Author Archives: Martin Bailey - Partner

Following the publication of the consultation draft of SORP 2026, charities across the UK are taking stock of what the proposed changes could mean for them in practice. This session covers the key proposals and what they might look like in practice.

WEBINAR: Charities SORP 2026: Proposed Changes and How to Prepare

Martin Bailey - Partner - mbailey@goodmanjones.com

Posted on 1st May 2025

Categories:

• Charities & Social Businesses
• News
• Tax

SORP 2026 webinar slides

Transcript

So let’s start with the background to why we’re here on this webinar today. So as a reminder, charities must adopt FRS 102, so the financial reporting standard one zero two, which is the prevailing accounting framework within The UK. And the FRS 102 is subject to periodic review by the Financial Reporting Council. And the Charity SORP takes FRS 102 and then applies that specifically for charities. So whenever FRS 102 is updated, the Charity SORP then also must be updated. And charities that prepare accounts on an accruals basis must follow UK GAAP.The micro entity regime and IFRS are not available for charities, and so all charities must follow FRS 102 and the charity SORP. And in terms of timeline, so we’re a couple of years later than initially planned. So the the SORP was due to come out back in 2024. It was the consultation version was published at the March 2025, and the consultation is open until the June 20. The SORP will then be reviewed and revised if needed over the summer.
And in the autumn, October, November time, we are expecting the final version of SORP 2026 to be published following its approval by the FRC. And it will be effective for accounting periods beginning on or after the 01/01/2026. Now early adoption is permitted. I’m not sure how many will early adopt given how close we will get the final version to the effective date, but early adoption is permitted. If you do wish to early adopt the new SORP, then you must also early adopt the new FRS 102.
There are three possible outcomes. The thresholds will remain at their current levels. They will rise in line with the consumer price index with housing, or there’ll be a partial increase. Every financial threshold is being considered as listed here. However, the thresholds that we’ll be focusing on are the ability to prepare receipts and payment accounts, independent examinations, audit, and large charities.
We have a table that shows the three consultations in separate columns. So the first column shows the current up the current thresholds, the second column shows us the inflation increase, and option c shows us the partial increase. The figures in the table show income with the exception of large charities, which relates to total assets. These thresholds are for entities within England and Wales, and it’s important to note that Scottish charities are required to have an order at £500,000 It was announced that the Scottish government were committed to raising the threshold to 1,000,000 to align with England and Wales. However, this was before this consultation all started, so we’re unsure where the the outcome will end up.
There’ll be three separate tiers for the reporting requirements based on the turnover of the charity. Tier one being up to £500,000, tier two being between £500,000 and 15,000,000, and tier three being over 15,000,000. The £15,000,000 threshold aligns with the new small company turnover threshold. However, it’s important to note the difference between within the company size thresholds you have to meet two requirements. Here, it’s just the one.
The tiered system will mean that the concept of large charities will effectively disappear. Tier one charities will be able to use natural classification basis, whereas all other tiers must report on an on an activity basis. The disclosure requirements will be that all tiers must disclose what was required in the lower tiers plus any additional items. Just a reminder that within the SORP there are must, should, and may phrasing within the SORP. Must is mandatory, should is recommended but not required, and may are optional.
There is a balance to be struck between including the appropriate amount of information around material balances and not including additional unnecessary information around non material transactions. The SORP can be quite specific about which items are considered to be material. And that’s really it for tiered reporting. Thank you, Emma. So we’re going to move on to one of the next key updates, within the SORP.

I always think that’s because it’s possibly the most important part of the final financial statements. It’s an opportunity for a charity to tell the story and to explain what’s happened in the financial year, not just the numbers, perhaps putting some meat on the bone. And, where the numbers have the framework, but the report, gives the full story. Now the purpose of the trustees report is to ensure that the charity is accountable to its stakeholders and to communicate in the most helpful way. And the exposure draft or the proposed, changes does this, by using a series of prompt questions such as who are the users of the account, what are the information needs of those users of the report.
And as I say, the trustees, report is one area, of the exposure draft that has seen significant change from the existing, SORP. It’s an area where what we have and it’s interesting because it’s an area where what we’ve seen, under the current SORP that’s required, of larger charities is now being proposed, to apply to all charities, and they all we will see this a fair bit throughout, and not just the trustees report, but the rest of the, the rest of the changes. So the significant changes, as I put up there, the the five main ones are impact reporting, sustainability reporting, use of volunteers, our friends reserves, and plans for the future. So impact reporting. Now this was, discussed when, for inclusion in the current SORP, but was ultimately not made compulsory there.
But there is now much greater emphasis on charities reporting on the differences that they are making. And, the new SORP proposes that charities in all tiers must explain how their work has benefited society as as a whole. So that’s not just larger charities that, that we’ve seen at present. So how have how have, the char how’s the charity made a difference to the circumstances of its beneficiaries, and has the charity’s work provided any wider benefit, as I say, to society as a whole? The larger charities in tiers two and three have to provide a summary of the measures, or indicators used to assess their performance, and explanations required of the outputs achieved by the charities’ activities, especially when numerical targets have been set.
So, for example, the number of beneficiaries reached or, perhaps a number of events that have taken place. Information on activities, outputs, and outcomes, and how they’ve been, contributed to the achievements of the, charity’s aims and objectives needs to be disclosed. And you need to report on the positive and negative factors, as we do at the moment, that have affected the achievement of the objectives and how this might a few, affect future plans. As I say, this is very familiar to, larger charities, but it’s it’s proposed that this, applies to all. So, tier tier three then have to go on to talk about the performance of material fundraising activities set against, fundraising objectives.
And if the material, if there is a material expenditure incurred to raise that income to explain, how it, how its effect will impact not just this year’s, but also future, future years reporting. Sustainability reporting. I mean, we this reflects society’s increasing awareness of an interest in environmental governance and social issues. And the SORP proposes that, charities in tiers one and two are encouraged to explain how they’re responding to and managing environmental governance and social matters. For example, it might do it by using, KPIs to assess progress against targets, used to manage climate related risks or something like that, and details on how they calculate it.
And in governance, for example, it might include details of social opportunity or or diversity, privacy policies perhaps, or business ethics. And this becomes a must for tier three. Now this is a must for the very, very large charities, but as we’ve seen in, this council, what has been applied to large charities in the past often filters down to the smaller ones. And indeed tier one and two, charities are encouraged to make this disclosure. Volunteers.
Now recurrent SORP requires all charities to disclose a description of the role played by volant volunteers in module six. But the new SORP moves some of this disclosure to the trustees report itself. So that’s all charities disclosing the role played by, volunteers. Tiers two and three, it suggests, should, provide a little bit more detail by providing the number of charities and where practicable, their contribution expressed in terms of full time equivalent hours. Just to note the, existing requirements as set out in module six are still required in the notes.
Reserves. This is an area of interest to many stakeholders and is but is often misunderstood or complicated by the various terms used. Therefore, the news source has updated their glossary in appendix one. And now, as as we’ve seen before, requires all charities to include a reconciliation from the reserves shown in the trustee’s report to those in the accounts. And if there are no reserves held, you need to explain how the charity is still a going concern.
All charities are now required to compare reserves with the reserves policy and explain what steps the charity is taking to bring the amount of reserves into line with the level of reserves identified by the trustees as appropriate given their plans for the future. All charities are also required to identify and explain and, any designated or committed funds and indicate the likely timing of that expenditure. And finally, plans for the future. All charities must now provide a summary of their plans for the future. This has been extended to all charities, whereas it currently is just the larger ones.

