- Accounting and Legacy Income - New SORP
- August 23, 2013
- Law Firm: Withers Bergman LLP/Withers LLP - New Haven Office
The Charity Commission and the Office of the Scottish Charity Regulator have put out to consultation a draft new Statement of Recommended Practice (SORP) called the Exposure Draft SORP.
The Exposure Draft was published for comment on 8 July and the closing date for the consultation is 4 November 2013. It is due to come into effect on 2015.
The main reason for a new SORP is to reflect the changes which will be made to financial reporting by the new Financial Reporting Standard, FRS 102, which comes into effect for accounting periods starting on or after 1 January 2015. These changes affect charities as much as other entities.
Larger charities will prepare their accounts in accordance with FRS 102 and smaller charities will have the option of following the Financial Reporting Standard for Smaller Entities (FRSSE). The Exposure Draft will provide guidance for both.
Of particular interest to the legacy sector is the guidance on legacy income which was not included in the current SORP issued in 2005.
Module 5 deals with the recognition of legacy income, including legacies, grants and contract income. The module sets out guidance under a number of headings, including understanding the nature of income; general rules for income recognition; identification of terms and conditions; and disclosure and notes to the accounts.
In a recent e-mail from ILM, the board recommended that:
‘To the extent that it is relevant to your particular role, we would encourage you to contact your finance team and/or accountants so that:
you are clear how your organisation currently recognises legacy income; and
- you can seek their advice about what changes - if any - the new SORP may require you to implement.’