Revision to the SORP (FRS 102)

Financial Reporting Standards (FRS) 102 is subject to a periodic review at least every five years, and the latest periodic review was completed in March 2024.

The Financial Reporting Council (FRC) has published amendments to FRS 102, which details a number of changes and amendments focused on updating accounting requirements to reflect changes in International Financial Reporting Standards (‘IFRS’), particularly concerning revenue and leases. 

The key changes of FRS102 are: 

• A new Section 23 Revenue, based on IFRS 15 Revenue from Contracts with Customers and its five-step model for revenue recognition.
• A new Section 20 Leases, based on IFRS 16 Leases which brings most leases onto the balance sheet.
• Greater clarity for small entities in the UK applying Section 1A regarding which disclosures need to be provided to give a true and fair view.

The effective date of these changes is for accounting periods beginning on or after 1 January 2026, with early adoption permissible.

Whenever UK Generally Accepted Accounting Practice (GAAP) is amended, especially for major revisions such as the periodic review referred to above, the Charities Statement of Recommended Practice (SORP) is redrafted to align with its changes.

The Project Plan below has been issued by the Charity Commission and the long awaited SORP  exposure draft was issued 28 March 2025, commencing the 12 week consultation

Developing the charities SORP – project plan

These amendments represent significant change, and they will need to be considered in advance of their application.

In preparation for the changes being brought about, charities should: 

• Review their current lease arrangements and establish whether any leases are short-term or low value. 

• Identify and understand the approach needed to be taken to identify the value of leases and relevant transactions. 

• Review current contracts and income streams and identify both the amount and timing of income using the 5-step model. 

• Consider what additional record keeping is needed. 

• Consider whether the change in asset position will impact on any current or future borrowing or financial arrangements. 

• Consider whether a change in balance sheet value will require the Charity to have an audit where not already required. 

In addition to the major changes noted above, in brief summary the other key areas the SORP exposure draft addresses are tiered reporting, a refresh of the requirements of the Trustees Annual Report, changes to disclosure requirements relating to subsidiaries and heritage assets amongst other necessary module updates.

We will be happy to discuss with you, the potential impact on your financial statements.

Following the release of the Exposure Draft SORP, the Charities SORP-making body are seeking feedback through a 12 week consultation period ending on 20 June 2025 as set out in the Invitation To Comment – SORP. They have also issued a summary-of-key-changes-to-modules which sets out the nature of proposed changes to each SORP module.

Our FRS 102 webinar hosted on 16 May is now available to watch on demand.