So the column split by fund and should include total, subtotals, and reconciliations. Please note that natural classification basis does not remove the disclosure requirements in other module such as trustees remuneration, related party transactions, and key management remunerations. These disclosures are still required. There are some changes to income presentation as well due to the changes in leases, which will be covered in module 10 a little later on. Income from donations and legacies now include grants and donations implicit in the lease arrangement where the charity, a lessee, benefits from a lease term where the lessor made the lease at significantly below market value rates.
Investment income now includes finance income on the net investment in a lease and income from operating leases. Any variable lease payments which are not included in the measurement of the net investments in the finance lease are now included as investment income as well. Other income now includes income from subleasing, right of use assets, and now excludes gains on disposal of programme related investments covered in module 21 a little later on. This is an example per the SORP of the expenditure on tractable activities note layout. As you can see, it now has the activities on a row on rows in on the left and along the top.
Columns are direct are split by direct support and grant funding. This is an alternate suggestion as well, the diagram on the slide currently. And this details where accounting policies can now be put into a column at the end if you choose to do so. This concludes changes to the sofa. Lovely.
And there are the SORP has done this by splitting module five into two sections. Section one looks at exchange transactions, which is, basically contract income, and section two looks at nonexchange transactions, where there haven’t been very many changes, but there is enhanced guidance and explanatory notes within the SORP to help people with their decision making and recognition. So we’re going to focus on looking at the changes brought in, by FRS 102, section 23 on revenue, which establishes a five step revenue recognition model for accounting for contract income. And this very much aligns FRS 102 with IFRS. So the current SORP deals with contract income in just over a page.
The new SORP deals with accounting for contract income in 10 pages. I don’t actually expect that we’ll see too too, many changes in terms of the outcome. I don’t think we’ll see a radically different, figures of with respect to contract income recognition. But the method and the way that we get there and how what we need to demonstrate to show how those amounts have been recognised in accounts has changed. So as mentioned, we now have a five step model.
Step one is to identify the presence of a contract with a third party. Step two is to identify the performance obligations in the contract. Step three is to determine the transaction price. Step four is to allocate the transaction price to the performance obligations in the contract. And step five is to recognise income when or as the charity satisfies the performance obligation.
So in terms of step one, identifying the presence of a contract. So a contract is an exchange transaction. It’s an it’s an exchange arrangement with enforceable rights and obligations on the part of the third part party and on the part of the charity to provide certain goods and or services. And the contract is an agreement between two parties that creates those enforceable rights and obligations. And it’s important to note that a contract can take many forms.
It can be a a full written document. It may be verbal, or it may be in another form such as the listed terms of agreed terms of sale in a shop. So what do we have to look for? So a charity must apply the revenue recognition model to account for contract income when a contract, with a third party and when all of the following criteria met. So the parties to the contract have approved it and are committed to performing their respective obligations.
So the charity will be providing the goods and service, and the third party will be, providing the giving the charity consideration in return. That the charity can identify each party’s rights regarding the goods or services to be transferred, the payment terms for the goods or services, can be identified, that the contract has commercial substance, so I. E. The risk, the timing, the amount of the charity’s future consideration, and future cash flows as a result of entering into the contract, are expected to change. And finally, it’s probable that the third party will have the ability and the intention to pay the consideration to which the charity bill will be entitled when it’s due.
Now it is possible that during the life of a contract, there may be scope to the price or to the nature of the goods or services to be provided. And so then it’s important to review whether that’s a modification to the contract or whether it is a new contract altogether. If it’s a modification, then charity should refer to section 22 reference one zero two for those, for the guidance on that. If it’s a new contract, then you apply the full five step process to that new contract. For it to be a modification, then the increased scope or change of the price of the contract can’t be too too significant.
If they are significant, then it would be considered to be more of a new contract than a modification. The second step is to identify the the performance obligations within a contract. Now for charities that receive performance grants, this is probably not too dissimilar here. And so a charity must identify as a performance obligation each promise to transfer to the customer either a distinct good or service or a distinct bundle of goods or services or a series of goods and services that are substantially the same and that they have the same pattern of transfer to the third party. And it talks there in the in the step about a charity must identify as a performance obligation each promise.
And the SORP patch goes into detail about what is meant by a promise. So it might seem a bit strange to define a promise. But if we remember, a contract may be verbal, so there may not be written down terms and conditions, etcetera, if we have a verbal contract. So in terms of we need to make sure that we’re happy, that there is a promise on both sides around transferring the goods or services and the consideration. And the SORP talks about the promise being a valid expectation that the third party, of the third party that the charity will transfer the goods or services.
Now those promises may be implied. It may be just the charity’s customary practice, or the charity may have published policies or procedures or published terms of sale, etcetera, on its website, to its shop, and its premises, etcetera, that will provide some written backup and allow verification of that promise. Step three is to determine the transaction price. So the transaction price is the amount of consideration to which the charity expects to be entitled in exchange for transferring the goods or services consideration promised in a contract mainly the variable amount, and that variable amount will be the one that’s most likely to be received, and that assessment needs to be made at the beginning of the contract. So if the contract includes any penalties, any performance bonuses, any retrospective rebates, etcetera, perhaps rare for a charity, but not on not impossible, then consideration of the likelihood of those should be done at the beginning of the contract and then throughout the contract period as well.
And if a charity offers payment terms to a third party that defers payment beyond normal business terms or it’s financed by the charity at a rate of interest that’s not market rate, then that arrangement may constitute a financing transaction as well. And so the charity must account for the time value of money and discount the consideration and the amount that of consideration that the charity would expect to receive from the third party. And it’s important to note that if the the charity does have those arrangements, then that interest income that comes on accounting of the time value of money must be shown separately from the value of contract income in the sofa. They can’t be combined together. And a charity doesn’t need to adjust the amount of consideration and reflect the time value of money if it’s expected when the contract begins that the third party will pay for those goods or services within twelve months.
