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The voice of Scotland’s vibrant voluntary sector

Published by Scottish Council for Voluntary Organisations

TFN is published by the Scottish Council for Voluntary Organisations, Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh, EH3 6BB. The Scottish Council for Voluntary Organisations (SCVO) is a Scottish Charitable Incorporated Organisation. Registration number SC003558.

Worried about changing SORPs in 2015?

This opinion piece is about 9 years old

Adrienne Airlie examines the accounting changes charities face with SORPs 2015

I have lost count of the number of times I have been asked this question by the finance charity teams of many of our clients. Nearly always under resourced, those teams now have to deal with a new accounting rulebook – but not just one rulebook – they have a choice of two!

Some would say that, in general terms, having a choice is great news – but not in this case.

So, what is the answer to the question? On the face of it, it appears to be quite straightforward;

The Financial Reporting Standards that underpinned Statement of Recommended Practice (SORP) 2005 in UK Generally Accepted Accounting Practice have now been replaced by new standards which align UK accounting more closely with international accounting standards, all summarised in one Document, the FRS102. For those smaller organisations the exemptions of the Financial Reporting Standard for Smaller Entities still exists until Jan 2016. That’s why we now have two SORPs.

It’s clear that looking at the new SORPs, and tracking the differences, will be time consuming for charities, but don’t worry help is at hand

However, as always the devil is in the detail – and in practice it is not quite so straightforward.

It’s clear that looking at the new SORPs, and tracking the differences, will be time consuming for charities, but don’t worry help is at hand. Our own charity team has examined both documents and has produced a handy guide, outlining the major changes that charities need to be aware of. This document will form the basis of my presentation to The Gathering on Wednesday 25 February 2015.

There are changes to the style of the financial statements, modified accounting treatments regarding income recognition and additional disclosure and policy issues around reserves, risk, and information relating to key management personnel, staff, trustees and related parties.

My colleague David Davison of Spence & Partners, pension advisers, will join me at the Gathering. He will cover the SORP changes and other sector developments as they impact on pensions.

One area where there has been major change is the impact of FRS102 on the disclosure of pension fund deficits, which most commonly for charities relate to Multi Employer Defined Benefit Schemes (MEDBs). A previous exemption, which existed in the old standard, FRS17, meant that liabilities were excluded from the accounts and only disclosed by way of notes to the accounts. That specific exemption has now been withdrawn and there is no doubt that this will cause charities no end of problems; particularly when coupled with changes to the basis of actuarial valuations, which we have seen being presented to charity boards late 2014 / early 2015.

So our session will have lots to cover.

But let’s go back to the question to assess what in depth, practical answers David and I will provide at our Gathering event. Hopefully our presentation will inspire you to look beyond the dry technical reply at the beginning of this article and give you the confidence to respond in a much more user friendly way.

So let’s try it again - why do we have to change to SORPs 2015?

To improve the quality of financial reporting by charities, enhance the relevance, comparability and understanding of the information presented in the accounts. SORPs 2015 will assist this by providing additional clarity on the use of accounting standards and how they apply to charity and sector specific transactions.

That’s better, isn’t it?

Adrienne Airlie is chief executive of Martin Aitken &Co Ltd one of Scotland’s leading accountants and business advisers to the charity sector. She will be presenting Charities SORPs 2015 (FRS 102 & FRSSE) at The Gathering at Glasgow’s SECC on Wednesday 25th February from 9.30am – 11am.



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Eric Marsden
almost 9 years ago
An excellent summary from Adrienne, who has been a regular speaker on charity accounting topics at conferences organised by the Association of Charity Independent Examiners, with the next due to be held in Perth on 21 August 2015.Further details available at:
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