The accounting rules for charities, set out in the Charities SORP (Statement of Recommended Practice) derive from Financial Reporting Standard 102 (FRS102) which is published by the Financial Reporting Council (FRC). Previously we reported on developments in the production of a revised SORP with the expectation that it would likely be implemented with effect from accounting periods beginning on or after 1st January 2025.
An exposure draft that proposed changes to FRS102 (and ultimately the revised SORP) was issued in late 2022, followed by a consultation period which closed on 30th April 2023. The FRC has since reported in their Autumn update that final amendments to FRS102 will now be released in 2024, leading to a delay in the effective date to accounting periods commencing on or after 1st January 2026 at the earliest – a further delay to the existing timetable of at least 1 year. Some changes are also being considered to the detailed proposals as the FRC considers the responses received during the consultation period.
This news is likely to be welcomed by many charities as it provides an additional 12 months of preparation time for the implementation of the new SORP. Despite this, once the new SORP is implemented, comparative information may require to be restated to comply with the new requirements. As such, any transactions undertaken from 1st January 2025 will fall within the scope of the new regulations, so charities should start thinking ahead.
Our previous reporting on the FRC’s exposure draft is available here, and we reported that some of the key changes are likely to involve the accounting treatment for leases and revenue recognition. In the meantime, charities can prepare for potential upcoming changes by collecting, analysing and summarising their existing lease agreements, including lease terms and payment profiles, and gathering information on any revenue contracting including contract terms and performance obligations.
Further clarity on timescales and the exact extent of the changes will become clearer following the FRC’s announcements later in 2024.
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