Step four is to allocate the transaction price to the performance obligations in the contract, and the charity must allocate the transaction price to each performance obligation identified in the contract on a stand alone selling price basis unless the contract either only contains one performance obligation, in which case the full transaction price price is allocated to that, or if all the performance obligations in the contract are satisfied at the same point in time. Now if there are no observable stand alone prices, then these must be estimated using a suitable estimation to make, and the SORP then provides three options here. The first one is an adjusted market assessment approach. And this is where the charity evaluates the market in which it sells the goods or the services, and it estimates the price that the third party would pay in that market for those goods or services. Another option is the expected cost plus margin approach.
So a charity would forecast its expected costs of transferring the goods or services to the third party and then add an appropriate margin for doing so. And the final option is the residual approach, and this is only available if the standalone selling price of a good or service is highly variable or uncertain. And then the charity may estimate the selling price by reference to the total transaction price less the sum of any observable or estimated stand alone prices promises promised in the contract. Now the residual approach is is going to be, is considered to be very rare. It’s unlikely to be appropriate.
But if either of the other two, the adjusted market assessment or the expected cost plus, approach didn’t work, then the residual approach would be the one to use. And that would look at something like so for example, if a contract had five performance obligations and you could attribute a standalone selling price to three of them but not the other two, you would take the total transaction price on the contract. You would remove the three standalone prices that you can do, and then you’d use a residual approach to allocate the rest across the two remaining performance obligations. And any discounts in a contract are applied proportionately across all performance obligations unless any of them relate to a performance obligation or if it’s felt that there’s a fairer, method that would provide a fairer presentation of the amounts the charity is recognising in terms of discounts. But, generally, discounts will be recognised proportionately.
And step five is to recognise income when or as the charity has satisfied the performance obligations. So you must recognise income when or as the charity satisfies the performance obligation by transferring the promised goods or services to the third party. And they are transferred when the third party obtains control of those goods or services. And control refers to the ability to direct the use of or obtain substantially all the remaining economic benefits that may flow from that asset. And for each performance obligation identified, a charity must determine at the beginning of the contract whether the performance obligation is satisfied over time or satisfied at a point in time.
So there’s no real change here in step five. It’s looking at recognising and think about the point where substantially all the economic benefits have transferred. So no real change. So those are the the new five steps, within the new revenue recognition model. As I say, I don’t actually expect there to be a radical change in terms of the level of income that charities will record and recognise for their contracts, but the method of getting there and the assessment to get there, is different.
And there’s quite a lot of technical language within there. As I think you’ll have seen, it’s not always the most straightforward language to read and follow and understand. But once you get your head around it and work through, I think we’ll see that there’s no no major changes. One other point just to be aware in terms of exchange transactions is around membership subscriptions. So membership sub subscriptions can be in two two types.
They can be exchange transactions, or they can be nonexchange transactions. A nonexchange transaction being effectively a donation or a gift. But in terms of membership subscriptions that might might be considered an exchange transaction, then the charity needs to identify how it fulfils its performance obligations to the member and how that is linked to the member benefits that are drawn down. So where a charity has membership subs, it needs to look at what benefits or what rights does having that membership give to the member. And then then if that’s considered to be an exchange transaction, then it must follow the five step process that we’ve just been through.
And so it must select, a method that best reflects the situation. And the SORP suggests that one option could be recognising income on a straight line basis. Now recognising income evenly over a period is not, something that’s that the SORP and previous versions of the SORP have have generally allowed previously. And the SORP gives an example here of a membership subscription that allows the holder to visit historic gardens or properties. Now it doesn’t know how often that individual is going to visit, the the sites.
It doesn’t know how many times. And so because all of that is unknown and with the numerous number of members as well, it’s almost impossible for the charity to make that assessment. And so a a fair mechanism here might be to recognise income in a straight line basis over the membership period. Now if those gardens were perhaps only open March until September, it might be that the income is recognised within those periods and not outside of those periods. In terms of the transition arrangements, there are two options here when applying the five step model, in term because that model is applied retrospectively.
So what we have to do is we have to apply it to the previous accounting period, as well so that the comparative figures are present presented, on a fair and consistent basis. But the SORP gives us two options here in f r s one. No. Two gives us two options as well here. So the first one is that the cumulative effect at transition is recognised by adjusting opening reserves.
So in this case, you wouldn’t restate your comparatives. Reserves. So in this case, you wouldn’t restate your comparatives. You would apply the five step model to contracts that have not been completed at the date of transition. And there’s also the option to take advantage of what FRS 102 calls various practical expedients.
And so what does that mean? So it gives you the option to for completed contracts, you don’t need to restate those contracts. For contracts that begin and end within the same annual reporting period, you don’t need to restate those. And any contracts that were completed at the beginning of the earliest period presented don’t need to be restated. So any contracts that were completed before the beginning of the comparative year don’t need to be considered.
For completed contracts that have variable consideration, then the SORP allows you to use the final known transaction price rather than applying judgments at the beginning and trying to use estimates of what you think the transaction price will be when you already know that because the contract is finished. So it allows you to use that completed transaction price. And for contracts that were modified before the date of initial application, but not complete by that date, then an entity need not retrospectively restate the contract for those contract modifications. You can just apply apply the end point as though those modifications all occurred at the beginning. So that’s option one.
We do the restatements, but we just amend opening reserves. Option two is that we restate comparatives as though that policy and that accounting model has always been in place. And we disclose where practicable the amount of adjustment to revenue and to profit and loss for the effect of applying the model. And we give an an explanation of the reasons for any significant changes, or we need to disclose why those that explanation cannot be disclosed, and that’ll be perhaps because it’s not been practical to quantify it. So that wraps up the the slides looking at the change to exchange transactions and contract income.
So grant income must be recognised as follows. So transactions that don’t impose any specified future performance related conditions are recognised in income when the amount is received or receivable. And transactions that do impose future performance related conditions are recognised when those performance conditions have been met. So any resources that are received or receivable before the performance conditions are met, then the liability is recognised, I e, the income is deferred and held in deferred income on the balance sheet. Just so just for clarity.
