INPAS transition relief and the narrative report

The two-year INPAS transition relief ICPAK describes for Kenyan non-profits, and what the narrative report must cover once full compliance starts.

By Achekam · 11 October 2026 · 4 min read · For Accountants & audit firms in Kenya

When a new standard arrives, the first question from a client's board is rarely about recognition or measurement. It is "how much extra work is this, and when?" For Kenyan non-profits facing the International Non-Profit Accounting Standard, ICPAK's description of the transitional provisions gives a useful answer: not everything at once.

The relief splits the move into two stages. In the early years, an organisation can concentrate on getting its financial statements right. A little later, it must add a narrative report that tells readers about its activities, risks, governance and sustainability. This article explains both stages as ICPAK describes them, and how a firm can use the breathing space well.

The starting gun

ICPAK confirmed in a technical advisory dated 21 October 2025 that INPAS will be adopted in Kenya. The transitional provisions run from adoption, so the year an organisation counts as "year one" depends on the adoption timetable ICPAK sets. Check ICPAK's roadmap as issued for that date before telling a client which year is which. The wider adoption story is in INPAS: Kenya's coming non-profit accounting standard.

Years one and two: the financial statements first

ICPAK states that under the INPAS transitional provisions, for the first two years following adoption, non-profit organisations may issue financial reports that comply only with the financial statement requirements, rather than with the full standard.

In practical terms, the first two years are about the numbers: the primary statements, the policies and the notes, prepared on INPAS principles. An organisation that uses this relief is not yet producing the full package the standard ultimately expects.

The narrative report exemption

Alongside that, ICPAK states that a two-year exemption applies to the mandatory Narrative Report requirement. The two reliefs work together: an organisation that relies on them prepares INPAS-compliant financial statements in years one and two, without the narrative report.

Year three: the full Financial Report

From year three, ICPAK states, full compliance will include both the financial statements and a narrative report, together referred to as the Financial Report.

The term "Financial Report" is worth adopting in client conversations early. It signals that, from year three, the narrative is not an optional extra at the front of the document but part of what the standard requires.

ICPAK's page on adopting INPAS in Kenya sets out the advisory, including the reasons ICPAK gives for why IFRS and IPSAS do not fully meet non-profit reporting needs.

What the narrative report will cover

ICPAK states that INPAS narrative reports will be expected to disclose information on four areas:

• Organisational activities and performance: what the organisation did and what it achieved.
• Risk management: the risks it faces and how it manages them.
• Governance structures: how it is directed and controlled.
• Sustainability efforts: read the standard for exactly what this area covers.

Most Kenyan non-profits already write about some of these, in donor reports, annual reviews or board papers. The difference under INPAS is that the narrative becomes part of the reporting package, prepared alongside the financial statements and consistent with them.

Using the two years to prepare

The relief is most valuable to an organisation that uses it as preparation time rather than a pause. During years one and two, a firm can help a client:

1. Decide who will own each of the four narrative areas inside the organisation.
2. Collect the information each area needs, such as activity data, a risk register and governance documents, on a regular basis rather than at year-end.
3. Draft a trial narrative report for year two, even though it is not yet required, and review it alongside the financial statements.
4. Agree with the board how the narrative will be approved.
5. Check the year-two draft for consistency with the numbers, so year three holds no surprises.

Drafting narrative text in Achekam, with a person reviewing it

Achekam's statements Studio builds a draft set of annual financial statements from a mapped trial balance, with every figure calculated in code. The draft includes the directors' report, the four primary statements, policies, notes and a detailed income statement. Any block a person has edited is kept when the draft is rebuilt.

When the firm has set up an AI key, AI writes narrative text such as the nature of the business and note wording. That text is checked in code and labelled "AI draft - review before issue". The figures always come from code, not from the AI. There is no separate accept step for each paragraph: the safeguard is the review stages and the partner's signature. Without a key, standard wording is used instead.

For an INPAS narrative report, that means AI can help with a first draft of descriptive text, and a person must then review it against the organisation's own records. AI does not know what the organisation achieved this year or how its board actually works; those facts come from the client. Once a reviewer has edited a passage, the edit survives later rebuilds. What a directors' report should contain more generally is covered in what goes in the directors' report.

Making the most of the relief

Use the first year to get the numbers right under the new standard, and the second to rehearse the narrative. A non-profit that reaches year three with a reviewed trial narrative already on file will find full compliance a step, not a leap.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.