Charities in receipt of a grant from the government’s Retail, Hospitality and Leisure Grant Fund have been asking whether to recognise the grant in March or April 2020. The timing is important because many charities have a year end of 31 March and the treatment will impact their annual accounts.

What is a Retail, Hospitality and Leisure Grant?

These grants are part of the measures introduced by government to support businesses through the impact of Covid-19 and apply to small premises with a rateable value less then £51k used for retail, hospitality and leisure businesses. For charities this may include charity shops.

Income recognition

Paragraph 5.10 of the Charities SORP (FRS 102) states that income from grants is recognised when there is evidence of entitlement to the gift, receipt is probable, and the amount can be measured reliably. The use of the ‘accrual model’ option (section 24 of FRS 102) for the recognition of income from government grants is not permitted by the SORP. The judgemental part is on what date charities or their subsidiaries became entitled to these grants. The SORP (Paragraph 5.11) states that evidence of entitlement will usually exist when the formal offer of funding is communicated in writing to the charity. Guidance was issued at various points, and each charity needs to decide when it gained reasonable assurance that it became entitled to the grant, taking into consideration its own circumstances.

Reasonable assurance

Reasonable assurance is not a defined term and it is, therefore, a matter of significant judgement whether this threshold has been met.

Factors to consider when determining when and whether the reasonable assurance threshold has been met would include:

• when relevant information came into the public domain;
• the detail available; and 
• whether information that becomes available after the end of the reporting period sheds light on conditions that existed at the balance sheet date.

Available information that might be included any assessment:

• Check if your retail, hospitality or leisure business is eligible for business rates relief due to coronavirus (COVID-19) published 18 March 2020.
• Coronavirus (COVID-19): business support grant funding - guidance for local authorities published 24 March 2020 per gov.uk website.
• Guidance for business made available on local authority or other websites or by other means.
• Guidance to business on gov.uk  Check if you're eligible for the coronavirus Retail, Hospitality and Leisure Grant Fund published 1 April 2020 per website.

This is not an exhaustive list and, as ever, any conclusions about the accounting will depend on individual facts and circumstances.

Finally, it’s worth noting that the SORP (paragraph 3.40) requires disclosure of judgements that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on amounts recognised in the financial statements