Following a public consultation in 2015, the charity SORP making body issued in February 2016 ‘Update Bulletin 1’ which amends the Charities SORP (FRS102) in a number of areas that were highlighted as part of the consultation process.
The areas updated include:
- Amendments to how stock held for distribution to beneficiaries should be valued
- Changes to the period over which goodwill must be written off
- Prohibition of the reversal of impairment losses of goodwill
- Changes to accounting methods for the merging of charities
Perhaps the most significant change in respect of many small charities relates to the definition of a “larger” charity.
Under the first draft of the Charities SORP (FRS102), “larger” charities had to add additional disclosure to the Trustees Annual Report, and a charity that was subject to statutory audit was deemed to fall into this category.
With the recent doubling of the statutory audit threshold in England and Wales from £500,000 to £1,000,000, something that Scotland has not followed, and appears unlikely to, we were going to have different requirements either side of the border. This discrepancy has now been eliminated by fixing the “larger” threshold at £500,000 rather than relating it to audit limits.
In addition, an exemption from the requirement to prepare a Statement of Cash Flows has been introduced for charities that are below the same “larger” charity hurdle.
There are no other exemptions or reduced disclosures for smaller charities however, which will be a disappointment to many who felt that the imposition of some of the aspects of FRS102 to smaller charities for accounting periods commencing on or after 1 January 2016 was perhaps excessive.
The bulletin confirms the withdrawal of the FRSSE SORP from January 2016, and the application of the amended version of the FRS102 SORP for accounting periods commencing on or after 1 January 2016.
The Bulletin did state that “Except where prohibited by regulations or charity or company law, the early application of the amendments made to this SORP is permitted for reporting periods beginning on or after 1 January 2015.” This indicated that the Bulletin could have been applied straight away, which would have been of benefit to those charities seeking to avoid preparing a statement of cash flows in their first year of applying the FRS102 SORP.
Unfortunately, however, the Scottish Charity Accounting Regulations refer to specific versions of the Charity SORPs, and the update Bulletin is only referenced in the latest amendment to these regulations which do not apply to accounting periods beginning before 1 January 2016. The outcome, as confirmed by OSCR, is therefore that in Scotland, the update cannot be ‘adopted early’.
Details of all changes can be found in the Bulletin which can be accessed at http://www.charitiessorp.org/media/642756/frs102-bulletin-1.pdf
If you wish to discuss any of the changes in more detail, please don’t hesitate to get in touch with us.