The Charities SORP is Changing – Have your say
The Charities SORP is Changing – Have your say The Statement of Recommended Practice: Accounting and Reporting by Charities (“SORP”) is being revised and everyone has the opportunity to contribute to the consultation which is running until 4 November 2013.…
News1st Oct 2013
The Charities SORP is Changing – Have your say
The Statement of Recommended Practice: Accounting and Reporting by Charities (“SORP”) is being revised and everyone has the opportunity to contribute to the consultation which is running until 4 November 2013.
Why is the SORP being updated?
The Financial Reporting Council (“FRC”) has issued three new financial reporting standards which form the new Generally Accepted Accounting Practice in the UK and the Republic of Ireland (“GAAP”). GAAP establishes the principles upon which accruals accounts are prepared to give a “true and fair view” and new GAAP is mandatory for financial years beginning on or after 1 January 2015.
The Charities SORP provides guidance on how charities apply GAAP. Therefore the current SORP needs to be updated to reflect new GAAP. As GAAP applies to accruals accounts the new SORP is not relevant to any charities which prepare accounts on a Receipts and Payments basis.
New GAAP is made up of 4 standards, of which FRS 102 – The Financial Reporting Standard applicable in the UK and Republic of Ireland – is of particular interest to charities. In addition the FRC is retaining the current Financial Reporting Standard for Smaller Entities (“the FRSSE”) to ease the transition for smaller entities. This means that the majority of charities will have a choice of new GAAP or FRSSE and the proposed SORP takes this into account – although one of the consultation questions asks if the respondent agrees that this should be the case.
Overview of the draft SORP – a selection of the changes
The draft SORP has been produced in a modular form which is intended to ease use by enabling the reader to tailor the SORP to exclude modules which are not relevant to the user’s charity.
A new format Statement of Financial Activities (“SOFA”), with reduced categories, is proposed as is a new format cash-flow statement.
Changes are proposed to the format of the Trustees’ Annual Report together with the inclusion of information on going concern and the principal risks facing the charity
There are separate modules on financial instruments, social investments and defined benefit pension schemes with proposed changes which reflect the increasing complexity of accounting issues affecting charities.
Changes are proposed to the disclosure of staff salaries – with a suggestion that the SORP might require larger charities to disclose the job title and remuneration of the highest paid employee.
These are just some of proposed changes and Helpsheet 2 sets out the major changes between the current and draft SORPs.
Access to the consultation process
A micro website has been produced containing all of the SORP consultation documents at www.charitysorp.org
This contains the draft SORP, invitation to comment document and two help sheets (one mapping the existing SORP to the draft SORP and the other which sets out the major changes between the existing and proposed SORPs).
The invitation to comment sets out a number of questions which the SORP committee would like responses to – you can answer as many or as few as you like, some may not be relevant to your organisation but many are applicable to all organisations, for example question 1 asks if you agree that the modular format improves accessibility to issues and better meets the needs of the preparers of charity accounts? Question 8 asks if the simplification of the format and headings of the Statement of Financial Activities will assist preparers whilst still providing users of the accounts with the relevant information about the income and activities of the charity.
Invitation to comment
The invitation to comment document sets out the background to the consultation and specific matters on which views are sought – in the form of 25 questions. This is your opportunity to contribute to the shape of the SORP which will apply to charity accounts from 2015 onwards and to ensure your views are considered. Responses can be submitted by email, using a web form or in writing.
Further information
If you would like to discuss this topic further please contact:
Elaine Parr, Charity Services Senior Manager
01224 625111