Charities SORP

Application guidance for charity accounting

Consultation launch - 28 March 2025

Following an extensive development process, the SORP-making body has today launched its public consultation on the Exposure Draft SORP. The SORP-making body is seeking stakeholder views on key areas of change which will inform the final SORP.

Go to Public Consultation

Deadline for consultation responses is midday, Friday 20th June 2025

One of the principal roles of the SORP is to provide charity specific guidance on applying UK-Irish accounting standards when preparing a charity’s accounts. When changes are made to relevant accounting standards these need to be reflected in the SORP. In preparing the Exposure Draft SORP work has also been undertaken to improve the clarity and explanation the SORP offers and to advance charity reporting.

On 27 March 2024, the Financial Reporting Council (FRC) published the periodic review of FRS 102. The Exposure Draft SORP has been updated to reflect these amendments. Two key areas of change are in relation to lease accounting and revenue recognition. The SORP has been updated to provide sector specific guidance on these two changes. Although these changes are not being consulted on, feedback on how these are being explained in the SORP will be very helpful to ensure charities are clear about what they need to do. Charities are encouraged to start thinking about how to get ready for these changes.

Preparing for the new SORP – steps you can take now

Lease accounting

The current FRS 102 allows charities account for operating leases as an expense. The new FRS 102 will require charities to account for most operating leases on the balance sheet. As a result, charities that lease assets, will see an increase in assets and liabilities on the balance sheet. There will also be changes to how a charity presents expenses relating to the lease in the statement of financial activities.

The SORP-making body acknowledge that this will be a challenging area for charities to understand and to make the necessary changes. Charities must now consider how the changes impact them and apply the changes as necessary to all leases.

In readiness for the changes introduced by FRS 102 charities should:

  • Refer to FRS 102 and resources provided by the FRC
  • Review current lease arrangement
  • Establish whether current leases would qualify for any simplification i.e. short term of low value lease (see section 20 FRS 102)
  • Identify what leases will need to be accounted for on balance sheet (see section 20 FRS 102)
  • Identify and understand the approach that will need to be taken to identity the value for the leases and relevant transactions
  • Consider what record keeping would be helpful to implement now to assist with future preparation of financial statements
  • Consider whether the change in asset position on the balance sheet will impact any current borrowing or financial arrangements/covenants or planned future financial arrangements/covenants
  • Consider whether any potential changes in balance sheet asset value will result in the charity needing to have an audit
  • Seek professional advice if needed and consider speaking with auditors or independent examiners

Revenue recognition

The new FRS 102 Section 23 will introduce a five-step revenue recognition model for income from exchange contracts. This will mean that charities will need to recognise income from exchange contracts differently under the new FRS 102. Charities will need to carefully assess their revenue recognition accounting policies to ensure they are compliant with the new requirements.

In readiness for the changes introduced by FRS 102 charities should:

  • Refer to FRS 102 and resources provided by the FRC
  • Review current contracts and income streams
  • Identify both the amount and timing of income using the new 5 step mode
  • Consider what record keeping would be helpful to implement now to assist with future preparation of financial statements
  • Consider whether the change will impact any current borrowing or financial arrangements/covenants or planned future financial arrangements/covenants
  • Seek professional advice if needed and consider speaking with auditors or independent examiners

To see if a SORP applies to your charity, answer the following question:

Does your charity prepare accounts on an accrual basis?

Yes No