After a considerable consultation period the Statement of Recommended Practice (SORP) for Charities 2005 has been replaced, with TWO new Charity SORPS!  These will need to be applied to accounting periods beginning on or after 1st January 2015.

Two Versions

between-two-options-151889594The first is for medium and large entities and will be referred to as the FRS102 SORP, after the accounting standard which has recently been introduced to bring the UK more in line with international accounting standards (IFRS).

The second, FRSSE SORP is based on pre-FRS102 requirements and can only be used by small entities as defined by the Companies Act 2006 i.e. it meets two of the following three criteria:

  • Income less than £6.5m
  • Assets less than £3.26m, and
  • Fewer than 50 employees.

These thresholds have recently been increased in the EU, so it is expected that they will increase in the UK too, in the near future.

Like using FRSSE for commercial enterprises, the FRSSE version of the SORP will require less disclosure, for example, it provides exemption from publishing cash flow statements and computing present values of long term intercompany balances.

Key changes

Lord HodgsonHowever the main purpose of updating the SORP was to provide guidance to Charities on how to apply UK accounting standards and to increase transparency of results, primarily as a result of Lord Hodgson’s review of the effectiveness of Charities in 2012.

Other than there now being two versions and both being split up in to “easy to read” modules, the key message as you might expect, is transparency and even more emphasis on impact reporting.

Other key points for those preparing the financial statements of charities to look out for are:

  • 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

Finally, elements of the SoFA have been withdrawn, for example the governance costs category in the name of simplicity and others renamed such as “voluntary income” will now be shown as “income from donations and legacies”.  I am not sure this really provides any clarity, and most will chose to provide additional information in a note to the accounts instead.

Toni May2014More guidance

If you need more assistance there are some useful help sheets at or of course you can call me on 01480 426500.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

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