From 1st January 2015 there will be two new Statements of Recommended Practice (SORP) for charities. The last SORP was released in 2005 and the new guidelines will see significant changes for charities operating in the UK.
There are two new versions; FRS 102 which applies to large charities, and FRSSE SORP for smaller charities. There are simple guidelines to follow in order to decide which practice applies to each charity. To follow the FRSSE SORP they must fit into two of these categories:
- Have no more than 50 employees
- Have a balance sheet total of no more than £3.26 million
- Have a turnover of less than £6.5 million
However the FRSSE is due to be reviewed in 2016 which will therefore change the current SORP, possibly making the guidelines different for small charities that currently follow the regulations.
There are key differences between the two statements too. FRS 102 requires charities to produce financial documents such as a cashflow forecast, it also requires revenue recognition and an accrual for short term employee benefits.
As the statements are so different it is important that charities decide which applies to their organisation, there is no option to choose different elements from both practices. If a charity doesn’t fit into the FRSSE SORP guidelines then they must solely follow FRS 102.
After SORP 2005 was released the guidelines weren’t clear for smaller charities therefore most charities in the UK followed the FRS option. The new statement of practice should see smaller charities following guidelines more suitable for their size.
MCC are small business accounting specialists working with a range of sole traders, limited companies and charities. For more information on the services that we offer call us on 0161 707 1500 we will be happy to answer any queries you have.