A New Era of Accountability
By CPA Francis Ugango
The global accounting landscape is evolving rapidly, driven by an urgent demand for transparency, sustainability, and accountability. Over the past two years, two major developments have emerged with far-reaching implications for Kenya’s private and non-profit sectors: the adoption of the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards S1 and S2, and the introduction of the International Non-Profit Accounting Standard (INPAS), the world’s first dedicated global accounting framework for non-profit organisations. These developments, guided by the Institute of Certified Public Accountants of Kenya (ICPAK), promise to transform how entities in Kenya report on financial performance, sustainability, and social impact.
The IFRS S1&2 Roadmap
In September 2023, ICPAK announced its intention to adopt the International Sustainability Disclosure Standards (IFRS S1 and IFRS S2) issued by the International Sustainability Standards Board (ISSB). IFRS S1 sets out the general requirements for disclosure of sustainability-related financial information, while IFRS S2 focuses specifically on climate-related disclosures. The standards became effective globally for reporting periods beginning on or after 1 January 2024, with Kenya adopting them in phases. Under this plan, voluntary adoption began in 2024; public interest entities (PIEs) will adopt mandatorily by 1 January 2027, large non-PIEs by 2028, and SMEs by 2029. Guidance for the public sector will follow once ICPAK concludes consultations with the relevant authorities.
This roadmap reflects Kenya’s commitment to align with global sustainability reporting practices and to embed Environmental, Social, and Governance (ESG) principles into corporate accountability. Early adopters—particularly listed companies and those seeking international capital—will enjoy enhanced investor confidence and improved access to funding. The ability to communicate how sustainability risks and opportunities affect enterprise value is fast becoming a prerequisite for investment. Companies that act early can expect a competitive advantage in sectors such as manufacturing, financial services, and agriculture, where ESG factors strongly influence stakeholder perceptions.
However, the transition will not be without challenges. Businesses will need to strengthen internal reporting systems, train staff, and upgrade IT infrastructure to collect, manage, and disclose sustainability data. While the initial costs may be considerable, the long-term benefits—greater transparency, better risk management, and alignment with global capital markets—are expected to far outweigh the investment. As sustainability reporting matures, ICPAK’s leadership ensures that Kenyan businesses remain competitive and credible in the global market.
Bridging the Standards Gap for Non-Profits
For decades, the non-profit sector has operated without a globally accepted accounting framework tailored to its unique financial and operational characteristics. Existing standards, such as IFRS, designed primarily for profit-oriented entities, and IPSAS, developed for the public sector, fail to address the nuances of non-profit activities. Issues such as fund accounting, donor restrictions, and detailed narrative reporting have long required bespoke treatment.
To close this gap, Humentum, in partnership with the Chartered Institute of Public Finance and Accountancy (CIPFA) in the United Kingdom, launched the IFR4NPO initiative. This initiative culminated in the development of INPAS, which provides a comprehensive, principle-based financial reporting framework specifically designed for non-profit organisations. The standard was approved by the Technical Advisory Group on 23 July 2025 and officially launched in Geneva on 21 October 2025, marking a watershed moment in international financial reporting for the sector.
The CPAK’s INPAS Roadmap
ICPAK, Kenya’s statutory regulator of the accountancy profession, played a pivotal role in shaping INPAS through its active participation in the Technical Advisory and Governance Groups. In its Technical Advisory on the Adoption of INPAS, ICPAK confirmed that Kenya would formally adopt the new standard and issue a detailed national adoption roadmap by 1 January 2026. The Institute’s participation ensured that Kenyan and African perspectives were embedded in the final document, particularly around donor funding dynamics, accountability to beneficiaries, and the diverse operating environments of civil society organisations.
ICPAK’s advisory outlines a pragmatic and inclusive transition approach. Following the publication of INPAS, each jurisdiction is expected to determine its adoption timeline and implementation process. Kenya has signalled a two-year transition period, during which non-profit organisations may produce financial statements compliant only with the financial-reporting aspects of INPAS, while deferring the full narrative reporting requirement until the third year. From that point, entities will issue a comprehensive “Financial Report” encompassing both financial statements and a narrative report.
The narrative report will provide a qualitative perspective on organisational activities and performance, governance structures, risk management, and sustainability initiatives. This balanced approach recognises that smaller and mid-sized organisations will require time to build capacity, systems, and awareness. ICPAK, in collaboration with the Public Benefit Organisations Regulatory Authority (PBORA), plans to roll out nationwide sensitisation programmes from 2026 onwards, providing training and technical guidance to non-profits, auditors, and donors.
Benefits and Implications for NGOs in Kenya and Africa
INPAS represents a transformational response to the long-standing challenges of financial reporting within non-profits. One of its core achievements is the standardisation of financial statement formats, promoting global comparability and transparency. The standard introduces clear guidance on the accounting treatment of grants, restricted funds, and income recognition, reducing ambiguity that has historically hindered consistency across organisations and jurisdictions.
