Since 1 January 2016, all charities with accounting periods starting on or after this date have been asked to adopt a new SORP, based on the FRS 102 reporting standard. The Charity SORP Committee announced that all charities will have to follow an amended FRS 102 reporting standard, as the Financial Reporting Standard for Smaller Entities (FRSSE) will be abolished.
Prior to the new changes, the two SORPs operated independently under two different standards. The FRSSE had been implemented for small to medium sized charities that fall under the 2014 charity audit threshold, whilst the FRS 102 looked after medium sized organisations that required an audit.
As a consequence of these changes, the FRS 102 standard has been amended to benefit small to medium sized charities. Similarly to the FRSSE standard, FRS 102 will now include an update that allows for cashflow statements to be made optional when producing an audit. However, this will only apply to charities that have no more than an annual gross income of £6.5 million; whose total assets are less than £3.26million; and have no more than 50 members of staff. A threshold of £500,000 will apply to charities in the UK and €500,000 for those based in the Republic of Ireland. To add further, the committee also removed a statement in the definition of what is considered a larger charity so the SORP will be prevalent if there are any changes to the audit threshold.
The decision for FRSSE to be dropped was nearly unanimous, with 23 out of the 24 members of the SORP committee voting yes for the change. Ray Jones, Former head of Accountancy policy at ¬¬ the Charity Commission, stated: “For those that read the consultation over the summer, this decision by the SORP Committee is to be expected”.
“We believe that this will simplify the system for charities and will provide stability for charity reporting,” stated a spokesman from the Charity Commission.
Larger charities with an income above £500,000 will still need to follow the SORP despite the March announcement, which stated the audit threshold would increase to £1 million.