Charity bodies call for urgent action in updating accounting standards - Thorne Widgery

In a joint letter addressed to the digital minister Matt Hancock, four major accounting bodies are calling for the “overdue reform” of charity accounting rules in England and Wales.

ICAS, ACCA, CIPFA and ICAEW have expressed concern about the UK Government’s continued delays in updating the accounting regulations for charities.

The letter reads: “Charities preparing ‘true and fair’ accounts and following the Charities (Accounts and Reports) Regulations 2008 are required to prepare their accounts in accordance with the Charities SORP 2005.  The Charities SORP 2005, however, was replaced by a new Statement of Recommended Practice: Accounting and Reporting by Charities (FRS102)(the Charities SORP (FRS 102)) effective from 1 January 2015.”

It explains that the SORP 2005 is based on accounting standards which have now been withdrawn by the UK Financial Reporting Council, so affected charities are in the “extraordinary position” of being required by regulation to comply with outdated accounting rules.

In 2016, the Charity Commission for England and Wales suggested that charities could get around this by using the principle of a “true and fair override”, which is a permitted means of departing from the 2008 regulations.

“This has created an incongruous situation where charities are being actively encouraged by the CCEW to depart from secondary legislation,” says Christine Scott, Head of Charities and Pensions at ICAS.

“Moreover, such departures must be disclosed and explained by notes to the accounts. It is challenging enough for charity trustees to understand all their “normal” financial reporting obligations without adding the complications of a ‘true and fair override’.”

She added that the issue has now been outstanding for more than three years.

“We are asking the Secretary of State to free charities as a matter of urgency from this unnecessary and confusing regulatory complication.”