Changes to charity accounting

All charities that are required to prepare accounts are obliged to do so in accordance with UK accounting standards, and in particular the Statement of Recommended Practice on Accounting and Reporting by Charities, commonly known as the SORP.

Earlier this month the charity regulators published ‘Update Bulletin 2’, setting out a number of changes to the SORP that the preparers of charity accounts need to be aware of. The majority of these changes take effect for reporting periods beginning on or after 1 January 2019, although early adoption is permitted. In addition, there are some clarifying amendments that take immediate effect.

The changes to the SORP are not extensive, and in the main only reflect recent changes to the underlying UK financial reporting framework that arose as result of the triennial review of FRS102, the principal accounting standard that sets out how accounts should be prepared in the UK. The main areas that are affected are as follows:

• Charitable groups and the use of trading subsidiary companies
• Investment property let to fellow group entities
• The disclosure of comparative information
• The Statement of Cash Flows and the need to disclose a reconciliation of net debt
• Accounting for charity reconstructions
• The recognition of intangible assets on the acquisition of a non-charitable subsidiary undertaking

Many charities will not be impacted by these changes, but if these issues do affect you then please do hesitate to contact one of our charity specialists or your usual Kreston Reeves adviser.