CCH Accounts Production. Charity FRS 102 User Guide Master Pack 6.00

Transcription

1 CCH Accounts Production Charity FRS 102 User Guide Master Pack 6.00

2 Legal Notice Disclaimer Wolters Kluwer (UK) Limited has made every effort to ensure the accuracy and completeness of this User Guide. However, Wolters Kluwer (UK) Limited, its staff and agents will not be liable for any errors or omissions and use of the software is subject to the customer s licence with Wolters Kluwer (UK) Limited. This User Guide should not be relied upon as a detailed specification of the system or the software. Wolters Kluwer (UK) Limited may make changes to this User Guide from time to time. Copyright This User Guide may not be copied, altered, edited, disposed of or distributed without the prior consent of Wolters Kluwer (UK) Limited. The content is confidential. Unless indicated otherwise all elements of this software product are owned by Wolters Kluwer (UK) Ltd Wolters Kluwer (UK) Limited Trademark Rights Microsoft, Windows, Windows NT, Windows for Workgroups, Windows 98, 2000, XP, MS- DOS, Windows Vista, Windows 7, Windows 8, Windows 10, Windows Server, Microsoft SQL Server, and Microsoft Office, are either registered trademarks or trademarks of Microsoft Corporation. Novell and NetWare are trademarks of Novell Inc. Citrix MetaFrame is a registered trademark or trademarks of Citrix Systems, Inc. All rights reserved. All other trademarks are the property of their respective owners. Wolters Kluwer (UK) Limited 145 London Road, Kingston Upon Thames, Surrey KT2 6SR CCH Accounts Production Charity FRS 102 User Guide II

3 Contents Scope 1 1. FRS 102 Charity Master Pack Background Client Creation 2 2. Features of the Charity Master Pack Types of Charity Accounting requirements for charities Nominal Ledger Coding Structure Statutory Database Officers Specific matters within the financial statements Transition to FRS Main differences for users of legacy Charity Master Pack General SOFA analysis notes Analysis of charitable expenditure Link with SOFA, and comparative fund by fund analysis Overview of recharges Known Issues 32 Appendices more detailed guidance 33 A1. Posting Staff Costs, Depreciation and Governance Costs Identification of codes 34 A1.1 Staff costs 34 A1.2 Depreciation and impairment 36 A1.3 Allocation of support and governance costs 37 A2. Code allocation on conversion 39 A2.1. Unmapped codes 39 A2.2. Allocation of sub-codes 39 A2.3. Other unmapped codes 41 III CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

4 Scope The content of this master pack allows you to generate FRS 102 compliant Charity financial statements. This pack does not support the version of the charity SORP based on FRSSE You are able to convert your existing UK GAAP Charity jobs onto the new FRS 102 Charity master pack. This can be done during the Year End process, and will convert the Trial Balance and the relevant entries from the Statutory Database, to minimise the amount of re-keying required to process the first FRS102 set of accounts. The conversion process is the same as for Limited FRS 102 and is described fully in the FRS102 Limited Company User Guide. However, as well as changes to the nominal codes themselves, there have been some changes to the coding structure so that there are some codes which will need to be reanalysed on conversion. To highlight the areas which are most likely to require further consideration the relevant codes have been left unmapped. Accordingly it is likely that you will need to customise the nominal code mapping during the conversion, so you should allow some time to consider the new chart of accounts and plan where each of your existing balances should be posted to. See Appendix 2 for further details. Other features and format collections NOT yet available Although this information is not currently available we will be making the following available in a subsequent release: Exception report Lead schedules Formatted trial balance 1 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

