Why do you never find what you’re looking for in financial statements?
Eric M. Gosselin, MMCCU, Research Associate, CEARC
This blog is inspired by a Maureen McCulloch article which you can read here: https://smu.ca/webfiles/10.36830-IJCAM.20191_McCulloch.pdf. For the curious, it’s pronounced mc-CULL-ock. Thanks Maureen!
Picture this: you’re sitting at your co-op’s AGM and the chair announces the next item on the agenda. It’s time for the dreaded financial statements; the moment where everything becomes murky for 90% of the audience. Almost everyone stares out into nothingness like bears lost in a swamp. You, on the other hand, quickly flip through the audited financial statements. Urghh, so frustrating! Why is your coop’s positive impact so hard to find in the financials? You muster the courage to raise your hand and ask the treasurer a question. Thank goodness you asked about that project; otherwise, the audience would never have known about that project’s benefit to the coop. Next year you’ll ask about why member shares are in liabilities instead of equity.Yes!
At last, you saved another AGM. Phew!
Why do financial statements seem so irrelevant to your coop? It turns out that the classic layout of financial statements and your coop’s entire accounting and reporting system is dictated by the International Financial Reporting Standards (IFRS). The standards are designed for investor-owned corporations. They are designed for investors, not members. You’re in a coop, you know the difference.
When you’re sitting at your coop’s AGM with financial statements in hand, you want to know how the money generated and spent by the co-op helped to achieve its purpose. How were the member needs met? You don’t want to know if you should buy or sell your shares! You can’t sell your share nor buy more shares anyway! So, we need to change the international standards. Sounds easy, right? Actually, it’s shouldn’t be too difficult.
There’s a precedent in the UK. Charities in the UK have developed their own way of accounting and reporting that fits within the international standards. Their system is laid out in a SORP: a statement of recommended practice that has been approved by the International Accounting Standards Board (IASB). Perfect! Maureen, named at the beginning of this blog, suggests that we develop a SORP for co-ops in the UK. That gets our foot in the door. If the SORP is approved in the UK that means it’s valid on an international level. Who doesn’t love precedence?!
Are you tired of having your accounting and reporting driven by investor-owned ideology? Do you want to be able to report on how your co-op actually shines? Get on board with the co-op SORP train. Give Daphne a call at CEARC and be part of the team that will make every co-op AGM in the world relevant. Finally!
Posted Jun 25, 2020
By Eric Gosselin, MMCCU, Research Associate, CEARC
© Can Stock Photo / dagadu_photo