So for a grant without any performance conditions, it’s likely that when a formal offer of funding has been communicated in writing to the charity, there is then a valid expectation that payment will be made and the income is receivable. So that should be recognised in full at that point even if it is paid in instalments. And the SORP has provided some additional guidance around what are performance conditions and what are not performance conditions or what are conditions that don’t impact recognition. So performance conditions are those conditions that closely specify a level of output or service that is to be performed by a charity. And it’s really important to note that a restriction on the use of a grant or donation to a particular purpose or project does not create a performance related condition.
It makes it restricted funding, but it doesn’t necessarily prevent recognition of the income under the performance related conditions. But there may be some conditions that do prevent recognition. And it may be that the condition that the grant funding is conditional upon receiving planning permission or match funding or some other form of consent from a third party before a charity can receive and and accept that funding. And then we may also see that the donor imposes some times, time periods. So the donor is imposing some time conditions as to when the charity can spend the funds.
Now this can be a very grey area in determining whether these are donor imposed time conditions or just a payment plan of a grant. So let’s say a a third party awards you a hundred thousand pounds a year for three years. We need to assess whether that hundred thousand pounds a year for three years is just a payment plan. If it’s a payment plan, you would recognise all £300,000 upfront with years two and three being in accrued income. Or is the donor specifying that those years two and three payments relate to activities to be done in years two and three, in which case there may be implied time conditions and the charity is not entitled to recognise the funds all upfront and instead recognises on an annual basis.
Now often, the wording in the grant agreements can be quite grey in that area. So it’s worth it’s really worth talking to the donor, just getting clarity in in the documentation to specify that or even asking them to confirm in an email just that that is their intention, that funds relate to future years. Often, what we’ll see is that a charity has submitted an application form that specifies activities to be done in each year for for, say, for three years with a budget allocated and cost allocated across the those activities in the future years. The donor will then say, we’re giving you a grant based on your application. In that case, then the donor is effectively saying, yep.
You applied for money to do these activities in these years. We’re awarding it on that basis, I. E. We are aligning our funding to those future years and imposing time conditions. So it may be there.
It may not be. It is quite a gray area, so it’s worth just making sure that the wording and the agreements, is clear. And the SORP pin, has now provided some enhanced guidance around conditions that do not limit recognition. And in particular, it states that conditions such as submission of accounts, progress reports, or certification of expenditure are considered admin requirements and do not prevent recognition of income. And the sorts really made this clear because most grant, funding agreements will require progress report or update reports to be provided back to the donor.
But often, that’s just that. It’s just a progress report on how you have spent the funds. But the tie so the timing of the related expenditure remains under your control. And so just because the chair the funder has asked for a report on how you spent the funds in year one, doesn’t necessarily mean that you you aren’t entitled to years two and three as well. So for progress report to prevent recognition, it would need to be very clear in the documentation that the future donor would need to confirm in writing that that years two and three have then been released.
And I think if you’ve had if you’ve been paid the second year, beef while you’ve or even before you’ve submitted the report for first year, if you’ve been paid the second year tranche without having that confirmation from the donor, I think that’s highly likely to indicate that there is no substance there behind the donor’s review, that it is just a progress report, and that they are not controlling the timing of the expenditure. So I I think some charities may find that the wording of the agreements here in Fergus reports mean that they are recognising grant income sooner. And finally, just because there’s a repayment condition for any unspent funds, again, that doesn’t prevent recognition. So if you if you apply for funding and you’re expecting to spend the full amount, that full amount should be recognised. You only recognise the liability, for any unspent funds at the point that repayment is is likely to the donor.
But unless there are restrictions attached to that asset, the asset is unrestricted, meaning that the related x the the related depreciation charge is unrestricted. So what the new SORP says is that when you use your capital grant income to acquire an asset, at the point you acquire that asset, the full amount is then transferred out of restricted funds and into unrestricted funds. If you haven’t purchased the asset at the balance sheet date, those funds remain in restricted funds until you purchase the asset. And the swap also states that if you get grant income that is unrestricted, you may wish to set up a designated fund for the asset and charge the depreciation as an expense to the fund rather than doing a transfer. So at the moment, what often happens is a charity receives restricted grant income.
That income sits in restricted funds. And then a tran because the asset is unrestricted, the depreciation goes through as an unrestricted expense, and a transfer happens each year for the amount of the depreciation charge. So that will that will change going forward. And so we’ll just have that full movement into unrestricted funds at the point the asset is purchased. In terms of Gift Aid payments from a a a subsidiary or subsidiaries to the parent charity, and the source just provided some additional guidance here, and it states that income is accrued when a Gift Aid payment is payable to the parent under a legal obligation.
So either being a deed of covenant in place, and a board decision to make a gift date payment to a parent charity that has not been taken before the balance sheet date is not sufficient to create a legal obligation. So if the board decide after the balance sheet date when it knows what the profits and the subsidiary are to make to pay the profits up and there’s no due to covenant in place, you would not recognise that in the accounts. If the board had decided to pay something up before the balance sheet date, then that would be a, transaction that would need to be accrued within the accounts. And then just moving on to legacy income. So there’s no major changes here, but the SORP has provided some verification around certain areas.
And it’s now provided enhanced guidance around receipt of legacy income when it’s considered probable, and it’s considered probable when there has been a grant of probate or a grant of confirmation in Scotland. When the executives have established there are sufficient assets within the estate to pay the legacy, and any conditions attached to the legacy have either been met or within the control of the charity. And the legacy legacy income must only be recognised when it can be measured reliably. And the SOAR pack knowledge is that the value of legacy income may be impacted by various events such as valuations or disputes. And, therefore, those matters need to be considered when determining whether to recognise or disclose as a contingent asset.
So if a charity knew it was to receive a residual legacy that was based on the value of, selling a property, it may not have a value of the property, at the balance sheet date, although there may be no offers on that property. So it may not consider that it can reliably measure the amount, and so it may disclose as a contingent asset. If a charity is made aware of a legacy but has also been made aware that there have been three or four challenges on that on that legacy, on that will, then it may consider that there’s just too much uncertainty at that point in time as to whether they will actually receive anything or not. And so they may not have anything to recognize or potentially even bring in as a contingent asset note. They could, of course, still bring in a disclosure to say they’ve been made aware of a legacy, but that there are challenges on the will, and it’s not possible to quantify anything at this stage.

