Why IFRS falls short for Kenyan non-profits
The non-profit gaps ICPAK says IFRS leaves, such as fund accounting and donor restrictions, and how firms can present funds clearly until INPAS applies.
By Achekam · · 4 min read · For Accountants & audit firms in Kenya
A Kenyan NGO receives a grant from a foreign foundation for a water project in one county, a smaller grant from a local trust for school fees, and unrestricted donations from members. Its board wants to see each pot of money separately. Its donors want proof that each grant was spent as agreed. Its audited statements, prepared under IFRS, show one total for income and one for reserves.
That mismatch is not the preparer's fault. It comes from the framework. ICPAK has said so publicly, and Kenya will adopt a dedicated non-profit standard. Until it applies, firms still have to produce statements that make sense to a non-profit's readers. This article sets out the gaps ICPAK identifies and practical ways to present funds clearly in the meantime.
Written for investors and creditors
ICPAK states that IFRS Accounting Standards were primarily developed for for-profit entities, focusing on the needs of investors and creditors. A shareholder wants to know about returns, cash flows and the value of the business. A donor or a member of a non-profit wants to know something else: whether money given for a purpose went to that purpose, and what it achieved.
Under current Kenyan arrangements, a non-profit that is not publicly accountable and prepares general purpose financial statements may use the IFRS for SMEs Standard, or full IFRS Standards instead. The IFRS Foundation's profile of Kenya, last updated on 16 June 2016, describes IFRS Standards, including the IFRS for SMEs Standard, as Kenya's national accounting standards, with no Kenyan modifications to the SME standard. Neither option was written with non-profits in mind.
The three gaps ICPAK names
ICPAK states that IFRS Accounting Standards do not adequately address three non-profit areas.
| Gap | What a non-profit's readers need |
|---|---|
| Fund accounting | To see resources and their movements by fund, such as each project or programme |
| Donor restrictions | To know which resources are restricted to a purpose and which the organisation may use freely |
| Detailed narrative reporting | To understand what the organisation did, how it is governed and the risks it faces |
ICPAK has also said what the non-profit standard's narrative reports will be expected to disclose: organisational activities and performance, risk management, governance structures and sustainability efforts. That list is a good guide to what readers of non-profit statements already want, even before the standard applies.
ICPAK confirmed in a technical advisory dated 21 October 2025 that the International Non-Profit Accounting Standard will be adopted in Kenya; the timing and process are covered in INPAS: Kenya's coming non-profit accounting standard. ICPAK's INPAS adoption advisory gives its reasons why IFRS and IPSAS do not fully meet the reporting needs of non-profit organisations.
Presenting funds under the current standards
Until INPAS applies, a firm works within the framework the client uses. That still leaves room to make funds visible. The approaches below are presentation choices to test against the framework and to agree with the auditor, not requirements of any standard:
- Separate reserve lines. Show restricted and unrestricted fund balances as distinct lines within reserves on the statement of financial position, rather than one combined figure.
- A fund movements note. Add a note that takes each significant fund from its opening balance, through income received and expenditure, to its closing balance.
- A restrictions note. Describe the nature of each significant restriction, who imposed it, and whether conditions remain unmet at the year end.
- Clear policy wording. Explain in the accounting policies how the organisation identifies, records and releases restricted resources.
- A narrative in the directors' report. Use the directors' or trustees' report to explain activities, governance and risks in plain terms, anticipating what INPAS will expect.
All of these depend on the ledger. If grants are not tracked by fund during the year, no amount of presentation at year-end will make the note reliable. Setting up the chart of accounts so that restricted funds are visible from the start is covered in restricted funds in the chart of accounts.
Custom lines and groups for funds in Achekam
Achekam's statements Studio can carry this kind of presentation without breaking the rest of the statements. A firm can add its own statement lines and groups and change the wording of any row title, and later builds keep those choices. Each custom line still totals into a standard line, so the notes and the cash flow stay consistent with the face of the statements.
For a non-profit client, that means the firm can add "Restricted funds" and "Unrestricted funds" as separate lines under reserves, or group income by fund type, and know the next rebuild will not undo it.
Policies need the same attention. The Studio's standard policy wording is based on IFRS for SMEs and is labelled for review before issue; it was not drafted for non-profits. Staff can write their own policies, and for a client with donor restrictions they should, describing how restricted grants are identified and released. Notes take their figures from the mapped trial balance, and anything the trial balance does not hold is left as "[to be completed]", which makes gaps in fund information easy to spot during review. A line carries a note reference only when that note is in the set.
Next step for a non-profit client
Before the next year-end, sit down with the client's finance lead and list every fund the organisation holds, with its restriction and its donor. That list drives the reserve lines, the fund movements note and the policy wording, and it is the same list INPAS will ask for when it arrives.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
