The Financial Reporting Council (FRC) has issued three new accounting standards, FRS 100-102, which will replace all existing FRS's, SSAPs and UITFs. The new financial reporting framework will be applicable on a mandatory basis for the majority of UK entities for reporting periods starting on or after 1 January 2015. Charities will be required to apply FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' which was issued in March 2013.
FRS 102 addresses some of the specific reporting issues faced by charities and other public benefit entities, including the basis for recognising government grants, business combinations and the recognition of income from donors and other sources. The charity SORP has been updated to reflect the new framework and the final SORP has now been published and is available at www.charitysorp.org.
Charities will be required to adopt the new financial reporting regime for accounting periods starting on or after 1 January 2015, with the comparative balance sheet and opening position requiring restatement. For charities with a December year end, this will mean a 1 January 2014 transition date, a 31 December 2014 comparative balance sheet and the first FRS 102 compliant accounts being prepared for 31 December 2015. For a March year end, the first set of FRS 102 accounts will be required for 31 March 2016, therefore the transition date is 1 April 2014. In England, Wales and Scotland, early adoption will only be permitted once the Regulations have been updated to allow the use of the new SORP.
It is not too soon to start considering how you will address the transition process. From our extensive experience in assisting clients with transition to EU-adopted IFRS, we know that good planning is key to success. Timely actions and the right support will ensure that the process goes as smoothly as possible.
There are also operational matters which may need to be addressed in preparing for transition, such as training requirements for your finance and operational teams, systems changes to ensure relevant information is captured, education of your stakeholders, and the potential need for additional resources.
This factsheet provides a summary of the key changes brought about by the FRS 102 compliant SORP (FRS 102 SORP), our interpretation of the practical effects of implementation, together with suggested actions. Most actions involve conducting a review of accounting policies. There is also a second SORP for smaller charities who elect to adopt the FRSSE (FRSSE SORP). Where relevant, the changes listed on the following pages will also apply to smaller charities.