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Charity Commission and OSCR issue consultation proposing amendments to the Charities SORP (FRS 102) as a result of changes to UK Accounting Standards

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23 Feb 2018

The Charity Commission for England and Wales (‘Charity Commission’) and the Office of the Scottish Charity Regulator (OSCR) have issued a joint consultation on proposed amendments to the Charities Statement of Recommended Practice (FRS 102) (‘Charities SORP FRS 102) following amendments to UK accounting standards in December 2017 which formed part of the 2017 Triennial review of the standard by the Financial Reporting Council (FRC).

SORPs issued by the Charity Commission and OSCR apply to charities 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 within the charities sector.

Following amendments to UK Accounting Standards in December 2017, amendments to the Charities SORP FRS 102 have been proposed and are included within ‘Draft Update Bulletin 2’. The amendments are split into:

  • Amendments which are based on clarifications made by the FRC and do not relate to changes to the underlying text of FRS 102. These amendments ensure that the SORP is consistent with the original drafting intention of FRS 102 and align the requirements of the SORP with FRS 102.
  • Amendments which are based on those changes made to the underlying text of FRS 102. These are split between those which are significant and likely to have an impact on the financial statements of charities, and those which are less significant or editorial in nature.

The principal amendments proposed to the Charities SORP FRS 102 that have an impact upon the financial statements are:

  • The introduction of an accounting policy choice for entities that rent investment property to another group entity.
  • The clarification of the accounting treatment for payments by subsidiaries to their charitable parents that qualify for Gift Aid.
  • The clarification of the requirement for comparatives for disclosures required by the SORP.
  • The introduction of a requirement for a net debt reconciliation to be prepared as a note to the statement of cash flows.

It is proposed that the amendments set out in ‘Update Bulletin 2’ apply to all charities in the UK and Republic of Ireland that follow the SORP for reporting periods beginning on or after 1 January 2019. ‘Update Bulletin 2’ also proposes to permit early application provided that all amendments are applied at the same time. Those amendments to the SORP which clarify how existing requirements of FRS 102 must be applied, are effective immediately.

It is expected that the final version of ‘Update Bulletin 2’ will be issued in October 2018 subject to FRS approval.

The consultation closes on 4 April 2018.

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