What is the charity SORP?
The charity SORP is a Statement of Recommended Practice which sets out how charities should prepare their annual accounts and report on their finances. It is really a statement of required practice, as all charities have to follow the guidelines.
Why has it been changed?
The charity SORP is an interpretation of the financial reporting standards and generally accepted accounting practice in the UK. Because these have changed, the SORP has to be updated. The introduction of Financial Reporting Standard 102 (FRS 102) has been a radical departure as this brings together a whole series of piecemeal standards and guidelines on general accounting into a single standard. FRS 102 also includes specific sections on public benefit entities.
What’s different in charity SORP 2015?
Some of the key changes:
- Many charities will have to prepare a statement of cash flows. Only smaller charities with income below £500,000 will have an exemption, introduced in SORP update bulletin 1
- Income including legacies should be recognised when their receipt is ‘probable’ rather than certain
- All charities must disclose the total amount of all employee benefits received by ‘key management personnel’ for their services to the charity – this is the senior managers
- All charities must disclose the fact that there were no employees who received pay over £60,000 or disclose the number of employees remunerated above £60,000 in bands of £10,000
- Charities are encouraged to disclose their remuneration policy in the trustees’ annual report
- Governance costs are no longer shown as a separate row in the Statement of Financial Activities (SoFA) but must be disclosed in the notes
- Comparatives are required for each column of the SoFA, but may be provided in the notes to the accounts
- Gains and losses on investment assets are part of the income or expenditure of the charity and therefore go ‘above the line’
- Material items should be disclosed separately in the accounts, as should extraordinary items
- All charities have to make a statement about going concern, either explaining any material uncertainties or risks to cast doubt on it or the factors that support it
When did the changes take effect?
A new SORP needs to be applied for your accounting period beginning on or after 1 January 2015.