5 1. FRS 102 Charity Master Pack Background These formats are devised to meet the requirements of: The Charity SORP for use with FRS 102 New UK GAAP FRS 102 The Companies Act 2006 or the Charities Act 2011 as appropriate The introduction of new UK GAAP FRS 102 is mandatory for accounting periods beginning on or after 1 January The exemptions available to small trading companies in section 1A of FRS 102 are not available for charities. Some limited exemptions to small charities will be available for accounting periods commencing on or after 1 January 2016 but these cannot be applied early. For further detail see section 2.2 below. The new pack has been designed to share nominal coding with the main FRS 102 pack as far as possible. Although the SORP requires a different set of codes to be used for the SOFA (which replaces the profit and loss account/statement of comprehensive income) and the analysis of funds at the foot of the balance sheet, the remaining formats, including in particular the formats for the analysis of net assets in the balance sheet, have been adapted from the main FRS 102 formats We strongly recommend you read and familiarise yourself with the charity Statement of Recommended Practice (SORP) The charity SORP contains guidance on how to produce accounts for a charity. 1.1 Client Creation You must enter a Configuration Key into CCH Central in order to enable the FRS102 Charity Master Pack. Log into Central and open Maintenance > User Defined > Configuration. Enter the following key: Key Name = AccountsShowCharityFRS102Entity (case sensitive) Key Value = 1 Click OK to close the screen. Log out of Central and back in to activate the new key Create client in CCH Central CCH Accounts Production Charity FRS 102 User Guide 2

6 When setting up an FRS 102 Charity Client, in the Create Client Wizard Main Details tab, the Contact Type is Not for Profit. In the Accounts tab, the options to choose are under Type, select Charity and under Entity please select Charity (FRS 102) Create new Charity FRS 102 accounting period for an existing client On the Accounts Production tab, click in the grid to create a new accounting period: Type: select "Charity". Entity: select "Charity (FRS 102)". Set other fields as required and click OK. Double click the accounting period row on the grid to load the accounts production screen. 3 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

7 2. Features of the Charity Master Pack This Charity master pack is largely based on the standard FRS 102 Limited company pack providing users with the same look and feel and familiarity. The structure of the chart of accounts, statutory database and formats are similar. Therefore, if you have not read the standard FRS 102 Limited user guide, we recommend you read this and use it in conjunction with this specialist master pack guide. 2.1 Types of Charity A charity is an entity registered as such. In principle other entities could be charities but in practice charities are normally: a) companies limited by guarantee; or b) trusts or similar bodies established by a governing document. Previously separate formats were used to cater for incorporated and unincorporated charities but the differences are not that significant. The charities FRS 102 pack caters for both entity types in a single set of formats. The different requirements of the two entity types are controlled by a trigger within the database. The reference is #cy755 (0= unincorporated charity -1= charitable company) This trigger controls: a) the disclosure of a company registration number on the cover page and in the legal and administrative information page; b) the disclosure of a company secretary (charitable companies may still dispense with this role) and of a registered office on the legal and administrative information page; c) the wording of the audit report (see more detail in section below); and d) other wording changes throughout the accounts. CCH Accounts Production Charity FRS 102 User Guide 4

8 2.2 Accounting requirements for charities Charitable companies are required to follow the accounting requirements of the Companies Act 2006, while unincorporated charities must follow the requirements of the Charities Act Both are required to follow the requirements of FRS 102 and of the relevant SORP Small entity exemptions not available to charities A major feature of the FRS 102 formats for trading companies is the availability of small company exemptions under FRS 102 section 1A. The version of FRS 102 which incorporates section 1A, and hence the small company exemptions, must be applied for accounting periods commencing on or after 1 January 2016, but UK companies can elect to apply this version (together with other relevant legal provisions) a year earlier. (The legal changes required to enable early adoption are not currently in place for companies registered in the Republic of Ireland.) The previous version of FRS 102 is still available for use for accounting periods commencing on or after 1 January 2015 for those entities which do not adopt the new version early, but this version contains no concessions for small companies. Instead a final version of the FRSSE for use in this period is available. The main FRS 102 formats for trading companies assume that, for periods commencing within 2015, companies will either: a) adopt the new version of FRS 102 early; or b) continue to use the (pre FRS102) FRSSE formats for a further year. The position of small charities under the new accounting regime is different from that of small trading companies. For accounting periods commencing from 1 January 2015 two new SORPs were prepared: a) Charities which were under the old/existing company law thresholds can follow a FRSSE version of the SORP; b) Other charities must comply with an FRS 102 version of the SORP. Revisions have been made to the FRS 102 version of the SORP which apply to accounting periods commencing from 1 January 2016, and the FRSSE SORP is no longer available for these accounting periods. Unlike the position with trading companies, there is no option to adopt the revised version early. The position was made clear in Update Bulletin 1 which the Charity Commissions (the SORP is developed by a joint body set up by the English and Scottish Charity commissions) issued on 2 February In addition to that, the amendments to the FRS 102 version of the SORP make far fewer concessions to small charities than those introduced into the latest version of FRS 102 for other entities: a) The only significant concession is to exempt charities whose gross income is under 500,000 from the requirement to prepare a cash flow statement. b) FRS 102 section 1 A was introduced to comply with the European Accounting Directive, but the directive does not apply to charities and the Charity Commissions took the view that the special nature of charities as holder of donated funds means that the more detailed disclosure requirements which previously applied, should continue to apply, and that there was no justification for allowing significant disclosure exemptions. 5 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

