Charity statement of recommended practice (SORP) consultation

The review of FRS102 in spring of 2024 instigated changes to the statement of recommended practice (SORP). The update will reflect these changes and provide clarity and guidance on the impact on charity reporting.

The periodic review of FRS102 resulted in two key changes in relation to lease accounting and income recognition. Whilst the changes themselves are not part of the consultation, there is an opportunity to feedback on the clarity of the associated guidance within the SORP exposure draft. The release of the exposure draft also provides charities with an opportunity to think about how the changes will affect them. This includes what information they need to gather in advance of the effective date of 1st January 2026 and how well prepared they are.

In addition, the SORP-making body has also taken this opportunity to propose more wide-scale amendments to the SORP. In response to feedback from the sector, they have sought to ensure that smaller charities are served better by the SORP. And so, a system of “tiering” has been proposed.

The exposure draft proposes to introduce a three-tier system. With a view to financial reporting becoming more proportionate, it aims to balance the needs of stakeholders and recognise the importance of maintaining public confidence and trust.

The proposed tiered system is set out as follows:

• Tier 1 – charities with gross income of not more than £500,000 (EUR 500,000)

• Tier 2 – charities with gross income above the tier 1 threshold but not more than £15 million (EUR 15 million)

• Tier 3 – charities above the tier 2 threshold

The varying reporting requirements for each tier will impact the following modules:

• Module 1 – trustees’ annual report

• Module 4 – statement of financial activities

• Module 8 – allocating costs by activity

• Module 9 – disclosure of trustee and staff remuneration, related party and other transactions

• Module 14 – statement of cash flows

Other modules will be applied in full to all charities.

The deadline for responses to the exposure draft consultation is midday on Friday 20 June 2025. The SORP-making body will publish a summary of consultation responses in summer 2025. They will then publish the final SORP in autumn 2025.

We will be covering the proposed changes to the SORP during our annual Charity Conference at Buckfast Abbey on 19 June.