The Future of the SoRP
For reporting periods commencing on or after 1st January 2015, we finally say goodbye to the long serving 2005 Charities SoRP with the transition to the new dual SoRPs.
Small Charities which meet the criteria for applying the Financial Reporting Standard for Smaller Entities, can chose to either adopt the new UK GAAP (Generally Accepted Accounting Practice) compliant Charities SoRP (FRS 102) or they can adopt the new GAAP old GAAP hybrid Charities SoRP (FRSSE).
Those opting to take the FRSSE should however be aware this SoRP is likely to have a one year shelf life for periods that commence from 1 January 2015 to 31 December 2015. Those adopting the SORP (FRSSE) will therefore face two changes to reporting in two years – a prospect which is making many small charities adopt the SoRP (FRS 102) on a voluntary basis. The FRSSE itself will be made redundant in 2016 with FRS 102 having a new section inserted for small entities to completely remove the need for a separate reporting standard. The sector is now left to consider either a return to the single SoRP or to maintain the dual SoRP approach.
The belief of the Charity Commission is, there are likely to be differences between what a small entity would disclose, when compared to the requirements of full FRS 102 compliance under the new regime.
Other areas of change from this consultation are around the definition of a ‘larger charity’ in the SoRP and areas around transparency. As noted in the article “Changing Audit Thresholds” the definition of a ‘larger charity’ has always been geared to the audit thresholds. The feeling of the Charity Commission is that they would wish to retain the £500,000 income level as the definition of a ‘larger charity’, the £1,000,000 income level represents only 4% of UK charities who would have to make the additional disclosures which is a level of transparency the Charity Commission believe is harmful to public trust in the sector. It is therefore very likely that the next incarnation of the SoRP be it in single or dual format, will look to remove the connection between audit thresholds and the ‘larger charity’ definition, most likely reverting back to the £500,000 income level.