1. Fleur Holden 16 September 2016 SORP 2015 update

2. Where are we now? The end of the FRSSE SORP Options for smaller charities Moving to FRS 102 SORP FRS102 SORP requirements Common issues on transition Signposting to more information Current issues and SORP consultation Agenda 2

3. Where are we now? 3 Year endDecemberMarchJune Transition date1 January 20141 April 20141 July 2014 Restate comparatives 31 December 2014 31 March 2015 30 June 2015 First full set of accounts prepared 31 December 2015 31 March 2016 30 June 2016 Most charities will have now filed their first set of accounts under new SORP … Accounting periods starting on or after 1 January 2015

4. Option for small charities based on CA 2006 thresholds One year life - from 1 January 2016, FRSSE will be replaced with small entity option within FRS102 No new FRSSE SORP Those already on FRSSE SORP will now need to transition to FRS 102 SORP The end of the FRSSE SORP 4

5. New framework from 1 January 2016 5 An option for non-company charities with a gross income of £250k or less Receipts and Payments accounts Applies to all charities preparing “accruals accounts” Statement of cash flows only required of “larger charities” FRS 102 and the FRS 102 SORP Larger charities will be those with gross income over £500,000 or €500,000 in Republic of Ireland

6. Statement of cash flows not required SORP update bulletin 1 Simplified Trustees’ Annual Report FRS 102 SORP para 1.9 Option to use natural classifications in SOFA FRS 102 SORP para 4.23 SORP concessions for smaller charities 6

7. FRS 102 and FRS 102 SORP 7

8. “Larger charities” meant those over audit threshold, SORP update bulletin 1 clarifies £500k or €500k income “Must, should and may” “This SORP requires” to distinguish where over and above standards SORP terminology 8

9. Link needed between trustees’ annual report (TAR) and statement of financial activities (SoFA) Format of SoFA Comparatives for SoFA Statement of cash flows Changes to format of accounts 9

10. Report income and expenditure in line with activities reported in the TAR How charity has used resources to further its charitable aims for public benefit TAR = objects, activities, achievements, impact What are the key charitable activities? Link trustees’ report and SoFA 10

11. Simplified headings to reduce clutter Columnar format for funds Comparatives for SOFA columns required – permitted in notes Governance should be component of support costs, not on face of SOFA Format of SoFA 11

12. Income headings reduced and “plain English”: Donations & legacies Income from charitable activities – add sub-headings here Other trading activities Investment and other income Expenditure: Expenditure on raising funds (more detail in notes) Expenditure on charitable activities Other expenditure SOFA headings 12

13. Unrealised gains Now reported higher up on the SOFA as “Net gains/(losses) on investments” before net income/expenditure for the year Revaluation reserve Fair value reserve Show discontinued operations in separate column(s) Transfers between funds must net to nil Show tax payable if company for I&E account SOFA – other changes 13

14. Was going to be mandatory under FRS102 but now: Exemption for small entities in section 1A Exemption for smaller charities under £500k or €500k income (SORP update bulletin 1) Simpler format - 6 headings down to 3: Operating activities – Principal revenue producing activities; a charity’s primary activities Investing activities - investments in fixed assets, intangible assets, interests in joint ventures & subsidiaries, cash advances/loans to other parties Financing activities - relates to equity & borrowings; share issues, debentures, loans, bonds & mortgages Clarity on what is cash Includes short term deposits with a maturity date < 3 months Includes overdrafts when form an integral part of cash management Statement of cash flows 14

15. Income recognition - probable vs certain Fair values Long term creditors to net present value Property revaluations Investment property Donated stock held for sale Holiday pay Multi-employer pension schemes Changes to numbers 15

16. Recognition criteria are : Entitlement – control over right or access to economic benefits has passed to the charity Measurement – the value can be measured reliably Probable – it is more likely than not that the economic benefits associated with the transaction of gift will flow to the charity SORP 2015 – income recognition 16

17. Circumstances of each legacy Portfolio approach permitted Entitlement Evidence gift left to the charity Executors satisfied legacy not subject to claims Receipt probable Probate granted Conditions of legacy met or within control Executors established sufficient assets in estate to settle liabilities and pay legacy If notified post year end – accrue if executors’ decision made before year end Legacies - considerations 17