9 The current Master Pack caters for the requirements of charities preparing accounts in the year commencing on or after 1 January Changes to cater for the following year will be the subject of a future master pack which will only be available for periods commencing after 1 January It follows from the above that the automation in the formats to remove disclosure for small companies has been disabled in the charities formats. Given the relatively small number of concessions available under the FRSSE in the charity context, separate formats to enable charities to follow the requirements of the FRSSE have not be made available Accounting requirements for unincorporated charities The FRS 102 formats also cater for a specific anomaly which applies to unincorporated charities. Regulations made under the Charities Act 2011 specifically require adherence to the 2005 version of the SORP. Unincorporated charities can no longer do so as the more general requirement to give a true and fair view requires them to follow the current version. It follows that such charities are required to make a specific reference to this technical breach. The formats include a suitable statement by default in: a) the accounting policy note; and b) the audit report or the independent examiner's report. The wording has been adapted (simplified) from that given in the Charity Commission guidance note CC15c. This disclosure is suppressed for charitable companies. For unincorporated charities, in case the legal position is rectified during the currency of a Master Pack, there is a trigger within the database to turn this disclosure off. The reference is #cy763 (0= No -1= Yes ). Note that this node is hidden for charitable companies. This controls the disclosure in the accounting policy note and the audit report, a separate item (#cy765) controls the disclosure in the independent examiner's report Comparatives for fund by fund analyses In the previous formats the fund by fund analysis given on the face of the SOFA was not followed through into the further analysis in the notes. Neither was a fund by fund analysis of the comparative figures given. CCH Accounts Production Charity FRS 102 User Guide 6

