A consultation on a new draft Statement of Recommended Practice (SORP) was recently launched by The Charity Commission for England and Wales and the Office of the Scottish Charity Regulator (OSCR).
The new SORP is required as a result of the Financial Reporting Council (FRC) issuing a new Financial Reporting Standard (FRS102) in March of this year that will form the basis of financial reporting for accounting periods starting on or after 1 January 2015. For the first time, this new financial reporting standard addresses some of the key issues faced in charity and public benefit entity accounting and reporting.
This is the largest change to reporting by charities since the introduction of the SORP 2005, and as a result a 4 month consultation process has begun, ending on 4 November 2013. Should you wish to read parts of the draft SORP, please visit the new SORP micro-site: www.charitysorp.org. The site contains more details about the consultation, how to comment and upcoming events.
As the SORP will deal with both small and large charities, it has been substantially re-worked so that it is modular. Certain modules not applicable to all charities (for example grant making, social investments) are included in additional modules at the end of the SORP. The idea is that this will make it more user friendly for both larger and smaller charities.
Charities in the UK must apply either the FRSSE (for small entities) or FRS 102 (larger entity disclosures) when preparing accruals accounts under the new SORP (for reporting periods beginning on or after 1 January 2015). The SORP has been developed to support the application of both accounting standards. In particular, the SORP identifies those recommendations that apply:
- to all charities, whether their accounts are prepared under the FRSSE or FRS 102;
- only to those charities preparing their accounts under the FRSSE; and
- only to those charities preparing their accounts under FRS 102.
Although the new standards are not being introduced immediately, charities need to be aware that figures for the comparative period will need to be restated and in certain instances this will affect closing figures for the period before this, perhaps at 31 December 2013, so all charities will need to be aware of the changes well before the new SORP is introduced.
At Menzies we will be reviewing the draft SORP in detail and responding to the invitation to comment in due course. As the new SORP may affect the reporting required of your charity, you may wish to read parts of the SORP and to make any comment either yourselves, or to us as you see fit. We will be happy to assist you in the application of the new SORP when it is finalised.
For further information on any of the issues raised here, please email Peter Earle at firstname.lastname@example.org