Three months left for charities to have their say on the new Charities SORP
The beginning of July saw the start of a four month consultation period on the new Charities SORP. The Charity Commission is keen for charities to provide them with feedback on the format and content of the Exposure draft.
We take 5 minutes to answer the key questions that charities should be considering in relating the new Charities SORP.
Why is the new SORP necessary?
The existing Charities SORP has been in place since 2005, however due to the issue of FRS102 which effectively replaces UK Generally Accepted Accounting Practice in March 2013, the SORP has been updated in the context of this new accounting standard.
It is worth noting that FRS102 has had considerable input from the not for profit sector – resulting in a set of rules within the standard especially designed for public benefit entities.
In short, the new Charities SORP will interpret FRS102 for the benefit of charities
Who is affected?
The new SORP will apply to:
– All UK and Irish charities preparing accounts on the accruals basis, regardless of size
– All charitable companies
It will NOT apply to charities that are required to follow other SORPs such as:
– Registered Social Landlords
– Further and Higher Education Institutions
– Common Investment or Common Deposit Funds
How will it affect my charity?
1. Choice of accounts preparation
Small charities (i.e. turnover < £6.5m, net assets < £3.26m and fewer than 50 employees) can choose whether to adopt the FRSSE or FRS102.
Large charities, or charities choosing not to apply the FRSSE, must prepare their accounts under FRS102.
The SORP applies to charities adopting FRSSE and FRS102 and it identifies recommendations that apply to:
– all charities
– charities preparing accounts under FRSSE
– charities preparing accounts under FRS102
2. Key Changes
Pensions – all charities will be required to recognise a liability for agreed deficit reduction schemes in multi-employer pension schemes. Currently, under existing UK GAAP, charities need not comply with FRS17 should the scheme qualify as a multi-employer scheme.
Heritage Assets – a more comprehensive section within SORP specific to charities.
Investment properties – if a reliable measure of fair value is not available ‘without undue cost or effort’ then property can be treated with no further valuation but depreciation applied instead.
Holiday pay accruals – will become mandatory where such an accrual would be material to the accounts.
When will the new SORP come into force?
The SORP will be applicable for reporting periods beginning on or after 1 January 2015. For the majority of our charity clients, this will mean that the first period of reporting affected will be the year ended 31 March 2016.
It is worth noting however, that comparatives for the period ending 31 March 2015 will need to be restated.
What action does my charity need to take?
Have a look at the Charity Commission’s dedicated website http://www.charitysorp.org/ where you can download the draft SORP and find out more detailed information.
Don’t miss out on your opportunity to respond to the Charity Commission on the draft SORP – the deadline for responses is 4 November 2013.
If you have any questions or would like to discuss this topic further, please contact Christine Wilson on 01772 821021.