The Sorp revision: Financial instruments

By finance expert Don Bawtree

 Don Bawtree
Don Bawtree

The consultation period for the revised Sorp has ended, but you can still plan for some changes that will happen anyway. One such area is financial instruments, where the new rules arise because of FRS 102, not just the Sorp.

In future, charities will need to identify if they have financial instruments and then work out how to account for them. The good news is that most of them are defined as 'basic', and not much changes. So items such as cash, debtors and leases will probably be treated as before.

But there are two pieces of bad news. First, any financial instrument not classified as basic is automatically 'complex', and has to be brought into the accounts at fair value. So someone has to identify these items and arrive at a valuation. Examples include certain interest rate swaps and advanced-fee schemes.

Second, some financial instruments are 'embedded' - built into other arrangements but still valued separately. You will need to separate them out and put them on the balance sheet, with any movement in value affecting the Sofa.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus