Consultation on the Charities SORP

CTG has responded to the Charity Commission and OSCR consultation on amendments to the Charities Statement of Recommended Practice (SORP) following changes in UK-Irish accounting standards.

The consultation ran for 6 weeks (until 4 April 2018) and focuses on 21 proposed amendments to the SORP which are considered necessary as a result of the changes made in December 2017 to FRS 102. These changes are to be made via a second Update Bulletin and include:

  • the introduction of an accounting policy choice for entities that rent investment property to another group entity
  • the clarification of the accounting treatment for payments by subsidiaries to their charitable parents that qualify for gift aid
  • the clarification of the requirement for comparatives for disclosures required by the SORP
  • the introduction of a requirement for a net debt reconciliation to be prepared as a note to the statement of cash flows

For the gift aid point, see Module 13: Events after the end of the reporting period in the Update Bulletin.

The draft Bulletin only deals with changes resulting from the updating FRS 102. Although these changes are not up for review, feedback on how these are being applied in the SORP will be very helpful in finishing the writing of the Bulletin.

The consultation is inviting comments on the draft Update Bulletin with 2 questions:

  1. Do you agreed with how the amendments to FRS 102 have been reflected in the proposed amendments to the Charities SORP (FRS 102) in draft Update Bulletin 2? If not, which of the proposed changes do you not agree with, and why?
  2. Are there any other amendments to the Charities SORP (FRS 102) that you consider to be necessary based on the recent amendments to FRS 102? If so, please state the amendment to FRS 102 and the relevant SORP paragraph(s)

**UPDATE – The Charity Tax Group’s response to the consultation can be read here.**

It notes:

CTG has often been approached by its members in recent years about the way in which their trading subsidiaries should account for corporate Gift Aid payments. So, while this issue is one of accounting treatment rather than tax, we are providing you with our perspective on this matter.

The key concern before the proposals in FRED 68 were published was that different auditing firms required different treatments from our members.  For those charged with preparing the accounts this caused much concern and led to many treatments that our members did not think made sense.

For this reason, we supported the changes proposed by FRED 68 as they would result in much needed alignment in accounting for corporate Gift Aid payments. However, we are concerned that the introduction of the FRED 68 proposals could result in confusion over the implementation of the new requirements.  This runs the risk of inconsistency that the proposals were meant to deliver us from.

We are therefore keen to see an implementation period for any changes relating to the FRED 68 requirements. It would seem to make sense for this to take effect for accounting periods beginning after 1 January 2019 – the same time frame as for the other changes in FRS102.

We also see the need for clear guidance about how the changes should be implemented, be that from the Charity SORP-making body or the FRC itself.  At the moment, this issue seems to be falling between stools. While it can be argued that this is a ‘for profit’ accounting issue it has deep importance for charities and we would be grateful if the SORP-making body could champion the need for implementation guidance.

Furthermore, we are concerned that the implementation of the new requirements might be considered to be no more than a clarification of the treatment that should always have been adopted.  This suggests that accounts where a Gift Aid liability was accrued for as a constructive obligation were prepared in error, which we do not believe was the case.