The SORP making body has published an Exposure Draft for the next Charities SORP, incorporating the changes to lease accounting and revenue recognition in FRS 102, which forms the foundation of the SORP. The Exposure Draft SORP explains how these changes apply to charities, and its development was informed by a sector-based SORP Committee and engagement with key stakeholder groups.

In our upcoming webinar, “Charities SORP 2026 – Hot topics from the Consultation”, two representatives from the SORP-making body will introduce the consultation. This will be followed by a panel discussion, led by Charity Committee Chair Daniel Chan MBE, about the hot topics arising from the consultation, with opportunity for you to share your views and ask questions.

• Register here

Driven by FRS 102 changes and sector feedback, key changes include a new three-tier income-based reporting framework, enhanced disclosure requirements, revised income recognition criteria and the introduction of new modules on provisions and lease accounting. The consultation runs until 20 June 2025, with the final Charities SORP expected to be published in Autumn 2025 for mandatory implementation in reporting periods beginning on or after 1 January 2026.

The Exposure Draft introduces several significant changes to charity accounting and reporting, aligning with updates to FRS 102 and responding to stakeholder feedback. Key revisions include the introduction of a three-tier income-based reporting regime, enhanced disclosure requirements in trustees’ annual reports – particularly around impact, volunteers, and sustainability – and the restructuring of income recognition to distinguish between exchange and non-exchange transactions.

Newly introduced modules (10a and 10b) cover provisions, contingent assets / liabilities and lease accounting, which were introduced to ensure consistency with FRS 102 and include examples and additional guidance to help SORP users understand and apply the new requirements.

The draft also streamlines expense recognition and exempts charities with income below £15 million from preparing a cash flow statement, unless required by FRS 102. Updates to fund accounting, financial instruments and social investments ensure consistency with legal requirements, while modifications to disclosures on trustee remuneration and related-party transactions improve transparency.

The SORP-making body has acknowledged that it has been challenging to identify areas of simplification for small charities reporting under the SORP. They concluded that the transparency and accountability expectations of stakeholders in the charity sector were higher than in other businesses and believe that the proposed new reporting requirements are proportionate. Certain new reporting requirements only affect the biggest charities (income over £15m) with the introduction of a new third tier.

Despite its name, the Statement of Recommended Practice (SORP) for charities is not optional; it provides essential guidance on applying UK Generally Accepted Accounting Practice (GAAP) and must be followed where applicable. Charities that are required to prepare accrual-based accounts under the Charities Act or UK company law – typically those with income above £250,000 or structured as charitable companies – must apply the SORP unless specifically exempt. Financial thresholds are currently under review and charities are encouraged to respond to the DCMS consultation which seeks views on the financial thresholds and whether or not to increase them in line with inflation.

The SORP includes three types of statements: "must" indicates a legal or regulatory requirement, "should" signifies best practice expected to be followed unless there is a valid reason not to and "may" provides additional guidance or recommended approaches. These distinctions ensure clarity in compliance while allowing flexibility where appropriate.

We encourage all Charity Community members to familiarise themselves with the Exposure Draft and key changes, and to respond to the consultation. Our response to the consultation will be informed by our Charity Committee and we are keen to hear from you too. Join our webinar on 9 April to share your views with our Charity Committee Chair. If you would like to have a conversation with me or want to share your view on specific consultation, please contact me by email.

• Respond to the SORP consultation (deadline: midday, Friday 20 June 2025)
• Read a summary of the key changes to modules
• Read the full Exposure Draft of the Charities SORP 2026