The albatross has finally landed, and on Friday 31 October the SORP-making body released the final Charity SORP 2026.
This 300 page tome of charity accounting was launched on Halloween.
Perhaps the timing was deliberate, and it was felt to be a difficult pill to swallow so could be sneaked in under the radar of high profile government and constitutional challenges. Or perhaps it was simply getting close to the end of the “Autumn” planned publication date. Nevertheless, we finally have a confirmed picture of what the charity statutory reporting framework will look like for UK and Ireland voluntary organisations.
The good news is that there appear to be no surprises. The draft Charities Statement of Recommended Practice (SORP) was released at the end of March this year, with a consultation period running to the end of June. While this draft did contain some fundamental changes from the previous accounting rules, the rules themselves incorporated the latest iteration of UK “Generally Accepted Accounting Practice”, specifically Financial Reporting Standard 102 (“FRS 102”). FRS 102 was published way back in September 2024, so we knew what was coming as it, importantly, continued the progression to alignment of UK accounting rules with international standards.
So what are the key changes, now confirmed? Should we be worried?
The first change relates to how charities account for property and other assets they lease from others. Many charities rent their offices or other property they use for their activities from third parties, and historically the regular rent payments have been recognised as a cost only when due for payment. The big change, which we can blame international standards for, is the requirement to now treat the remaining lease payments we are committed to make as a fixed asset, with a corresponding liability for these shown in creditors. As you can imagine, this will significantly change how the balance sheet of many charities will look, even if the impact on the annual income and expenditure will be more limited. Most people, I think, will consider this a trick rather than a treat.
The other big change confirmed now is how certain types of income are to be recognised. A complex five-step process is now mandatory and when applied where relevant, it could lead to income being brought into the financial statements earlier or later than it would have been previously. This does only apply to “exchange” contracts where a service is being performed, so charities in receipt of, for instance, investment income, donations or legacies should not have to worry about wrapping their heads around this one. For many other not-for-profit entities however, this could present some real challenges, and it certainly will not be a treat.
Other changes we knew were mainly presentation related, but in many cases will mean more, rather than less, to be disclosed in the financial statements. This will involve detailed consideration by management and trustees as to what is said in their trustees’ reports and notes to the financial statements. The extent of this should not be overlooked, especially by charities whose existing disclosure of such items may have been “sub-optimal”. This could be regarded as something of a treat if it provides more useful information to users of the financial statements, and should help boards be more clear about their policies on financial reserves and sustainability among other governance matters. Sticking with the theme, it should not involve dressing up for the sake of it.
When do the SORP changes come into affect?
The 2026 SORP applies for financial year ends from December 2026 onwards, and over the coming months we will be reviewing the new requirements in detail and advising our clients of what changes will be needed in their specific circumstances. Our aim for our clients is for the first year of financial statements prepared under the new standards not to impact the normal year end reporting timetable. We will advise management and trustees what they have to do, and when, to ensure appropriate compliance, and also giving time to engage with stakeholders such as funders where necessary.
The 2026 Charity SORP can be seen at https://www.charitysorp.org/documents/d/guest/charities-sorp-2026-1
Other official SORP-making guidance is available at https://www.charitysorp.org/
For more in depth CT insight , as well as guidance sessions on the new SORP, please keep an eye on our website or get in touch with your usual CT contact.
Author: Euan Morrison, Head of Charities