10 While not requiring the disclosure of comparatives for each figure analysed in the accounts, the new SORP requires disclosure, in the notes to the accounts if not on the primary statements, of comparatives for all figures which are included in the primary statements. The FRS 102 SORP requirement is: FRS 102 requires that comparative information must be provided for all amounts presented in the SoFA. This SORP requires that the comparative information provided for the total funds of a charity must be presented on the face of the SoFA. Comparative information provided for the separate classes of funds, if any, held by a charity may be presented either on the face of the SoFA or prominently in the notes to the accounts. (FRS 102 SORP s4.2) This requirement is met in the new formats by the addition of further disclosure tables in the notes to the accounts: a) in notes where the primary columnar analysis is by fund, a simple analysis by fund is given beneath the main table. This is illustrated in the FRS 102 format for the Donations and legacies note shown in section 4.1 below. The line headed For the year ended 31 December 2014 gives an analysis for that year. b) In notes where there is an analysis by charitable activity, as illustrated in the FRS 102 formats for the Charitable activity note shown in section 4.2 below further disclosure is required as described below. In the note illustrated at 4.3 the new requirement to disclose comparatives for all figures included in the primary statements (in this case the SOFA) has been met by the addition of two new tables which disclose a fund by fund analysis of the total charitable expenditure: a) in the current year - the figures under the heading Analysis by fund tie up to the SOFA; and b) in the prior year - the analysis by fund under for the Year ended 31 December 2014 was not previously disclosed. These examples illustrate what this disclosure is supposed to show, but in many cases the analysis would give no additional information. For example, if all of the income or expenditure in a particular note relates to a single fund. There is coding within the formats to remove this disclosure in cases where it has no real content. 2.3 Nominal Ledger Coding Structure As described in the section 1, the formats are consistent with the main FRS 102 formats as far as this is possible. In practice the layout of the SOFA, and the fund analysis at the foot of the balance sheet, mean that different codes must be used for these areas of the accounts. Nominal ledger codes for the balance sheet, i.e. the codes from 6000 onwards, are substantially the same as those used in the main FRS 102 formats. Some of the existing codes are unlikely to apply to charities but the presumption is that these could, in principle, be used and that where possible consistency is preferable. Some codes have been added to the balance sheet sequence for charity specific assets: a) Heritage assets, these now have a full two column fixed asset style analysis. b) Performance related investments and mixed motive investments have similarly been catered for (only performance related investments were catered for previously). In practice these 7 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

11 categories are seldom used but they are described in the SORP and may arise in some circumstances. Codes between 9600 and 9990 relating to conventional types of reserve have been removed, these are replaced by an analysis of reserve movements in each of the fund types as described below SOFA coding In the nominal coding for the SOFA, the existing four column analysis by fund has been retained, but the designation of the funds has been slightly revised. In the existing formats the main fund types are described as: Unrestricted Designated Restricted Endowment Strictly, designated funds are a subcategory within unrestricted funds and within the existing formats it was common not to use the designated funds column. The SORP suggests that some charities may need to give particular prominence to a particular funds or group of funds (SORP 4.13). These may be funds of any type. The second fund type has now been re-designated as Material Funds, this can still be used to highlight designated funds (for example to indicate that additional funding for new activities is required) but the heading for this column is now user definable through the database to allow this to be used for other types of fund and to better reflect that this analysis is being used as a matter of emphasis, rather than as the default analysis for designated funds. See section for further details of how to use this feature. The nominal ledger coding has four separate analyses in the sequences from 1000 for unrestricted funds, 2000 for material funds to highlight, 3000 for restricted funds and 4000 for endowment funds. The codes run in the same sequence (i.e. each code within restricted funds would share the final three digits with the equivalent code in the unrestricted funds sequence) and the codes now all run in the same order. Although the Name Ranges cater for the complete analysis within each of the four funds, some detailed codes within the endowment fund category, which are unlikely to be used in practice, have not been set up. The formats also cater for up to 7 charitable activities and there is a consistent coding structure within the section catering for each activity. A similar analysis is available for charitable income. It is best practice to match the categories of income and expenditure where this is possible, but there is no link in the program to enforce this and it may well be that a strict one for one match should be departed from when the circumstances require it. For example, if one charitable activity results in two separate types of income while others may not have related income at all. CCH Accounts Production Charity FRS 102 User Guide 8

12 Codes in the 5000 range are dealt with under Support and governance costs in section below. Note that the codes within the 5000 range are intended to be self balancing. All expenses charged to codes in this range must also be reanalysed to other codes in the 1000 to 4999 range. This is achieved by crediting these amounts to the various recharge codes within the 5000 range and debiting these amounts to the appropriate codes in the 1000 to 4999 ranges. The result must be that all amounts posted in the 5000 range must sum to zero. If this is not achieved the accounts will not balance Change of approach with regard to recharge codes The use of recharge codes has always caused difficulty. The revised requirements of the SORP for the treatment of support and governance costs effectively oblige the use of recharge codes to give a complete analysis, however it is no longer necessary to use recharge codes to accumulate staff costs and depreciation. Within the coding structure there is a separate analysis of staff cost and depreciation within each subheading in which it can appear (see further detail in Appendix 1) Support and governance costs The new SORP requires all governance costs to be recharged to specific charitable activities, the same has always applied to support costs. The new master pack adopts a slightly different analysis whereby the components of both support costs and governance costs are posted initially to codes in the 5000 range, these amounts are then recharged to the various specific funds, so that codes in the 5000 range should balance to zero. In the previous ukgaap master pack formats, support and governance costs were held within unrestricted funds and then recharged to other funds. The SORP envisages that some support costs may initially be allocated to: a) governance costs and then recharged on in total; b) fundraising costs or trading costs; c) as well as to expenses related to each charitable activity. This allocation can be presented in a number of ways; these formats adopt a presentation derived from one of the Charity Commission example accounts. How this works can best be illustrated with reference to the support and governance cost note. 9 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