A related party is a person or entity that is related to the charity, And appendix one gives a full definition, but commonly, it’s referred to a trustee or other person with significant influence and their close family members and those entities which they control. And there was a new requirement to disclose transactions with former related parties if that transaction relates to a time when they were a related party. So an example of this is where a settlement’s made, to a related party after that related party has ceased to be related. And there is one other small change relating to transactions to be disclosed within, related parties. All charities must dis, disclose the total amount of any employee benefits received by trustees and its, key management personnel.
And when calculating it, it must include employers and ice and that’s insurance contributions. That’s not a change. I hear you cry. We’ve been doing that already. In which case, that’s excellent.
So the next is a new module, module 10 a, which looks at provisions, contingent liabilities, and contingent assets. And as I just mentioned, there’s no there’s no major changes here. It’s a new module because all of the content has been taken out of module seven on expenditure and put into a new module. And it was felt it was more appropriate here. One is to group the material into its own module so that module seven doesn’t become too long and unwieldy.
But, also, because it might sit better within the balance each section. So module 10, of the SORP looks at the balance sheet, and it was felt that this might sit, better within that balance sheet section. Again, enhanced guidance, and disclosure help within the SORP around accounting for provisions and funding commitments here. So as I mentioned, no major changes, but there is some guidance around the fact that funding commitments are not recognised as provisions or liabilities. If it’s clear that an offer has been made, but the recipient charity is unlikely to proceed with the project, in which case we would disclose as a contingent liability.
So no change there. But just draw an attention to paragraph 10 a point two three that says, it is important that charities disclose the existence of unrecognised commitments and explain how these will be funded. So that is a that is a must requirement, and it’s just then explaining how those commitments will be funded. And module 10 a also provides some further help around onerous contracts. So if a charity does have a have a contract that is onerous, then it measures and recognises the present obligation, under the contract as a provision.
If the contract is considered to be onerous, I. E. You will cost more than the consideration you will receive in return. And the SORP gives the guidance that the that the amount to be recognised is the lower the cost of fulfilling it, or any compensation or penalties arising from the failure to fulfil it. And then we’re next going to move on to lease accounting, and this is probably the biggest change that’s likely to impact charities.
Again, it’s a new module, and, again, it sits within, a sub module of module 10 on the balance sheet. So this is module 10 b on lease accounting. So where we had some changes in terms of the tiered reporting, we had some changes to the trustees report disclosures, and we had the the contract income change. While some of those may may be new to charities, some may not be an actually the the contract income one. Whilst it feels like there might be significant changes, we’re not expecting there to be.
So lease accounting is going to be a big change for charities. The consultation doesn’t, can’t consult on whether or not to bring in these changes because FRS 102 has brought them in. So the SORP doesn’t have any choice in whether whether to adopt these changes or not. It is required to do so because these changes have been brought into FRS 102. And the changes are a bit like the contract income five step model.
It’s more to align FRS 102 with IFRS going forward. So this module applies to all charities, and it covers accounting treatment and the disclosure requirements, as well. And I’m going to talk about it from the lessee point of view rather than from the lessor point of view. So it’s likely most likely that charities will be lessees. They will be leasing assets.
It’s perhaps less likely they will be lessors, although they may sublet parts property. But we’re going to focus the the attention in this webinar on the treatment for lessees. And the main point to note or one of the main points to note is that there’s no longer a distinction between finance leases and operating leases. The lessees, there is for lessors, but not for lessees. So under this new approach, the lessee recognises at the beginning of a lease an asset and a liability with part of the consideration being paid to the to the lessor being treated as a cost of financing the arrangement.
So let’s say you have a you lease a property on a ten year lease. At the moment, you have an annual rent charge. Going forward, you won’t have an annual rent charge. You’ll have an annual depreciation or amortisation charge and an interest cost of the finance element. You’ll have an asset on your balance sheet, and you’ll have a corresponding liability on your balance sheet as well.
So we’re going to see some quite big change. You’ll potentially see some quite big changes of increases in asset values. And if we think back to the slides that Emma talked about earlier in terms of the size limits for charities, those size limits are based on balance sheet totals based on gross assets. So if you’re bringing an asset onto the balance sheet for a leased asset, that will be adding to your balance sheet total. You don’t make any allowance for the for the related liability, so we could have higher balance sheet totals.
And as Emma mentioned, it’s perhaps not unreasonable that a charity might have, with these enhanced rules, more than 7 and a half million of of assets, more than 50 employees, and therefore not be a small entity for for company law and become a medium sized company and all the additional disclosures that that may bring around strategic reports, cash flow statements, etcetera. So what do we do first? Well, perhaps, the first thing that we do is try and find a way out of doing lease accounting. And so, helpfully, there are two exemptions that are available for us. The first one is looking for any short term leases.
So these are leases that are twelve months or less. And then we look for low value assets, and the FRS gives examples of personal computers, tablet devices, telephones, and other small items of office furniture. It’s important to note that neither FRS 102 nor the SORP gives a monetary value here. So it doesn’t give a diminimus level, in terms of what is considered to be a low value asset. It gives examples of the types of things that would be considered.
I think one of the most common ones here might be printers and things like that, photocopies that that charities lease. They are probably considered to be fairly low value, but it’s where it doesn’t have a de minimus, so you need to assess the value of the item, and the nature of the item as well. So if you are able to take advantage of those exemptions and in and indeed do do so, then you need to disclose the fact that those exemptions or one either of those exemptions has been taken. And then you must also separately disclose the amount of lease commitments for short term assets and low value assets at the balance sheet date analysed between commitments due within one year And then for low value assets, I’d amounts due between one and five years and then over five years. So that’s very similar to the current operating lease commitment note.
So if you do have low value assets that don’t fall under the lease accounting rules, you still need the disclosure that’s very similar to the operating lease disclosure currently. So if we’ve ruled out whether anything counts as a short term, asset or a low value asset, we then need to determine whether or not it is a lease. So if the exemptions aren’t available, we need to look at whether the agreement for the use of that asset will qualify as a lease. So a lease is a contract or part of a contract. And for a contract to be a lease, then the bullet points on the slide must apply.
So there needs to be identified asset. The contract, must specifically identify the assets or the asset must be implicit when it’s made available for use by the by the lessor. The agreement gives the lessee the right to control the use of the asset, and the agreement does this when the lessee has both the right to direct the use of the asset and obtain substantially all of the economic benefit from the use of the asset. There’ll be a commencement date. There’ll be a period over which the lessee has the right to control and use the assets.
And the SORP does say that that can be viewed in terms of time. So it could be you you know, you’d lease a or commonly, you would lease a an asset for a period of time. Or it may be in terms of the amount of use. So if you lease a a machine that can produce a certain number of units, then it may be that that’s the that’s the basis on which you determine the term of a lease. And there must also be payments due by the lessee to the lessor for the right of control of the asset.
So none of that is perhaps different to what we’re used to. The the language may seem quite formal and legal and technical, but it’s no different. So at the moment, really, to looking at whether there is agreement in place, there is an asset, there are payments going around, in return for the use of the asset, etcetera. Now the SORP goes into quite a lot of guidance on each of those bullet points. And there’s actually there’s there’s a lot of guidance within the SORP of lease accounting, and I think that’s because it is new.
And the SORP is trying to provide as much help as possible. For me, I think one of the issues is that the language is not the most user friendly. It’s not the most accessible of language, and there could perhaps be a few more examples within the SWAP, to help charities and. There are some that could perhaps be a few more. But it does go into quite a lot of information and guidance to try and help charities when they’re carrying out their reviews of assets and leases and whether they fall under, lease accounting.
So the SORP has quite a lot of guidance within there. Just to pick up on a couple of bits. So in terms of being able to identify an asset, so an an asset can be separately identified and that the supplier doesn’t have a substantive right to substitute the asset during the lease term. And in terms of having control of the asset, the SORP again gives quite a lot of detail and also gives a few examples in terms of having a right to use a vehicle when leased or to use a building to carry out its activities or to rent out to other parties to generate a economic benefit. Again, they seem fairly fairly common sense, and standard examples that we’re used to.
In terms of commencement date and lease periods, we need to consider any rent free periods and any noncancelable periods as well when looking at what the commencement date is and what the lease term is. And in respect to the lease term, we need to consider, excuse me, if there are any break clauses. And we also need to make a judgment as to whether it’s reasonably certain or not that those break clauses will or will not be exercised. So as an example, let’s say that the charity leases a building for twenty five years and there are break break clauses at ten years and twenty years. So at the point of inception when recognising this for the first time, you need to make an assessment as to whether it’s likely you’ll break it to ten years or break it to twenty or neither.
Just run the full lease term. So if if it’s considered that the charity won’t break the lease clause at ten years, but may is likely to break the lease clause at twenty years, then the lease term becomes twenty years for accounting purposes even though you’ve signed up to a twenty five year lease. If, however, it was only the landlord that could break, had had the right to exercise the break clauses, then the charity would need to exercise, a lease term of the full twenty five years. And finally, you also need to consider whether there are any non-lease elements. If if you sign the lease that comes with an additional service charge element or there are some other other components that form part of this, then they need to be split out between the lease and the non lease elements.
