Charity accounting in the UK is based upon Financial Reporting Standard (FRS) 102 which is subject to periodic review every five years. The latest revision to FRS 102 was published in March 2024. The Charities Statement of Recommended Practice (SORP) provides recommendations and requirements setting out how to prepare true and fair accounts in line with FRS 102.
The latest iteration of the Charities Statement of Recommended Practice (SORP) is due to have a twelve-week consultation period when it is issued in March 2025.
How to prepare for the new Charities SORP
Although the new charities SORP is not yet out, you can begin to prepare given known forthcoming changes to FRS102. Of particular importance are two key changes being brought in with FRS102. The first is in terms of revenue recognition and the second is the treatment of leases. It should be noted that the effective date of implementation is for accounting periods beginning on or after 1 January 2026, with early adoption permitted.
Terms of revenue recognition
A new model for revenue recognition will be implemented as part of FRS102. This will be aligned with IFRS 15: Revenue from Contacts with Customers but with some simplifications. It follows a comprehensive five-step model for revenue recognition for all contracts with customers.
Treatment of leases
Treatment of leases will be aligned to IFRS 16: Leases, but with certain practical exemptions for low value leases. Broadly, the distinction between operating and finance leases has been removed and all leases will need to be recognised on the balance sheet as right to use assets. It is important for charities to get to grips with the leases they have so that they can better understand the impact of this change.
With these changes we recommend you do the following:
- Contact your auditor to discuss how these changes might affect what you are currently doing and how you report.
- Consider the resources available from the FRC, in particular factsheet 10 and 11 which give further consideration to the two key changes highlighted above.
How can we help?
At Hawsons our accountants recognise that not-for-profit organisations have very different requirements from other businesses and are currently exposed to a challenging economic climate.
Our dedicated team of charity accountants fully understands the complex, ever-changing regulatory requirements of the charity and not-for-profit sector. Irrespective of your size we wish to support you to maximise the benefits you could achieve through our specialist professional advice.
Charities & not-for-profit organisations are currently facing extensive changes in their regulatory and legal framework. Given the additional pressures on fundraising, complex tax regimes, internal risk exposure, and stakeholder demands, it has never been more important to obtain specialist professional advice.
Simon Bladen
Partner
Free initial meeting
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