The IFRS Foundation recently issued its 2024 annual report, including the audited financial statements for the year ended December 31, 2024.

Among the items of interest: in 2024 the Foundation secured new multi-year philanthropic grants totaling £7.0 million for ISSB-related activities, compared with £2.9 million in 2023; it seems that some or all of these grants come with various conditions attached. The statements highlight the related key area of judgment:

• IFRS Accounting Standards do not provide explicit guidance on the treatment of philanthropic grants, which necessitates the use of management judgement to select an appropriate accounting policy. The Foundation has decided to adopt IAS 20 Accounting for Government Grants and Disclosure of Government Assistance to recognize income from philanthropic grants.
• IAS 20 offers a relevant framework for these types of grants, which often share features with government grants.
• Under IAS 20, revenue recognition is systematic, based on the fulfilment of performance conditions tied to specific outcomes. The Foundation recognizes grant income during the period when these conditions are met, ensuring transparency and consistency in its financial reporting. This method aligns with the Foundation’s strategic objectives, because many grants are multi-year and intended to support specific projects.
• By recognizing this grant income in accordance with IAS 20, the Foundation provides a clear basis for the timing and measurement of this income, thereby helping users of its financial statements to understand the financial effects of grant funding.
• IAS 20 sets clear criteria for recognizing grant income, emphasizing the need for a company to be entitled to the funds, have fulfilled the performance conditions associated with the grant, be reasonably assured of its receipt and be able to measure the amount reliably. These criteria align with the nature of the Foundation’s grants, which often span several years with performance based milestones.
• Management applies judgement to ensure revenue is recognized only when funds are available for drawdown, expenditures comply with grant terms and specified outcomes are achieved.

This yields the following accounting policy:

• In accordance with IAS 20, the recognition of income from philanthropic grants by the Foundation is based on several criteria: the Foundation must be entitled to the funds, the performance conditions associated with the grants must be met, the receipt of income must be probable and reliable measurement of the amount must be possible. Any amounts that do not meet these criteria are deferred and may be recognized in income in later years as these conditions are satisfied.
• Of (the £7.0 million total received), £4.5 million was recognized as income (2023: £2.6 million). The remaining grant amounts will be recognized in future periods as the Foundation meets the required performance conditions, and the funds fall due. This systematic approach meets the requirements in IAS 20, ensuring that our income recognition complies with the grant conditions and aligns with the timeline for fulfilling our performance obligations.

The area is also highlighted in Grant Thornton’s auditors’ report as a key audit matter, in response to which they performed the following audit procedures:

• inspecting management’s accounting paper, which identifies the judgements and estimates they made in recognizing the grant income. This included reviewing management’s judgement in the application of IAS 20 by inspecting the criteria of the Accounting Standard alongside the grant agreement to identify whether the criteria per the Accounting Standard were met;
• inspecting correspondence between the grant providers and the Foundation, including the signed grant agreements, to identify whether management’s judgements aligned with the agreed conditions;
• inspecting management’s workings to identify expenditure that had not been funded through other contributions during the year;
• inspecting the remaining expenditure, comprising primarily staff costs, to identify whether this expenditure met the criteria of the relevant grant agreement;
• confirming directly with the relevant employees whether they worked on the projects stated within the grant agreement during the period; and
• inspecting Foundation bank statements to identify whether the grant monies were received in 2024.

One totally understands that of all the financial statements and accompanying auditors’ reports in the world, the IFRS Foundation’s are probably the least likely to omit any minor disclosure that anyone might possibly miss. Still, that’s a lot of words for an item amounting to $4.5 million, out of $67.6 million in total, and for which it seems dubious that any stakeholder would have much concern about the likely propriety of the Foundation’s treatment. That is to say, while we don’t know the exact nature of the conditions attached to the grants, they’re presumably less labyrinthine than the average episode of Severance: if you decide to channel part of your philanthropic efforts toward the IFRS, you presumably want them to profit from that with relative ease, not to trip up and embarrass themselves. One notes that the accounting policy disclosure could very easily have been merged with the “significant judgment” language, and that the listing of audit procedures above reads largely as a generic primer on “how to audit something,” further raising a question of whether anyone involved truly assessed the area as carrying a significant risk of material misstatement. Given all of that, questions about “disclosure overload” could easily arise, although in this context, one wonders whether that’s done consciously, to provide a useful reference point in discussions about disclosure overload. That is, it’s tempting to think that any financial reporting issued by the IFRS Foundation must in part be conceived as a contribution to financial reporting, if that’s not getting too “meta’-minded. And the good news is, there are no conditions in the way of accessing that contribution!

The opinions expressed are solely those of the author.