So if we’ve been through all of those, bullet points and we’ve determined that the short value the short term asset exemption doesn’t apply and the low value asset exemption doesn’t apply. We’ve been through those bullet points, and we’ve considered that that out of that, we don’t have a lease. Then it’s considered that the payments are treated as an expense over an appropriate basis over the terms of the arrangements, I. E. You have an annual or monthly rental charge that goes through your accounts.
But only if those bullet points on the slide don’t exist and therefore you don’t have a lease, which I think is unlikely. So then we move on to the initial recognition. So firstly, we have to measure the the right of use asset at cost. And the SORP uses the term right of use assets, excuse me, kind of throughout the module. And, again, it it’s it doesn’t mean that it’s, overcomplicating anything.
All it means is that in terms of having a lease, the charity must have the right to use that asset and gain the economic benefit from it. So it uses the the phrase right of use asset, but but I think we can just refer to it as being the the leased asset or the or the asset. So it has to measure that that asset at cost, has to measure the lease liability, and also identify the interest element of the lease. And when you calculate the cost, you need to make that initial measurement of the lease liability when entering the lease. You adjust it for any lease payments made or before the commencement date less any lease incentives received.
And those lease incentives may include cost of agreed enhancements or improvements that are undertaken by the charity as lessee where those costs are assumed by the lessor. You deduct any initial you need to consider any initial direct costs that are incurred by the lessee in taking up the lease, so you may have some legal charges or something like that, and make an allowance for any expected dilapidation or other similar costs of making good, the asset to return it in an agreed condition at the end of the lease term. And finally, you would just for for any nonexchange transaction component that sits within the lease, and we’ll talk about that in a bit more detail shortly. Now when we’re calculating the initial lease liability, what we don’t do is add up the total amount payable to the lessor over the lease term, and that becomes the lease liability. Instead, what we need to do is we need to take account of the time value of money and discount the total amount payable to the lessor over the lease term, and we need to do that using an interest rate.
Now the default position is to use the rate that’s implicit in the lease. And it may be that the lessor is willing to disclose the discount rate, that’s using or the interest rate that’s being charged. Otherwise, if we can’t calculate the rate that’s implicit within the lease, then we would use the charity’s incremental borrowing rate, which is the rates to of interest a lessee would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment. So that’s option one. If that doesn’t work, then you move on to the charity’s obtainable borrowing rate, and that is the rate of interest that the charity would have to borrow over a similar term to the total undiscounted value of the lease payments that are included in the measurements of the lease liability.
And if the obtainable borrowing rate can’t be determined, then the last resort option effectively is that you use the rate of interest that you, the charity, would get if you had funds held on deposits. So, effectively, your your income interest rate. Now it’s considered that being able to calculate the rate implicit in the lease is probably going to be most common and should be able to be used in the vast majority of lease cases. And there is an IRR function within Excel, to enable a charity to calculate the value of the the rate that’s implicit within the lease. You can easily quite straightforwardly build a model within Excel that looks at the timing of the payments, the initial cost of the asset, the annual, monthly, quarterly payments, and then use those total payments to calculate the the rate of return.
And lease liabilities must be shown as a separate line on the balance sheet going forward. So they will be held separately on the balance sheet. Now one thing that’s very common for charities or quite common for charities is where there are leases be held below market rate or for nominal amounts. Now those leases are not viewed as having commercial substance or the lease is not intended to generate an a commercial return to the lessor. Instead, those lease arrangements are serving a social purpose.
They’re allowing the charity to further its charitable aims. So if there are nominal or what’s commonly known as peppercorn arrangements, then it may have the legal form of a lease. But if there’s very small or no payment due, it’s unlikely to be a lease in accordance with FRS 102. So you won’t bring that in onto the balance sheet as a leased asset or with a lease liability if you have nominal or Peppercorn arrangements. Instead, those payments of the Peppercorn will be treated as an operating expense.
But what you then need to do is consider whether that the fact that you are paying a, use of an asset at a nominal rate, so below market rate or not at all, is does that count as a donated asset, service, or facility? And that’s where we would need to consider module six, which looks at donated goods or services, and whether we need to bring in to the accounts an amount that reflects the the gift effectively, of being able to use an asset, free of charge or at a nominal below market rate. So if there’s a market a market value of the, lease and we pay the charity is paying not paying anything towards it or paying much less than that, then that potentially is a donated good or service that should be recognised with an income and expenditure within that. And the swap also talks here about being mindful to consider whether any restrictions imposed on the use of an asset, may and that may result in payments being below, market rates or payments are low on nominal amounts actually mean that those low payments are in effect market rate. And the SORP gives, an example of restricting the use of space to a particular faith group where the restrictions mean that only a nominal amount is paid.
And in effect, that is the market rate because no other faith groups or other groups could use that space. And leading on from that, the the SORP talks about social donation leases. So a social donation lease is an arrangement where the payments are below market rate but higher than a nominal rate. So we’ve got somewhere in between our normal rate and our nominal peppercorn rates, And this is what’s known as a social donation lease. And this is as a result of the lessor deciding to accept lower rent and returning for providing the asset to the charity so that it can use it for its charitable purposes.
So the lessor is is, providing some philanthropic benefits as well as the use of an asset. And so as such, those leases will often contain a nonexchange component, and that nonexchange component is recognised as part of the cost of the asset and then also in income. So, for example, let’s say that a lessor offers a charity a discount on rent as part of its social responsibility activities. So the normal market rent, is £72,000 a year, but the charity is only paying £60,000. And the £12,000 difference is then the nonexchange element, and that is usually recognised in income at the commencement of the lease.
And there are quite a lot of disclosures that need to be brought into accounts as a result of the lease accounting changes. So firstly, all charities must disclose a general description of their significant leasing arrangements, needs to disclose information about future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of the lease liabilities, and that includes any variable lease payments, any extension options, any termination options, any residual value guarantees, or leases not yet commenced to which the lessee is committed. It needs to provide information about any restrictions or covenants that are imposed by leases. It needs to give information about the types of discount rate. So the rate in interest rate that’s implicit in the lease or whether it’s used the incremental borrowing or the obtainable borrowing rate or whether none of those have been determined, the rate of interest that it would have held on deposits.
So, effectively, it needs to disclose the interest rate it’s used in discounting the present value of the lease commitments. And if there are any sale and leaseback transactions, then they need to be included, in the usual disclosures that are required, with respect to those transactions. All charities must also disclose the interest expense on lease liabilities. It must disclose expense relating to short term leases if it’s if you are able to apply that relevant exemption. With the, except for any expense relating to leases with a term of one month or less, Sure.
If you’d take a lease out for a month or less, but, you do get exempt from disclosing that if so. You need to disclose the expense relating to leases of low value assets if you’re applying the relevant recognition exemption for low value assets. You need to disclose expense relating to any variable lease payments that are not included in the lease in calculating the value of the lease liability. Any income from subletting the right of use asset. So if you lease a building and you sublet part of it, you would need to disclose the income that you have received from that sublet, the total cash outflow for leases, and gains or losses arising from any sale and leaseback transactions.
And the disclosures go on. So the charity must also then disclose by underlying class of asset, the carrying value and depreciation at the beginning and end of the period, and a reconciliation of the carrying amount at the beginning and end of the period with respect to additions, disposals, acquisitions through business combinations, revaluations, impairment losses, depreciation, etcetera. So what that effectively is doing, it’s taking your fixed asset table, stripping out anything that you own, and, effectively, you’ll have a fixed asset table for owned assets and a fit a fixed asset table for leased assets as well. So you need to disclose those, fixed assets held, under leases separately as well. And this is the one area where comparatives are not required for these disclosures.
So FRS 102 requires comparatives for pretty much every figure within a set of financial statements, but it doesn’t require disclosure of prior, fixed asset tables as currently. And if you have any social donation leases or Peppercorn arrangements, then you must disclose the general description of the lease term, the remaining term if it’s not a perpetual lease, any restrictions or conditions in respect to the use of the right of use assets, the presence of any reversion clauses. You also need to make sure you’re covering any don’t any disclosures required under module six if you felt that it’s a donated, asset or good or service. If there’s a nonexchange element of a social donation lease, you need to disclose that amount and also disclose if a lease has been modified, but there’s been no change in the discount rate. So that wraps up the changes in lease accounting from, from the lessee side of things.
It feels like a massive change. I I think for some charities, there will not be a change. For some charities, there will be quite a big change. And and buildings in particular is one where we could see with especially if based in in London, we may see the values of those leases and assets being being quite high. And as we’ve just been through over three or four slides there, there’s a significant number of disclosures around leases.

