Britain’s charity regulators will consult later this month on scrapping a separate Statement of Recommended Practice (SORP) for small charities, the head of accountancy services at the Charity Commission has said.
The Charities SORP is the set of specialist accounting rules which governs charity accounting. It interprets the rules governing accounting for bodies in the UK which are not publicly listed.
In July last year, the Charity Commission and the Office of the Scottish Charity Regulator published the two new Statements of Recommended Practice for charities, applying to financial years beginning on or after 1 January 2015.
In addition to the SORP for charities using the FRC’s FRS 102 standard, there is a new SORP for smaller charities that work under the Financial Reporting Standard for Smaller Entities.
Charities may use the FRSSE SORP if they can satisfy any two of three conditions: their income is under £6.5m, their total assets are under £3.26m, and they have less than 50 staff.
But Nigel Davies, head of accountancy services at the Charity Commission and chair of the Charities SORP Committee, wrote in this month’s Charity Finance magazine that a consultation will be launched later this month on the topic.
However the Financial Reporting Council, which governs UK accounting, has now announced that the FRSSE is being removed in 2016. It will be replaced with a series of opt-outs from FRS 102 for smaller organisations.
The Charities Committee will consult in mid-June on how to change the SORP to comply with these changes in the rules.
The idea to be put forward would be to scrap the option for smaller charities to use the reduced disclosures, and make them follow the full FRS 102.
“Having carefully considered the Financial Reporting Council’s proposed amendment to FRS 102 (inserting a new section for ‘small entities’ as a replacement for the FRSSE), we believe that the differences are marginal in terms of what will have to be disclosed by a small entity, as compared to what is required for full FRS 102 compliance,” Davies wrote.
“We therefore plan to consult later this month on simply dropping the ‘small entities’ option altogether as the preferred alternative to offering a replacement to the Charities SORP (FRSSE).”
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