The SORP is changing: What do academy Trusts need to know?

Academy trusts will soon need to prepare for a series of important changes to charity accounting rules that will affect how they recognise leases, report income and present their Trustees’ annual reports.

The changes stem from updates to Financial Reporting Standards 102 (FRS 102), the UK’s main accounting standard, which in turn require revisions to the Charities Statement of Recommended Practice (SORP). While academy trusts are classified as exempt charities, they must still comply with both the Charities SORP and the Academies Accounts Direction (AAD), meaning these changes will flow directly into academy trust reporting.

The revised SORP 2026 will apply to accounting periods beginning on or after 1 January 2026, meaning the first academy trust year-ends likely to be affected will be 31 August 2027.  This means that you will need to start preparing your financial statements under SORP 2026, from 1 September 2026.

While that may feel some way off, several of the changes will require early preparation – particularly around leases, income recognition and the narrative reporting.

Here is a brief summary of the key changes and how they will impact academy trusts

Lease accounting: a significant change

One of the biggest changes is the introduction of an updated lease accounting model aligned with the revised FRS 102.

In many cases, leases that were previously treated simply as annual costs will now appear on the balance sheet as ‘right-of-use’ assets, with a corresponding lease liability. 

For academy trusts this could affect a range of arrangements, including: 

• Long-term property leases 
• ICT equipment leasing 
• Service vehicle leases

The SORP 2026 includes charity-specific guidance for situations such as low-value or peppercorn leases, which are common in the academy sector where properties may be leased from Local Authorities.

Even so, Trusts will need to review their existing lease arrangements and assess how they will be recognised under the new model.

New income recognition rules 

The revised SORP will also adopt the five-step income recognition model from the updated FRS 102.

This model aims to clarify when income should be recognised by distinguishing between: 

• Exchange transactions – where goods or services are provided in return 
• Non-exchange transactions – such as grants or donations

For academy trusts, this distinction may affect how certain income streams are recognised including: 

• School lettings where services are provided. 
• Holiday clubs and wraparound care. 
• Additional lessons such as music or sport. 
• Transport services or consultancy activities.

Trusts will need to review their various income streams to determine whether the five-step model applies and when income should be recognised.

A new three-tier reporting framework

The revised SORP will introduce a three-tier reporting structure for the Trustees’ Annual Report based on gross income: 

• Tier 1: up to £500,000 
• Tier 2: up to £15 million 
• Tier 3: above £15 million

Most single-academy trusts are expected to fall within Tier 2, while larger multi-academy trusts will fall into Tier 3.

The Academies Accounts Direction is expected to confirm how this tiering will apply in practice within the sector.

Expanded narrative reporting

Trustees’ Annual Reports are also likely to become more detailed. The updated SORP will place greater emphasis on areas such as: 

• Demonstrating impact. 
• Reporting volunteer contributions. 
• Sustainability and ESG disclosures (mandatory for Tier 3 organisations). 
• Clearer reserves and financial resilience reporting.

This means Trustee Boards will need to play a more active role in shaping the narrative around their organisation’s strategy, impact and financial sustainability.

Cash flow reporting

Under the new framework, cash flow statements will generally only be required for Tier 3 organisations or those that do not qualify as small company entities.  

This means some smaller Trusts may be exempt, although many larger MATs will still need to produce a full cash flow statement.

Preparing for the changes

While the new SORP will not take effect immediately, Academy Trusts may benefit from starting preparations now. Practical steps could include:

• Reviewing existing lease contracts and identifying if arrangements will likely appear on the balance sheet.
• Mapping income streams against the new five-step recognition model.
• Identifying which reporting tier the Trust is likely to fall within.
• Beginning to gather impact and ESG data and information that may be required in future reporting.

The updated Charities SORP introduces some of the most significant structural changes to not for profit reporting in recent years. By understanding the implications early and engaging trustees and finance teams now, Academy Trusts can ensure they are well prepared when the new rules come into force.

On Wednesday 11 March we hosted our Charity SORP 2026 accounting update webinar and it was great to see so many people join us.  The webinar, chaired by Lucy Hammond, also featured Coral Curtis and Kimberley Foulkes from our expert Charity and not for profit team.

Our webinar also included a Q&A section, allowing our attendees to ask their questions directly to our experts. You can watch the webinar here and download the slides here.