18. Choice to carry at cost or revaluation Revaluation required at “sufficient regularity” rather than 3 and 5 years On transition, can freeze revalued amount and treat as deemed cost Increase value of balance sheet Increase depreciation charge each year Can pick and choose buildings to revalue Get valuation at transition date Property 18

19. Property to earn rentals /capital appreciation Not property held by PBE for social benefit No exclusion if occupied by subsidiary Carry at fair value, revalue each year Gains to P&L, fair value vs revaluation reserve Apportion mixed use property If fair value cannot be measured reliably without undue cost or effort, use cost Investment properties 19

20. Measure @ fair value on receipt! Exception for public benefit entities & their subsidiaries Can stock be measured reliably? Do the benefits of doing so outweigh the costs? Where not practicable to estimate the value of the stock with sufficient reliability, recognise income when sold. Recognise when received or when sold? Consider retail gift aid scheme Discuss treatment with your auditors Donated stock held for sale 20

21. Recognise liability for cost of all benefits employees entitled to but have yet to be paid Untaken holiday leave/other entitlements What is holiday year? Does it align with financial year? Obtaining this information Collect information for comparatives Holiday pay 21

22. For multi-employer schemes (where unable to identify share of assets etc) Continue to account as a defined contribution scheme BUT if there is an agreement to fund the deficit - need to recognise liability on balance sheet At fair value – net present value Will impact on reserves Movement in year within charitable expenditure Multi-employer pension schemes 22

23. Remuneration policy Key management personnel Aggregate employee benefits Disclose who they are? Termination and redundancy costs Split costs for DC and DB pension schemes Staff numbers – average headcount Higher paid staff in bands over £60k/€70k still required New disclosures - remuneration 23

24. Expenses are reimbursed or paid to third parties Disclose expenses waived by trustees, unless immaterial Disclose aggregate donations from related parties (including trustees) New disclosures – for trustees 24

25. Reserves policy Going concern Lease commitments List all trustees (no longer maximum of 50) Disclosure of income from government Ex-gratia payments New disclosures – for all charities 25

26. Describe principal risks and uncertainties Remuneration policy Social investment policy Financial effect of significant events Advice on incorporating Strategic Report New disclosures for larger charities 26

27. Funders interested in sources of income SOFA remains focussed on how income used Analyse by charitable activity What it is used for FRS102 requires note to disclose income from government (5.58) so provide information on sources of income in notes Disclosures for grant recipients 27

28. Disclose details of institutions in receipt of material grants and the amount of such grants paid In notes, provide webpage address or disclose in TAR Accounting for multi-year grants – no change SORP remains principles-based Grant makers need flexibility to develop own approaches Consider review conditions in grant award and break point Consider expectations of both parties Disclosures for grant makers 28

29. SORP applicable for reporting periods beginning on or after 1 January 2015 Comparative information must be restated as far as practicable on a like-for-like basis Transition note to reconcile funds as previously stated, transition adjustments, and restated funds Transition to FRS102 SORP 29

30. Section 35 of FRS102 details transitional arrangements At date of transition 1 January or 1 April 2014: Recognise all assets/liabilities required Not recognise assets/liabilities not permitted Reclassify items as required Apply FRS102 in measuring all assets/liabilities Adjust reserves where change to accounting policy Some areas cannot be changed retrospectively Choose whether to take exemptions permitted Transition to FRS102 30

31. Charity Commission SORP microsite www.charitysorp.org/ FRSSE SORP and FRS102 SORP SORP update bulletin 1 Illustrative example accounts Helpsheets Sayer Vincent http://www.sayervincent.co.uk/ Free resources to download Training Templates Signposting to resources 31

32. Comparatives – what and where? Parent-only SOFA Cash flow statement – restricted/UR? What does the SORP mean by material? Current issues 32

33. Consultation to seek views on how SORP can be improved – specifically: the SORP’s structure, format and accessibility implementation issues that require improvements to the SORP your ideas for items to remove, change or add to improve the SORP Deadline 11 December 2016 SORP consultation 33

34. Fleur Holden – Director fleur.holden@sayervincent.co.uk Sayer Vincent LLP www.sayervincent.co.uk/ www.twitter.com/sayervincent @fleurholden Questions? 34