13 In overview the way this works is that the initial posting of support costs is to the codes which are displayed in the first few rows in the support costs column. The remaining rows in this column relate to direct governance costs and so have zero entries. Each of the support costs headings also have detailed coding within the governance costs column, the analysis of these amounts between the support and governance cost headings would then be made by journal entry between the underlying codes. The recharge to the various charitable activities (and fundraising and trading activities, where appropriate additional headings will appear under Analysed between ) are then made by a series of self balancing recharge codes i.e. crediting the amounts analysed in section 5000 of the ledger and debiting the appropriate parts of the coding within each of the four main funds. Here we are specifically recharging the total of a number of disparate codes and there would be no benefit in trying to replicate the level of analysis which is now in section 5000 of the ledger within each of the other fund analyses. Appendix 1 gives a detailed example of how this works in practice Elimination of sub-codes In the pre FRS 102 master packs, the coding structure gave a fairly high-level analysis of the main SORP headings and relied on subcodes to give further charity specific analyses. Within the notes to the accounts, the sub-code analysis had to be given separately for each fund, whereas a columnar analysis is often seen as preferable. The new Master Pack adopts a different approach. This approach has been adopted in a number of different areas but can be illustrated within the analysis of charitable expenditure. These formats cater for a total of seven charitable activities rather than the four previously catered for. There will probably always be a demand for more and more categories but seven is CCH Accounts Production Charity FRS 102 User Guide 10

14 manageable while allowing the full analysis of each category. More categories would produce some very unfocused accounts. Within each fund there is a series of generic codes for each charitable activity. The codes within the range 1200 to 1299 all relate to charitable activity 1, similar codes exist within the range 1300 to 1399 for charitable activity 2, and so on. Similar analyses exist within each of the fund types so that the same activity can be carried out using a combination of different funds. Some of the headings within each of these batches are fixed to enable further standardisation elsewhere in the accounts but note that codes from 20 within each subsection have generic headings. Within the accounts the amounts within each category will be summed and a separate database entry used to give the line heading. Care will be needed to align the analysis within each fund and within each activity. Each charity should start by devising a list of headings to use and then apply coding consistently with reference to that list. In summary, within the resulting format note, the line headings derive from the database, the numerical analysis derives from the nominal coding for each charitable activity, adding all fund types together. Because the analysis is given separately for each fund it is then possible to give an analysis by fund for the current and comparative year. As already described, to meet the specific requirement of the new SORP that comparatives should be given for each figure which appears on the face of the SOFA, comparatives are given for the total of each expenditure type for all charitable activities (the final column in the analysis) and the total expenditure for each activity (the rows below the main table), but it is not required to give a full analysis of each component in the comparative year. A layout similar to this to disclose comparatives is used in a number of the analysis notes. This layout gives no additional information where a note has only a single column, where this arises the comparative line is suppressed Flexibility The Charity Commission is quite keen on the idea that charity accounts should not follow a rigid format, notwithstanding that FRS 102 effectively obliges all entity types to follow the Companies Act formats insofar as these are appropriate. The example accounts that the Charity Commission have produced adopt quite different layouts in a number of areas. In setting up an automated system there has to be some standardisation but options can be allowed. For example within the SOFA and its notes a number of options are presented: Highlighted funds As noted above in section 2.3.1, the use of the second column in the SOFA is user definable, this can be used to highlight funds from within any category. Row headings Most of the row headings derive from the database, a default heading is included within the standard paragraphs but each heading can be amended. 11 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

