Regulators invite feedback on proposed changes to Sorp accounting standards

The Charity Commission and the Office of the Scottish Charity Regulator want to change the Sorps so that charities have to prepare statements of cash flows if they have incomes of £500,000 or more

Accounting standards changes consultation
Accounting standards changes consultation

Charities are being asked for feedback on proposals for changes to the Sorp accounting standards that would require them to prepare statements of cash flows if they have gross incomes of £500,000 or more.

Two statements of recommended practice are currently used by charities – one for charities that use the Financial Reporting Standards for Smaller Entities, which is generally used by smaller charities and is being withdrawn, and one that is based on a reporting standard known as FRS102, which can be used by everyone.

The Charity Commission and the Office of the Scottish Charity Regulator, which jointly oversee the two Sorps, have opened a consultation on changes to accounting standards that will be necessary because of changes to UK accounting practice.

This includes the withdrawal of the FRSSE standard, which charities will not be able to use if they have financial years beginning on or after 1 January 2016.

Statements of cash flows are optional under the disappearing FRSSE standard, which can be used if a charity meets two of the following three criteria: it has a gross income not exceeding £6.5m; it has total assets not exceeding £3.26m; it has no more than 50 staff.

The proposals put forward by the regulators make tweaks to the remaining standard, the Charities Sorp (FRS102), which in its current form makes statements of cash flows mandatory. The proposals would make them mandatory for charities with gross incomes of at least £500,000 a year.

Nigel Davies, head of accountancy services at the Charity Commission and one of the joint chairs of the Sorp Committee, said: "We hope that sector practitioners and users of the accounts will agree with our proposed response to the changes the Financial Reporting Council is making to UK accounting from 2016. Your participation in the consultation exercise is very important to ensuring that the solution is the best one possible."

The consultation runs until 18 September and more information can be found here.

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