New Charities SORP – Outline guidance

All charities who prepare accruals accounts are required to follow one of two new Charity Statements Of Recommended Practice (SORP) for accounting periods starting after 1 January 2015. The Church of England guidance on this has not yet been issued, but a number of Treasurers have been asking for an early “steer” on the implications for them.

As soon as the national guidance is received we will be arranging a series of “roadshows” around the Diocese (probably early December) specifically aimed at larger PCCs preparing accruals accounts where the SORP guidance should be followed.

The size criteria for 2015 are as follows

Size threshold / Type of accounts / Follow
Income >£6.5m, Assets >£3.26m , employees >50 / Accruals- audited / SORP 2015
Income>£250,000 / Accruals / SORP 2015 or FRSSE SORP
Income <£250,000 / Choice of Accruals / SORP 2015 or FRSSE SORP
Or Receipts and Payments / Charity Act guidance

If you prepare Receipts and Payments Accounts

All parishes with income less than £250,000 income mayaccount on a receipts and payments basis. In this case you, do not have to follow either SORP, but the accounts must comply with Charities Act 2011. The Church of England recommended guidance is given in PCC Accountability . The recommendations are likely to change in the light of the new SORP but this will mainly be in relation to the Annual Report

If you prepare accruals accounts

All parishes who prepare accruals accounts must follow one of the new SORPs. If you are a small church, you may want to consider whether accruals accounts are appropriate to your level of activity. As long as your size is under the £250,000 thresholds above, you are not required to follow accruals accounting. Guidance on making this choice can be found here

FRSSE SORP is simpler, but it is likely to only apply for 2015 accounts, after that there are proposed amendments to SORP2015 to accommodate smaller entities. This is an issue for all small charities, not just churches. However to a certain extent taking this route for 2015 “buys time” and means any significant changes can be deferred until 2016 accounts.

SORP 2015 is more complex as the requirements are intended to apply to much larger charities, but many smaller charities are moving directly to SORP2015 for 2015 accounts

The following guidance for churches is extracted from Stewardship briefing note: Charity accounting – forthcoming changes ©Stewardship

Changes if you use the FRSSE SORP

  • Where fixed assets continue to be used by the church, the amount recorded in the accounts continues to be calculated as now, being the net position of cost less accumulated depreciation. This only changes where the church has plans to dispose of an asset earlier than expected. Where this is the case, the asset should be written down to its net realisable value.

Changes for charities using FRSSE as a result of areas not covered by the FRSSE(where reference has to be made to SORP2015)

  • Recognition of income from gifts (excluding government grants which are covered by FRSSE) - SORP 2015 requires charities to adopt current practice when accounting for income from non-exchange (gift) transactions. Income from donations and grants is recognised when there is evidence of entitlement to the gift, receipt is probable and its amount can be measured reliably.In reality, this change is likely to make little if any difference to the way in which churches recognise income. The probability of receipt is only one of the three criteria that should be fulfilled in order to recognise income, the other two are equally important and in this context particularly the entitlement criteria. A pledge given to a church for a future gift is likely to be regarded as an intention and will not normally meet the entitlement criteria. As such, the question of probability of receipt will not arise.
  • Accounting for donated goods for distribution to beneficiaries- this may apply of a church directly runs a food bank or similar- donated assets have to be valued on receipt and then shown as expenditure when given away. Any stock is shown as an asset

Changes to Annual Report

  • A charity must disclose its reserves policy or state that it does not have one and provide an explanation as to why not. Arriving at a reserves policy is not an onerous responsibility, so on the face of it meeting this requirement should cause little difficulty. However, we see many churches that appear to put little or no thought into what should be a sensible reserving policy and we would encourage churches not to wait for this requirement to come into existence before giving the matter some serious thought.
  • All trustees (not limited to 50) who served in the accounting period together with those who were trustees on the date that the report was approved must be named.

If you choose to adopt SORP 2015. There are much more complicated rules, but the ones most likely to affect churches are:

  • Charities may be required to provide a statement of cash flows which shows the net increase or decrease in cash during the reporting period.( the current consultation indicates that this may only apply to charities with income >£500,000)
  • The income and expenditure headings included in the Statement of Financial Activities have been renamed, simplified and reduced
  • A new class of investment (mixed motive investment) is introduced to include investments that are used partly to further the aim of the charity and partly to provide an investment return. This might apply to churches that have provided financial support to another church or organisation in accordance with its own charitable purposes but which is also expecting a financial return on that investment.
  • Outstanding paid annual leave and sick leave should be recognised as a liability
  • There are some changes regarding the disclosure of trustee and staff remuneration and also related party transactions
  • Charities will have to disclose financial fees incurred other than simply for the audit or independent examination
  • Any material uncertainties when considering if the charity is a going concern must be disclosed, with trustees looking forward for at least 12 months from the date that the accounts are approved The FRSSE SORP is not so prescriptive in setting out a time frame for making this judgement, but that in no way alters the responsibility that rests with the trustees and a 12 month view would be considered to be best practice under any scenario.
  • Changes in the value of financial instruments (including investments) measured at fair value are taken through the Statement of Financial Activities

What next

  • Register to attend one of the roadshow sessions: email
  • Although the new SORPs did not come into effect until January 2015, comparative figures will need to be restated and so are likely to impact some 2014 figures. If you have decided which route to follow, consider the areas that might impact you. If these are likely to be significant you can take a look at the relevant SORP module(s). These can be found by visiting

Further information

  1. As soon as it is available we will post up links to the Church of England guidance . Current PCC Accountability booklet will no longer apply, but it is anticipated that the online version will be updated
  2. The main SORP guidance can be found at