ICA to develop accounting standards for cooperatives

'We need a financial language that allows us to express our performance as cooperatives'

The ICA General Assembly unanimously adopted a motion to develop accounting standards for cooperatives.

Submitted by Co-operatives UK and seconded by Kooperationen in Denmark, the motion calls upon the ICA to engage with members and experts to explore the case, costs and benefits, for the potential development over time of a cooperative statement of recommended practices. Such a standard would permit cooperatives to focus their reporting on their performance in line with cooperative values and principles.

Ed Mayo, Secretary-General of Cooperatives UK said: “There has been a race towards global accounting standards in recent years, but with a single-minded focus on shareholder firms and the needs of their investors.

“Two challenges co-operatives increasingly face in the process are around accounting for member capital and co-op dividend. The first risks making co-ops appear far more fragile than they are, as member equity may be treated as a liability. The second treats member dividends as an expense, i.e. a reduction in sales rather than a distribution of profit.”

The motion recognises the importance of the ongoing work of the Audit and Risk Committee of the ICA (IARAC), and of The Centre of Excellence in Accounting and Reporting for Cooperatives at the University of St Mary’s in Halifax, Nova Scotia, Canada.

Mr Mayo added: “While this is a technical field, the resolution is a permission slip to explore the case for appropriate guidelines or possibly even a new framework for co-operatives (a Statement of Recommended Practice, or SORP) at the international level. This work owes a huge debt to the efforts of Professor Daphne Rixon of the University of St Mary’s in Canada and Dr Maureen McCulloch, of Oxford Brookes University and an Associate of Co-operatives UK.

“It will take time and consultation to explore this further and any work will need to take into account the needs of co-operatives and mutuals across countries and in all their diversity. Most accounting, such as the valuation of assets, is perfectly appropriate. We need to focus on the specific areas of accounting where the member-owned model needs a different interpretation.

“We need a financial language that allows us to express our performance as cooperatives. Otherwise it is like being asked to write poetry in a language that you do not speak.”

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