Britain’s charity regulators will consult later this month on scrapping a separate Statement of Recommended Practice for small charities, the head of accountancy services at the Charity Commission has said.
The Charities Statement of Recommended Practice, or Sorp, is the set of specialist accounting rules which governs charity accounting. It interprets the rules governing accounting for bodies in the UK which are not publicly listed.
Nigel Davies, head of accountancy services at the Charity Commission and chair of the Charities Sorp Committee, wrote in this month’s Charity Finance magazine that a consultation will be launched later this month by the Sorp-making body, which consists of the Charity Commission and OSCR, the Scottish Charity Regulator.
At present there are two sets of rules governing UK accounting – FRS 102, for larger entities, and the Financial Reporting Standard for Smaller Entities.
When a new Sorp was introduced last year to interpret these rules, the Sorp-making body decided that each of these standards should have its own Sorp.
Charities may use the FRSSE Sorp if they can satisfy any two of three conditions: their income is under £6.5m, their total assets are under £3.26m, and they have less than 50 staff.
However the Financial Reporting Council, which governs UK accounting, has now announced that the FRSSE is being removed in 2016. It will be replaced with a series of opt-outs from FRS 102 for smaller organisations.
The Sorp-making body will consult in mid-June on how to change the Sorp to comply with these changes in the rules.
The option to be put forward would be to scrap the option for smaller charities to use the reduced disclosures, and make them follow the full FRS 102.
“Having carefully considered the Financial Reporting Council’s proposed amendment to FRS 102 (inserting a new section for ‘small entities’ as a replacement for the FRSSE), we believe that the differences are marginal in terms of what will have to be disclosed by a small entity, as compared to what is required for full FRS 102 compliance,” Davies wrote.
“We therefore plan to consult later this month on simply dropping the ‘small entities’ option altogether as the preferred alternative to offering a replacement to the Charities Sorp (FRSSE).”
Don Bawtree, head of not-for-profit at BDO, said he felt the Sorp-setting body’s proposals were not likely to be controversial.
“There is a sense of resignation around this,” he said. “We always knew the FRSSE had a short shelf life. It is outside the Commission’s control. It is coming from the FRC.
“I don’t think that following the FRS 102 Sorp will be a huge amount of extra work for smaller charities. A lot of smaller organisations are already following it voluntarily.”
- More information on how charities can comply with the two new Sorps is available in the Charity Finance Sorp Compliance Checklist. This can be purchased here.