In the bulletin, published on 5 October 2018, a number of changes are made to the existing SORP as a consequence of the triennial review of FRS 102, produced by the Financial Reporting Council (FRC) in December 2017. The 20-page document, which acts as an addendum to the existing SORP, includes changes to the way that gift aid is accounted for, a clarification of the existing comparative information requirements, and the addition of net debt reconciliation to a cash flow statement. 

The SORP has been adapted to clarify existing requirements for comparative information. It is now the case that ‘comparative information must be provided for all amounts presented in the current period’s financial statements, which includes the notes’. Charities are required to provide comparative information for all amounts presented in the accounts and notes to the accounts ‘unless otherwise stated in FRS 102’.

Amendments have also been made to cover ‘the recognition of payments by subsidiaries to their charitable parents that qualify for gift aid’. FRS 102 requires that such payments are accounted for consistently with dividends, which is recognised when the shareholder’s right to receive payment is established. This means that gift aid payments should not be accrued in the accounts of the parent charity ‘unless a legal obligation for the subsidiary to make the payment exists at the reporting date’.

A significant change has been made to the standards for measuring the cost or fair value of an investment property. It is now a matter of choice whether properties are measured either at cost, less depreciation and impairments, or at fair value. According to the bulletin, ‘A charity that rents investment properties to another group entity may choose to account for those properties in its individual financial statements either: at fair value with any gain or loss taken through the [statement of financial activities (SoFA)]; or transfer them to tangible fixed assets, and measure them using the cost model.’

In Module 14, the SORP is amended to incorporate the requirement for the reconciliation of net debt to be included as a note to the statement of cash flows: ‘When several balances (or parts thereof) from the balance sheet have been combined to form the components of opening and closing net debt, sufficient detail shall be shown to ensure users can identify these balances.’ The bulletin also provides an example format for this.

The amendments set out in the update apply to all charities in the UK and the Republic of Ireland that follow the Charities SORP (102) and are ‘applicable for accounts of relevant charities for reporting periods beginning on or after 1 January 2019. Except where prohibited by regulations or charity or company law, the early application of the amendments made to this SORP is permitted provided that all of the amendments are applied at the same time.’

This requirement has been relaxed slightly from its exposure draft. In the exposure draft, amendments to Section 3 of the bulletin would be effective immediately on publication of the final bulletin. In the final version, this has been modified so that the amendments only apply for periods beginning on or after the date of the publication of the bulletin.

Anne Cowley ACA, senior technical writer for Croner-i Tax and Accounting, said: 'This change represents a much more reasonable approach for charities because it gives them more time to implement those amendments, particularly in relation to the clarification on treatment of Gift Aid payable to parent charities by charitable subsidiaries.'