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New SORP published for Further and Higher Education

  • UKGAAP Image

28 Mar 2014

The Further and Higher Education SORP Board (the SORP Board) has published a revised Statement of Recommended Practice (SORP) setting out proposals for accounting for further and higher education institutions in the UK.

SORPS issued by the SORP Board apply to further and higher education institutions preparing accounts under UK GAAP to present a ‘true and fair view’ and are intended to supplement accounting standards and other legal and regulatory requirements to reflect transactions or circumstances that are unique to the sector within which such institutions operate.  The SORP is also intended to: 

improve the quality of financial reporting by institutions;

enhance the relevance and comparability of, and the ability to understand the information presented in institution’s financial statements;

provide clarification, explanation and interpretation of accounting standards and their application to sector specific transactions; and

assist those who are responsible for the preparation of the financial statements. 

The SORP updates the previous SORP (link to Universities UK website) to include the requirements of FRS 100 ‘Application of Financial Reporting Requirements’, FRS 101 ‘Reduced Disclosure Framework’ and FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'; the three main standards that were introduced as a package to replace UK GAAP. 

The new SORP will result in a number of changes on how further and higher education institutions present financial performance, assets and liabilities in their financial statements.  The most significant changes are:

  • Changes to existing terminology to reflect FRS 102 most notably the Income and Expenditure Account becoming the ‘Statement of Comprehensive Income’ and the Statement of Recognised Gains and Losses becoming ‘Changes to Reserves and Funds’;
  • Changes to accounting for endowments and donations as a result of the new revenue recognition rules. 
  • Allowing an accounting policy choice of applying the accrual model or the performance model when accounting for government grants except for capital grants of land which must be accounted for in accordance with the performance model.
  • The requirements to record a liability in respect of a defined benefit multi-employer scheme.  The SORP states “where an institution participates in a defined multi-employer plan and sufficient information is not available to use defined benefit accounting and the institution has an obligation to fund past deficits within the scheme, the institution must recognise a liability on the Balance Sheet for this obligation”. 
  • The requirements to account for certain student accommodation arrangements with third parties as finance leases on the Balance Sheet; and
  • The requirement to report certain assets and liabilities at fair value in the Balance Sheet.
  • The requirement to recognise non-exchange transactions under the performance model.

The final SORP is effective for accounting periods beginning on or after 1 January 2015.  Early adoption is permitted if FRS 102 is adopted early and the accounts direction of the relevant funding body permits it.

Click for further information from the SORP Board on the development of the SORP and a copy of the final SORP (link to further and higher education SORP website).

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