It’s now seven months since SORP 2026 took effect. The preparation of the first set of accounts under the new SORP is still to come, but what gets captured between now and then will determine how smooth, or how stressful, that first year-end turns out to be.
In this blog, Michael Jones, Partner at Bevan Buckland, recaps the key changes under the new SORP and sets out the data that trustees and finance teams should capture now, well before their first accounts under the revised rules fall due.
Where Things Stand, Seven Months In
The revised SORP applies to every charity preparing accounts using the accruals method, those using receipts and payments are not affected.
The new tiering thresholds change what each charity is required to report within its trustees report.
A Recap of the Key Changes
Beyond the tiers and thresholds, there are four key changes to how a charity’s accounts and Trustees’ Annual Report are prepared. The Trustees’ Annual Report has been substantially overhauled, with far more specific requirements around impact, volunteers and reserves. Income recognition has been brought in line with FRS 102 for exchange transactions following the five-step model. Lease accounting has moved to a single lessee model under Module 10B, bringing nearly all leases onto the balance sheet as a right-of-use asset and lease liability. And related party disclosure requirements have been strengthened across all tiers.
One noticeable difference for charities will be the treatment of peppercorn and below-market lease arrangements as it’s easy to overlook the changes. Peppercorn rents fall outside the lease definition entirely and are treated as donated facilities, while rents that are below market but not nominal are treated as social donation leases, with a donated income component that needs to be identified and measured.
What Charities Should Be Capturing Now
This is where the real work sits at this stage of the transition. Rather than treating the new requirements as something to address at year-end, the charities in the strongest position will be the ones already building the following into their day-to-day records:
Impact data – evidence of outcomes and long-term impact, not just activity levels, needs to be gathered throughout the year. That means recording what outputs and outcomes were actually delivered, not just what activities took place, and which KPIs are being used to judge success. Reconstructing this retrospectively at year-end is far harder than capturing it as it happens.
Volunteer records – numbers, roles, hours contributed and training provided all need to be disclosed under the new rules. If there isn’t already a system for logging this consistently, putting one in place should be a priority.
A full lease register – every lease, including property, equipment and vehicles, needs to be catalogued, capturing the term, payment amounts, and whether the arrangement is peppercorn, below-market or full market rent, since each is treated differently under the new rules. For peppercorn and below market rent, you will need to obtain the market value rent to calculate the donation being received. This is one of the more time-consuming pieces of groundwork and is best done well ahead of year-end rather than under pressure.
Grant and contract terms – every live agreement should be reviewed as a priority to establish whether it’s an exchange transaction, such as course fees or a local authority service contract, or a non-exchange transaction, such as a trust or foundation grant, and whether any performance conditions will affect when income can be recognised.
Reserves and risk detail – free reserves, the reasoning behind them, and principal risks all now require specific, evidenced disclosure rather than standard wording. That includes total funds held at year end, what’s restricted or designated, and the likely timing of any planned expenditure. Gathering the underlying detail throughout the year makes the eventual write-up considerably more straightforward.
Preparing for Your First Accounts Under the New Rules
If you haven’t already opened a conversation with your auditor or independent examiner about the judgements you’re making, that’s worth doing now rather than waiting until year-end, since those judgements will need to withstand scrutiny once the accounts are prepared.
If you would like to discuss how SORP 2026 is affecting your charity, or would like support with lease registers, income recognition, or the preparation of the Trustees’ Annual Report, our specialist charities team can help. Please get in touch by emailing us or by calling 01792 410100 to find out more.