Another milestone is the inclusion of Practice Guide 1 (PG1) – Harmonised Grant Reporting, which links donor-specific reports to the audited financial statements of the organisation. This innovation aims to reduce duplication and simplify compliance for grantees, who often face multiple donor reporting templates. Under PG1, grant financial reports will be aligned with the same classifications used in organisational accounts, ensuring clarity, reducing administrative burden, and improving audit efficiency.
The broader benefits of INPAS are equally significant. By adopting a globally recognised framework, non-profits can enhance donor confidence and credibility. Transparent and comparable reporting can attract greater funding opportunities from international development partners who value accountability and assurance. For donors, INPAS provides a consistent benchmark to evaluate performance across grantees, enhancing sector-wide trust. The standard also promotes better governance by embedding accountability and risk-management principles into the reporting process.
The implications of INPAS for African and Kenyan non-profits are profound. Many Kenyan NGOs receive funding from European, American, and multilateral agencies, where financial transparency and governance standards are increasingly stringent. INPAS bridges the gap between international expectations and local practice, empowering Kenyan NGOs to produce financial reports that meet donor requirements while reflecting local realities.
Adoption of INPAS will require capacity-building investments. Organisations must review accounting policies, revise chart-of-accounts structures, upgrade systems, and train finance personnel to interpret and apply the new requirements. Auditors and regulators will need to develop new assurance approaches aligned with INPAS principles, particularly around narrative reporting and fund-based accounting. ICPAK’s leadership in training and technical guidance will be crucial in ensuring a smooth transition.
Integrating Sustainability and Accountability: IFRS Meets INPAS
While IFRS S1 and S2 primarily target corporate entities, their ethos of transparency and sustainability resonates strongly with the principles of INPAS. Both frameworks aim to provide stakeholders with comprehensive insights into how organisations create and sustain value over time. For non-profits engaged in social and environmental programmes, sustainability reporting can complement financial reporting by highlighting impact, governance, and long-term viability.
As Kenya implements IFRS S1 and S2, NGOs and social enterprises operating in hybrid models—combining business and development goals—will find increasing convergence between sustainability and accountability frameworks. International donors and development finance institutions are also aligning their funding requirements with sustainability principles, creating opportunities for harmonised disclosure practices across sectors. ICPAK’s dual leadership in sustainability and non-profit reporting places Kenya at the forefront of integrated, purpose-driven reporting in Africa.
The adoption of INPAS and the phased implementation of IFRS S1 and S2 mark a transformative era for reporting and compliance in Kenya. For the private sector, sustainability disclosures will become a hallmark of responsible governance and access to global capital. For non-profits, INPAS offers a long-awaited solution to fragmented and inconsistent financial reporting, paving the way for enhanced trust, comparability, and efficiency.
To prepare for these changes, organisations should begin by conducting comprehensive gap assessments of their current reporting frameworks against the new standards. They should engage auditors and professional advisers early, review their information systems for compatibility, and build capacity through training and peer learning. Donors and regulators should support this transition by harmonising their reporting requirements with INPAS and IFRS S1/S2 principles.
The Role of ICPAK
ICPAK has demonstrated its strategic role by proactively engaging with global standard setters and its commitment to strengthening professional competence position Kenya as a continental leader in transparent and sustainable financial reporting. As the world embraces greater accountability, ICPAK, Kenya’s private and non-profit sectors stand ready to demonstrate that robust reporting is not merely a compliance exercise but a strategic enabler of trust, resilience, and impact.
References
1. Institute of Certified Public Accountants of Kenya (ICPAK). (2025). Technical Advisory on the Adoption of the International Non-Profit Accounting Standard (INPAS). Nairobi: ICPAK.
2. International Non-Profit Reporting Foundation (INPRF). (2025). INPAS and Practice Guide 1 FAQs. London: INPRF. Retrieved from https://www.inprf.org/wp-content/uploads/2025/09/INPAS-and-INPAS-Guide-1-FAQs-Oct-2025.pdf
3. Humentum. (2025). International Financial Reporting for Nonprofit Organizations. Washington, DC: Humentum. Retrieved from https://humentum.org/international-financial-reporting-for-nonprofit-organizations/
4. IFRS Foundation. (2023). IFRS Sustainability Disclosure Standards S1 and S2 Overview. London: International Sustainability Standards Board (ISSB).
5. Institute of Certified Public Accountants of Kenya (ICPAK). (2023). IFRS Sustainability Disclosure Standards S1 and S2 Adoption Roadmap. Nairobi: ICPAK.
6. ACCA. (2025). Standardising Non-Profit Reporting. AB Magazine, May 2025. Retrieved from; https://abmagazine.accaglobal.com/global/articles/2025/may/public/standardising-non-profit-reporting.html
The writer is an ICPAK Practicing Member and Partner at Crowe Erastus & Co. CPA (email: [email protected])
