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Charity Commission and OSCR issue further ‘Update Bulletin’ amending the Charities SORP (FRS 102) as a result of changes to UK Accounting Standards

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08 Nov 2018

The Charity Commission for England and Wales (‘Charity Commission’) and the Office of the Scottish Charity Regulator (OSCR) have published a further ‘Update Bulletin 2’ which amends the Charities SORP (FRS 102) as a result of changes to UK Accounting Standards.

The Charity Commission for England and Wales (‘Charity Commission’) and the Office of the Scottish Charity Regulator (OSCR) have published a further ‘Update Bulletin 2’ which amends the Charities SORP (FRS 102) as a result of changes to UK Accounting Standards.

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.

The Update Bulletin 2 amends the Charities SORP (FRS 102), that was issued in July 2014, in the following key areas:

  • Clarifying amendments – such amendments have been made to ensure that the Charities SORP (FRS 102) is consistent with existing requirements of FRS 102:
    • Module 3: Accounting standards, policies, concepts and principles, including adjustment of estimates and errors: clarifying the existing requirement to provide comparative information.
    • Module 5: Recognition of income, including legacies, grants and contract income: clarifying when payments by subsidiaries to their charitable parents that qualify for gift aid should be accrued in the individual accounts of the parent charity.
    • Module 10: Balance Sheet: removing the undue cost or effort exemption for depreciating assets comprising of two or more major components which have substantially different useful economic lives.
    • Module 13: Events after the end of the reporting period: clarifying when payments by subsidiaries to their charitable parents that qualify for gift aid are adjusting events occurring after the end of the reporting period.
  • Significant amendments (Section 4) - as a result of the Triennial review of FRS 102:
    • Accounting and Reporting by Charities: The Statement of Recommended Practice (SORP) - Scope and Application module: inserting the date from when the amendments in this Update Bulletin are effective;
    • Module 10: Balance Sheet:
      • permitting charities that rent investment property to another group entity to measure the investment property either at cost (less depreciation and impairment) or at fair value;
      • removing the undue cost or effort exemption for the investment property component of mixed use property to require measurement at fair value;
      • removing the disclosure of stocks recognised as an expense;
    • Module 14: Statement of cash flows: requiring charities to prepare a reconciliation of net debt as a note to the statement of cash flows;
    • Module 27: Charity mergers: including the transfer of activities to a subsidiary undertaking as an example of a charity reconstruction that should be accounted for as a merger; and
    • Appendix 1: Glossary: inserting a definition of the term service potential.

Additionally a number of editorial amendments have been made which are set out in section 5 of the Update Bulletin 2. The amendments to Section 4 (significant amendments) and Section 5 (editorial and less significant amendments) are effective for accounting periods beginning on or after 1 January 2019. Early application is permitted provided all amendments in both sections are applied at the same time.

As these changes are included within an Update Bulletin to the Charities SORP (FRS 102) rather than reissuing the Charities SORP (FRS 102), charities following the Charities SORP (FRS 102) will have to refer Update Bulletin 1 (issued in February 2016), Update Bulletin 2 and the Charities SORP (FRS 102) when preparing their accounts and reports.

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