Academies Accounts Direction 2025 to 2026 published

The Department for Education has just published the updated Academies Accounts Direction 2025 to 2026, along with updated versions of the Model Accounts and the Framework and Guide for External Auditors and Reporting Accountants.

These documents will apply to academy accounts for the period ended 31 August 2026 and are available to download from https://www.gov.uk/guidance/academies-accounts-direction

Main changes

This year the changes to the Academies Accounts Direction are relatively limited and include:

The removal of the duty to report trade union facility time
Some clarifications including:
- Payments in lieu of notice must be included within restructuring costs
- Related party disclosures include the salary and benefits paid to the principal/chief executive in their capacity as a staff member, where they have agreed to act as trustee
Increased guidance in respect of the disclosure of benefits for higher paid staff. Where a member of staff received less than £60,000 in the year, but would have received more than £60,000 pro rata on a full time or whole year basis, then narrative disclosure in the accounts note is required
Increased guidance in respect of the key management personnel disclosures, including a requirement to separately disclose accrued remuneration
Minor updates to the streamlined energy and carbon reporting text and the definitions of regularity and propriety
Narrative changes to the guidance on site improvements at church academy trusts, highlighting that the asset recognition criteria in FRS102 (including whether the academy has control over the portion of the asset improved) should be considered when deciding whether to recognise a site improvement in the accounts, even where the remaining site is not recognised as land and buildings in the accounts

Charities Statement of Recommended Practice (SORP)

The new Academy Accounts Direction also includes an annex in respect of preparing for the new Charities SORP, which will generally apply to academies for the year ended 31 August 2027. Academies are not permitted to adopt the new Charities SORP early, but they are being encouraged to assist the readers of their accounts by referencing the upcoming changes in the Trustees’ Report this year.

The two key changes in the Charities SORP, that will be reflected in the Academies Accounts Direction 2026 to 2027 are:

That all significant leases will need to be recognised on the balance sheet, replacing the previous distinction between the treatment of operating and finance leases
There is a new five step model for recognising revenue from contracts with customers. Whilst this is not generally expected to impact grant income (which is treated differently as a non-exchange transaction), academies will need to consider whether the new model applies to each different funding stream that they have

Recommendations for action now

The annex recommends that academy finance staff start preparing for the changes by reading up on the requirements and making sure leadership and governors are aware of the changes. Also to engage with their advisors and auditors to understand the impact of the changes and carry out initial impact assessments. They will then be able to take action to update processes and systems as necessary to accommodate the new requirements.

The annex also recommends academies give thought to the transition approach that they will adopt. In respect of the revenue recognition changes there is a choice whether to fully restate the comparative figures or to adopt a modified approach where just the opening balance position is updated. The annex comments that the modified approach would balance compliance with practicality and is likely to simplify the transition for academies.