15 As an example, all of the charitable expenditure headings within the charitable activities note are user definable, although each is set up with the standard place saver heading to indicate what should be added. The Charitable activities node illustrated is within the SOFA Notes group. Note that these fields control the line headings within the charitable activities note, the column headings (which may also appear on the face of the SOFA, and have the same default wording) are also user definable see below for details of those separate fields. Each of these headings is held within the database, and can be edited as normal. For example click on Edit to amend the wording or Clear to empty the cell. If the default wording is cleared then a warning will be given in the relevant page or note to state that an entry needs to be made Expansion of detail In some places the level of detail given is also user definable. For example there is a database trigger to determine whether the various charitable activities should be shown separately on the face of the SOFA, under a subheading, or whether a single line should give the total only with a cross-reference to the detail in the notes. By default a single Charitable activities line is shown on the SOFA as illustrated: The database options under: SOFA/User Definable Heading/Main Row Heading/ Charitable Activity Expenditure are: Selecting the Expand Charitable Expenditure Headings on the face of the SOFA? and ticking the Yes box, has the effect of expanding the display on the face of the SOFA to include up to seven activities under which charitable expenditure may be made (in the illustration below only two headings are used). CCH Accounts Production Charity FRS 102 User Guide 12

16 Note that the main Charitable activities heading can be amended through the database node Charitable Activities heading shown in the screenshot above. The Charitable Expenditure headings which are triggered here, but will always appear as column headers in the underlying note, can also be amended using the nodes shown at the foot of the database input screen illustrated above. Similar options apply to the level of detail given under: a) income from charitable activities b) costs of raising funds; and c) commercial trading operations; etc. Additional coding has also been introduced to allow a specific tailored heading of other income or expenditure to be highlighted on the face of the SOFA. 13 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

17 2.4 Statutory Database Within the FRS 102 Master Packs, some new features are implemented within the Statutory Database: Guidance notes Built within certain nodes of the Statutory Database, we have implemented 'Guidance Notes', which are there to help the user understand the information that needs to be disclosed within the particular nodes. This feature will be used more extensively in future master packs Trigger questions Built within certain nodes of the Statutory Database, we have implemented 'Trigger questions', these are designed to help the user mould the database and formats depending on how the questions are answered. Examples include the incorporated and unincorporated switch described in section 2.1 above, and those described under Expansion of detail within section on flexibility Fund analysis As already described in the context of the nominal ledger structure, on the face of the SOFA, up to four columns can be used to give a fund by fund analysis. Each column is activated by making nominal ledger postings to the relevant accounts: Unrestricted funds 1000 to 1999 Material funds to highlight 2000 to 2999 Restricted funds 3000 to 3999 Endowment funds 4000 to 4999 Each column will reflect the total movements on all funds in a category. A further fund by fund analysis is given in the statutory database. Each of these headings has similar content. It is worth considering each fund type separately CCH Accounts Production Charity FRS 102 User Guide 14

18 Restricted funds Within the restricted funds node of the database, various options are presented (and similar options appear in the area for each type of fund): a) An introduction to the note, the default text illustrated can be tailored to the circumstances of the charity. b) Column headings for an analysis note (see below) c) An analysis of fund movements (see below) d) Three free format text boxes. Selecting the Analysis of movements tab opens the following input screen: This database table allows a fund by fund analysis of the restricted funds to be input. Although the first column header is fixed (in the accounts the opening date will be given) all the other column headings are user-definable using the nodes under Analysis of movements column headings as illustrated in the screenshot form the database above. Any changes made will show both in this input screen and in the printed accounts. Enter: a) The fund name in the Description column. b) The amounts to be entered in the Opening, Incoming resources and Resources expended columns as positive figures (entries in the Resources expended column will be shown as bracketed, indicating that these amounts will be subtracted from the credit balance in the formats). c) In the Transfer and Revaluation gain and losses columns enter credits (e.g. transfers in and gains) as positive figures, but enter debit figures (e.g. transfers out and losses) as negative. A total for each fund will be calculated from the input in b) and c) above. The totals of each column should agree to the relevant subtotals per the SOFA, otherwise a warning message will appear in the accounts stating that there is a difference to analyse. The balance sheet and SOFA totals are derived from entries in the nominal ledger. The warning message appears if the database analysis does not agree to that given in the nominal ledger. 15 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