Leases of low value assets and variable lease payments are not included in this measurement of the lease liability. Cash flow from finance activities. Cash payments by a lessee for the principal portion of a lease liability. Previously, this was just finance leases. The other major section is cash flow from investing activities.
There are no big changes to discuss in this section. Moving on to looking at the presentation of exchange rates. There is an increased guidance on including exchange rate movements. This isn’t something new, but it is explicitly stated as a must now. Financial assets and financial liabilities in foreign currencies must be recalculated at the balance sheet date at that rate.
The year end exchange rate movement is what should then be shown separately on the cash flow statement. The note which reconciles net debt now includes obligations under operating leases as well as finance leases. This was previously just finance leases. Supplier finance arrangement. There are some changes in this area, but this isn’t something common.
So we’re not going to dwell on it too much, but it’s something to be aware of if you have supplier finance arrangements. Moving on to heritage assets. This applies to all charities and all tiers. Donated heritage assets to be measured at fair value isn’t something new, but if the fair value cannot be measured reliably at a cost proportionate within the benefits of the user’s financial statements, then the asset should not be recognised on the balance sheet, but it must be disclosed in the notes. In the disclosure, explain why the heritage asset has been recognised on the balance sheet and why the fair value cannot be reliably measured.
Date the significance and the nature of those assets and disclose any information which is helpful in assessing the value of those assets. Ability to not be able to value at fair value is now considered exceptional. The expectation is that the assets will be able to be valued. If heritage assets purchased or acquired by donations are held at valuations, the valuation should be reviewed with sufficient frequency to ensure the valuation is current. Efficient frequency is not defined.
It will depend on the nature of the asset. However, three years is probably a decent period. Disclosures required through heritage assets that are on the balance sheet are as follows. Present heritage assets as a separate class of fixed assets on the balance sheet. Provide an analysis in the notes to the accounts of those classes or groups of heritage assets reported at cost and those reported at valuation, include the valued placed on any heritage assets gifted to the charity in the income from donations and legacies heading in the statement of financial activities and allocate that income to a restricted fund when the use of the asset is restricted.
Recognise any changes in the valuation of heritage assets as a gain or loss on revaluation of fixed assets in the sofa. Recognise any gain on disposal of heritage assets as other income in the sofa, recognise any loss on disposal, depreciation, or impairment of a heritage asset at cost of charitable activities in the sofa, the carrying amount of heritage assets by class or group at the beginning of the reporting period and at the at the reporting date distinguishing between classes or groups of heritage assets recognised at cost and those recognised at valuation at the reporting date. Where assets are recognised at valuation, sufficient information is needed to assist in understanding the valuation being recognised. Information such as date of valuation, method used, whether the method whether they’re carried out by external valuers, and if so, their qualifications and any significance limitations to the valuation. An indication of the nature and scale of heritage assets held, the policy for acquisition, preservation, management, and disposal of heritage assets, including the description of the records maintained by the charity of its collection of heritage assets and information on the extent to which access to assets is permitted, the accounting policies adopted for heritage assets, including details of measurements basis use, disclosure of five year period of transactions covering the cost of acquisition of heritage assets, the value of heritage assets acquired by donation, the carrying amount of heritage assets disposed in the period, and the proceeds received, any impairment recognised in the period, any depreciation or amortisation recognised in the period.
Where heritage assets are held by the charity as lessee as a right of use asset, these must be shown separately within the heritage assets note with the same disclosure as non-leased items. That concludes heritage assets. Thanks, Lauren. Yeah. That’s a that’s a long list of of disclosures that are required around around heritage assets.

