Charity Accounts Update (SORP FRS 102 Information Sheet 1: Implementation Issues)

In the past the Charity SORP making body has produced “information sheets” which “seek to clarify the application of the SORP or particular recommendations contained within the SORP”. Information Sheets are advisory in nature and do not form part of the SORP, however, they are considered ‘best practice’ in terms of application of the SORP.

In April 2017 the SORP making body published “Information sheet 1 – Implementation issues” (in addition to the Help Sheets and Update Bulletins they have previously published) which contains guidance regarding interpreting and applying the requirements of the FRS 102 SORP and which should be applied immediately.

This Information Sheet covers various points of clarification and some of the key ones all charities should  be aware of are as follows:

Statements of Cash Flow

Parent and subsidiary charities may take advantage of the provisions of FRS102 which state that a parent charity can be exempt from preparing a Statement of Cash Flow in its individual financial statements that are presented alongside its consolidated financial statements. Similarly, a subsidiary charity is exempt from preparing a Statement of Cash Flow in its individual financial statements, where this statement is included in the consolidated financial statements of the parent. If you take advantage of these exemptions, you do need to disclose this.

However, for Scottish charities, while technically it is possible to take this exemption, it appears that it was not the intention of the Scottish regulations to reduce disclosure in this way, and accordingly it is recommended that it not be used for Scottish charities at present until clarified by OSCR.

Fundraising disclosure brought in by the Charities (Protection and Social Investment) Act 2016

Charities in England and Wales only must include extra information on their fundraising practices in the trustees’ report under provisions of section 13 of the Charities (Protection and Social Investment) Act 2016 (‘the Act’). Further guidance about the particular disclosures required can be found in Charity fundraising: a guide to trustee duties (CC20) and Charity reporting and accounting the essentials November 2016 (CC15d) as issued by the Charity Commission for England and Wales.

The provision applies to charities registered in England and Wales which must have their accounts audited by law, and applies for reporting periods beginning on or after 1 November 2016, although it may be applied early.

Comparative figures for fund disclosures

FRS102 itself (not the FRS102 charity SORP) states that “an entity shall present comparative information in respect of the preceding period for all amounts presented in the current period’s financial statements”. The SORP making body has interpreted this as requiring comparative figures to be provided when making the disclosures required for the summary of assets and liabilities of each category of fund of the charity and for the detail in the movements in material individual funds.

The Information Sheet notes that analysis of charitable funds should therefore, include fund movements from the beginning of the prior reporting period to the end of the prior period; and from the beginning of the current reporting period to the end of the current period.

This would clearly add to the already extensive fund reporting in the notes to charity accounts, and it is difficult to see that adding detailed information from the previous year improves clarity to the user of the accounts. We shall review interpretation of this particular element of the Information Sheet by the sector and consider application when use in practice becomes clearer and when the interpretation is clarified by OSCR.

Aggregate disclosure of the total amount of donations received without conditions

The SORP requires all charities to provide an aggregate disclosure of the total amount of donations received without conditions. Disclosure is considered only to be necessary if the total amount of donations received from trustees or related parties without conditions is judged to be material in the context of the total income from donations and legacies.

Inclusion of Employers NIC as part of employee benefits

When calculating “employee benefits” for the disclosure of remuneration and benefits received by key management personnel the definition of employee benefits should be in accordance with FRS 102 itself. Employers National Insurance Contributions should therefore be included where employee benefits are disclosed as part of KMP remuneration.

Where you are disclosing the numbers of employees that receive employee benefits of more than £60,000 however, employers NI should be excluded (as employer pension contributions currently are).

Other Topics included in Information Sheet 1

In addition to the matters discussed above, the Information Sheet also includes commentary relating to:

  • governance costs;
  • treatment of funding “clawed back” by funders;
  • exemptions from disclosure of related party names;
  • treatment of losses on disposal of assets;
  • and the company charity requirement for a fair value reserve.

Should you require to discuss any of the matters contained in the Information Sheet, or have any queries regarding the charity SORP, please contact Euan Morrison at