Updates to the charity SORP

It can feel as though the charity Statement of Recommended Practice (SORP) changes every year. In a way, that’s not untrue. Update Bulletins are issued between full reviews of the SORP to ensure it continues to reflect the underlying accounting standards (FRS 102).

The latest Update Bulletin brings a number of tweaks that foundations will need to know about, a handful of which are explored below. Some are clarifications which are effective for reporting periods beginning on or after the date the Bulletin was published (05 October), others are amendments which apply to reporting periods beginning on or after 01 January 2019.

The definition of a financial institution in FRS 102 has changed to remove references to ‘generating wealth’ and ‘managing risk’, and the SORP has been updated to reflect that. The first draft seemed like it would then incorporate foundations making social or mixed motive investments, but the final Update Bulletin “excludes those charities which make social investments including concessionary rate finance in the form of programme related investments, unless such lending is the charity’s principal or sole charitable activity”. Nonetheless it does incorporate other types of charity beyond its original scope.

Foundations with complex investments may also have to make additional narrative disclosures about managing risk. Those holding financial instruments deemed risky, like derivatives, will need to check FRS 102 to see if they are any relevant requirements under Section 34 'Specialised Activity'.

Foundations with investment properties will be able to choose how they are valued – either at cost or fair value. The exemption for measuring “without undue cost or effort” has also been removed. For some this flexibility to choose may prove useful; others may find the inconsistency in accounting treatment problematic.

Change to Gift Aid accounting may also affect some foundations. When Gift Aid payments are made from a subsidiary to a charitable parent, the Bulletin states that the “payment shall not be accrued in the individual accounts of the parent charity unless a legal obligation for the subsidiary to make the payment exists at the reporting date.

A new addition will be a note on net debt. Charities will be required to provide a reconciliation of net debt, perhaps presented in the format given as an example.

Comparative informationmust be provided for all amounts presented in the current period's financial statements, which includes the notes”. During the consultation period, some commented that this may add confusion, but that overall there is value in having these figures.

If you have any questions about changes to the SORP, please contact

You can read the full Update Bulletin 2 here.

We support UK foundations and grant-making charities