Countdown begins to new SORP

A major change for the charities sector will take effect next year with the introduction of a new framework for charity accounting and reporting.

The existing Charities Statement of Recommended Practice (SORP) will be replaced for accounting periods beginning on or after 1 January 2015, with two new versions of the SORP.

The first version, for medium and large organisations, is referred to as the FRS102 SORP, after the accounting standard recently introduced to bring the UK more into line with international accounting standards.

The second version, the FRSSE SORP, is based on pre-FRS102 requirements and can only be used by small entities as defined by the Companies Act 2006, which means they must meet two of the following three criteria:

  • income of less than £6.5 million
  • assets of less than £3.26 million
  • fewer than 50 employees.

The FRSSE version of the SORP will require less disclosure that the FRS102. For example, it provides exemption from publishing cash flow statements and computing present values of long-term inter-company balances.

However, there are parallels between the two, which will run alongside each other and both have been divided into modules, to make them easier to read.

Key messages within both SORPs include an emphasis on transparency and impact reporting. Other key points for those involved in preparing charity financial include:

  • holiday pay should be accrued for (FRS102 only)
  • if possible, income from donated goods should be valued
  • the definition of heritage assets has changed
  • any grants to institutions must be disclosed
  • related parties now include employees
  • the Trustees Report must be clear about reserves policies and state why they are held
  • all trustees must be listed, regardless of number.
Posted in Charities.