in the economies of Britain and Ireland. However, despite their economic importance, charity external financial reporting has been characterised by a diversity of accounting practice and a lack of standardisation. Over the last 20 years an attempt has been made to improve this situation by the publication of a Statement of Recommended Practice (SORP) for charities in 1988 and its revision in 1995. It is argued that inconsistencies in the financial statements of charities and the adoption of dubious accounting practices make it difficult for users of charity accounts to understand (and therefore use) the information provided. Previous studies have mainly looked at the impact of the original SORP (1988) on large charities in Britain. Little is known with respect to the impact on Irish charities. This paper presents the results of a comparative analysis of over 200 financial statements of Irish and British charities with respect to the recommendations contained in the revised SORP (1995). The results provide evidence that the accounts of Irish charities are considerably less compliant with the recommendations made in the revised SORP than their British counterparts. Possible reasons for this are discussed.