Tier one charities are encouraged to do this but there’s no requirement. There is no mention of social investments in FRS one hundred and two and therefore we must rely on the SORP in relation to these. Currently social investments are split between programme related investments and mixed motive investments. The suggested change is to remove the distinction between the two. The SORP 2026 uses the term social investments to describe the class of assets that comprises of investments made for both financial return and to further the investing charities purposes.

Comparatives must be restated on a like for like basis, but, however, there is, a bit of leeway where this is impractical. The definition of a concessionary loan will be aligned with FRS 102 where they are not repayable on demand. A concessionary loan is a loan made to a third party, interest free, or below the prevailing market rate. Charities making or receiving these loans must opt to either initially recognise and measure the loan at the amount received or paid with the carrying amount adjusted in subsequent years to reflect repayments or any accrued interest, or they can apply the charity’s accounting policy for financial instruments. The same accounting policy must be used when measuring these loans for con for once paid and once received.

So, the consultation is valid until the June 20. And if you go to charitysort.org, you’ll find a link on that page that takes you through to the consultation site. That will have the new SORP. It will have the consultation questions. It has a summary documents of the major changes and, obviously, the link there to go and submit your response.

And as we saw earlier, the the tier three fifty million has been aligned with the new income level in the small, company threshold. Whether we agree that the exposure draft sets out the reporting requirements for each tier, whether charities with the largest income threshold should be referred to as tier three charities or tier one charities, and then any additional comments that anyone may have. Section two is on the trustees report, and the trustees report starts with various prompt questions that allows the trustees to develop the annual report. So it’s asking whether those prompt questions are considered helpful. It’s asking whether the requirements for impact reporting for each tier is proportionate, whether the requirements for sustainability reporting for each tier is a port proportionate.

Same for the disclosures of volunteers. Same, same around reserves and whether the explanation of reserves in the glossary is helpful. It also asks whether the requirements for tier one charities to provide a summary of their future plans is considered proportionate. So as Julie mentioned earlier, that that future plans is currently only for large charities, but the the proposes that it will apply to all charities irrespective of size. Whether additional disclosures is in the trustees report on legacies, and treatments of legacies is helpful.

And any other comments on the trustees report? Section three looks at the the sofa and whether the example table is helpful. So as Lara touched on earlier, the slight change looking from activities being in being in the columns now rather than in the rows. Section four is around recognition of income. And does the module explain the five step module in a clear and understandable way?

Not sure. Do you find the module easy to navigate as drafted? And that’s really reflecting the fact that it’s been split into two with exchange and non-exchange transactions. And do you consider the guidance on those transactions to be, appropriate set out in separate module, or should they be in separate sections of the module as it’s currently drafted? Are all the disclosure requirements, listed?

Would it be clearer to set those out within each end of each section rather at the end of the module? So this is more kind of structure of the of the module rather than actually the content there. And then also just some questions around the accounting treatment for legacy income, and whether there’s any further guidance needed and any further questions on, income. Section five looks at looks at lease accounting. So whether the module is considered easy to navigate.

Does the module explain the requirements in a clear and understandable way? Do the does the section, on arrangements that are below market value provide sufficient clarity on how to count for those arrangements, so those nominal or Peppercorn arrangements? Are there any additional disclosure requirements, for charities, that have them, whether those are considered appropriate and any other comments? And I would just add that for question 26, the no response is actually split into four different options here. So the question, is asking whether the module explains the treatment and the requirements in a clear and understandable way.
So you can answer yes. You can answer no opinion. And the no option has been split into, no, you don’t understand the specific section. No. You don’t understand the recognition exemptions.

No. You don’t understand the disclosure requirements. Or no. You don’t understand the time value of money. So it’s just providing some additional breakdown there so it can just gather some further information as to whether any or all of those sections in the in the SORP need to be expanded upon.

Statement section six looks at the statements of cash flows and whether the proposal that only, tier three charities are required to prepare a statement of cash flows, is appropriate. Section seven on total return looks at the, additional disclosures around around the total return, and disclosures are appropriate there in module 20. We didn’t touch on that. That’s, with respect to end total return on on investments. Not there’s no real major changes, in terms of the content there.

Section eight on social investment. So whether it, whether you, the responder, agrees with the with the term the generic term of social investment rather than having programme related to mixed motive investments, Whether the simplification of putting the movements of those gains and losses rather than, as Emma mentioned, within expenditure or or other income is now clearer. And whether there’s any further guidance needed on the treatment of comparative figures and disclosures in that area. Section nine deals with smaller charities, and it’s asking whether, you agree that the drafting structure and proposals in the exposure draft support the needs for smaller charities while also addressing the needs of users of charity reports and accounts. And that’s really getting at where so the SORP takes a think small first approach, and that starts with the tier one charity.

So or disclosure that everybody needs to do, then the additional disclosures that tier two need to do, and then the additional disclosures that tier three charities need to make. So it’s just asking whether that structure, seems the best, structure for the SORP. And, also, whether you agree with the SORP’s decision not to allow the application of section one a of FRS 102. So there are various disclosure exemptions within FRS 102 for small companies. Currently, charities can’t make allowance of those disclosure exemptions.

A common one being at within FRS 102. If you have a parent charity in a subsidiary, in the subsidiary accounts, you can take advantage of of sexual and a disclosures if if you qualify on size not to disclose transactions with, other wholly owned entities within the group. But the parent charity still has to make those disclosures. I don’t see that changing. I I I think that will still be that option to adopt section one a will still be disallowed.

And then finally, section 10 is the capsule question.

I think it’s it’s very important that the SOAP committee, do hear from, charities and from users of accounts. I think, obviously, as, as, charity specialists, auditors, and accountants, we will be, providing our own, feedback and our own opinions. But it’s important that they are informed by, by you, the charities themselves and by users of the accounts, because on a day to day level, you have to provide this information or or use this information. And I think it’s extremely important that those who set the rules do get to hear from you.

So whether you do that yourself, whether you get in contact with us, I would really encourage people to look at those, consultation questions and to to give your own opinions. And, yeah, I just wanted to I just wanted to say I I personally feel that I think it’s really important. Thank definitely, Julian. I I agree with that. It’s, it’s all very well to kinda complain about the rules, but the the the whole purpose of having the consultations is to give people the opportunity to have their have their saying, give their thoughts around it and to and to shape the soap and the disclosures and the treatments there.

So, yeah, really important that everybody, feeds in their response, if they wish to do so. And with that, I’ll say thanks very much to to Julian, to Emma, and to Lara for joining me on today’s webinar. Thank you very much for attending. I hope you found it useful. Thank you very much, and enjoy the rest of your day.