The Charity Commission for England and Wales, the Charity Commission for Northern Ireland, and the Office of the Scottish Charity Regulator (OSCR) have launched a joint consultation on proposed changes to the Charities Statement of Recommended Practice (SORP). The updates aim to reflect recent changes to UK accounting standards, specifically those introduced by the Financial Reporting Council (FRC) in March 2024.
Key Proposals
- A new three-tier income-based reporting framework will be introduced, with charities categorized into tiers based on their income levels. The tiers will be defined as follows:
- Charities with income below £500,000 will have reduced reporting requirements.
- Charities with income between £500,000 and £15 million will have moderate reporting requirements.
- Charities with income above £15 million will have more extensive reporting requirements.
- Charities will be required to account for most operating leases on their balance sheets, resulting in changes to reported assets and liabilities.
- A five-step revenue recognition model will be introduced for income generated from exchange contracts, affecting how charities recognize income from these contracts.
- The SORP will also introduce proportionate reporting for environmental, social, and governance issues, as well as improvements to reporting in areas such as impact, volunteers, and sustainability.
Consultation and Implementation
The consultation is open until June 20, 2025, and the final version of the amended SORP is expected to be published in autumn 2025. The changes will be effective for reporting periods beginning on or after January 1, 2026, with early adoption permitted.
Impact on Charities
The proposed changes aim to make compliance more proportionate to the size and complexity of charities, reducing the reporting burden for smaller organizations while enhancing transparency across the sector. Charities are encouraged to respond to the consultation and prepare for the upcoming changes in accounting standards.
Menzies will be reviewing the proposed new SORP and providing commentary during the consultation period, but should you wish to have your say, you can do so by clicking the link below.
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