The Charity Commission and the Office of the Scottish Charity Regulator, as the joint SORP-making body for charities, have developed a new draft of the SORP in partnership with the charities SORP committee after considering feedback and responses from a consultation period, which has now closed.
The SORP Committee recently published the analysis of responses to the consultation, along with their recommendations that two separate SORPS be developed to govern charity accounts:
- One for those who opt to follow, or are required to follow, FRS 102 – governing charitable companies and charities above the £500,000 charity audit threshold
- One for smaller charities that opt to follow the Financial Reporting Standard for Small Entities FRSSE – designed for smaller organisations
New recommendations also include suggestions that charities with an income in excess of £250,000 and all charitable companies, must disclose information about salaries. Currently, this is only applicable to those charities over the audit threshold. Another recommendation is that charities will not have to separately disclose income received from the Government.
Sam Younger, joint Chair of the SORP Committee and Chief Executive of the Charity Commission, said: “The sector will get a SORP that works with them – particularly now that there will be two SORPs, which allows for the specifics of different accounting standards.
“In a number of ways, what the SORP asks of charities exceeds general accounting standards and we should be proud of this higher expectation. After all, the public have high expectations of charities – and quality financial reporting and accounting are essential to maintain their trust and confidence in the sector.”
The recommendations of the SORP are intended to achieve the following objectives:
- Improve the quality of financial reporting by charities;
- Enhance the relevance, comparability and understandability of the information presented in charity accounts;
- Provide clarification, explanation and interpretation of accounting standards and their application to charities and to sector specific transactions; and thereby
- Assist those who are responsible for the preparation of the trustees’ annual report and accounts
The recommendations, once approved, will apply to charity accounts from 1 January 2015 and when issued, the SORP will become a part of the UK-Irish Generally Accepted Accounting Practice (GAAP).
At Nicklin, our specialist team can provide expert advice to charities seeking clarification in readiness for when the new SORP is released as well as the implications it may have for them. For more information, please contact us.