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Charity Community
Author: Kristina Kopic, Head of Charity and Voluntary Sector, ICAEW
Published: 02 Feb 2023
The Financial Reporting Council (FRC) has published draft amendments to UK GAAP standards for comment. Here’s why it’s important for all charity finance professionals to make their voice heard.
Adoption of the SORP is mandatory in the charity law jurisdictions in the UK for charities preparing accrual accounts, and many charity finance professionals will be aware that the next Charities SORP is under development. However, charity professionals mustn’t neglect engaging with FRED 82 as it will directly impact the Charities SORP. How so?
Underlying the Charities SORP is the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102). The SORP provides guidance for charities on how to apply FRS 102 to ‘true and fair’ charity accounts and includes charity-specific requirements that are additional to those of FRS 102. In particular, requirements relating to the trustees’ annual report, fund accounting, the format of the statement of financial activities and additional disclosures.
Importantly, however, in the hierarchy established in accounting standards, FRS 102 requirements take precedence over the SORP. Therefore, it is crucial that user voices from the charity sector are reflected in the updates to FRS102 to ensure that those making changes will consider the special circumstances of charities. This is relevant in areas such as income recognition to ensure that there is special consideration around income recognition for grants or donated goods, for example. A strong charity sector voice on changes to FRS 102 will therefore also provide a better foundation for the next Charities SORP.
The proposals in FRED 82 mostly reflect recent changes in IFRS Accounting Standards, and here are a few key areas for you to consider in your consultation response:
“ICAEW is a long-standing supporter of global alignment in accounting standards, but in a proportionate manner which reflects cost-benefit considerations for preparers and users. We will be examining and debating the proposals in depth in the coming weeks and months, with these principles in mind” says Sally Baker, the Financial Reporting Faculty’s Head of Corporate Reporting Policy.
Our Charity Committee will provide sector-specific considerations and feedback for ICAEW’s consultation response. We also welcome your engagement – please share your charity-specific feedback on FRED 82 with me.
Daniel Chan, Chair of the ICAEW Charity Committee, comments,
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