19 Coding has now been added to cater for up to 20 restricted funds, previously only 10 were catered for Endowment funds Endowment funds are treated in the same way as restricted funds, except that the Analysis of movements tab, and the note itself, distinguished between Permanent and Expendable endowments. The movements in both categories are posted together in the nominal ledger, but the database analysis is used both to group the individual funds and to present a memorandum analysis on the balance sheet (this appears when a posting has been made within the expendable endowment area) Designated funds The analysis of the movements on up to 10 designated funds can be made through an Analysis of movements table similar to those described above for other funds. Designated funds will remain part of the charity s unrestricted funds and hence need not be separately analysed within the nominal ledger (but see section below on the option to highlight designated funds in a separate column on the SOFA). It follows that there is no warning message to compare the database and nominal ledger postings, the formats assume that these figures will be different, and simply subtract the total database entries from the relevant nominal ledger entries (i.e. in the ranges 1000 to 1999) to arrive at a total of General unrestricted funds which have not been designated Fund analysis on balance sheet In a simple case the analysis of reserve movements need not be extensive However the formats cater for the separate disclosure of a revaluation reserve and a hedging reserve where this is required. CCH Accounts Production Charity FRS 102 User Guide 16

20 Note that that, as already described, since designated funds are a subdivision of unrestricted funds (although material funds can be shown in a separate column of the SOFA and in lines 99 to 104) the analysis in rows 106 to 113 derive entirely from the database entry, with the total amount being subtracted from the amount derived from the ledger in row 114. In addition to this there is a separate coding in rows 90 to 93 and rows 107 to 110 to enable specific funds, or groups of funds to be shown separately on the face of the balance sheet. This is a separate sequence of database codes not tied in with the full analysis given in the fund note. This coding has been brought forward from the previous version. It is probably not used often, but is available in case it is needed Use of material funds column Although the second column of the SOFA was previously used by default as a designated funds column, in principle designated funds are a subdivision within unrestricted funds. In these formats coding has been added to allow this column to highlight material amounts from within any of the main fund categories. The display of the material (or highlighted ) funds column will be achieved by posting amounts to codes in the 2000 range. It will then be necessary to amend the main column headings in the SOFA to identify the contents of the column. These options allow a choice between which of the main fund categories the highlighted fund belongs to. The effect of the selection here is to: a) change the first line of the heading of the second column to reflect the relevant main fund; b) add the word general underneath the heading of the original main funds column selected. The description of the material fund, or funds, is then input separately. This accesses text field #cy220 The Material fund description node allows the entry of a brief description of the highlighted fund which appears in the third line of the title of the second column. This should be given with a lowercase initial. By default the content is designated. As explained above, there is a database analysis of each of the main categories of funds. 17 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

21 As described below, it is still possible to use the second column of the SOFA to highlight all designated funds, but the default position is for the highlighted funds to be shown as a subdivision of the main category. The material funds area follows the same pattern as for other fund types whereby a database entry can be used to give details of more than one fund in this category There is a separate Analysis of movements tab for material funds similar to that used for other funds as described above. This allows disclosure of the movements by fund where more than one fund is included. Where this is used the relevant funds would be excluded from the analysis attached to the remaining columns. Free format text fields also allow narrative to explain the significance of these amounts. Within the default settings, the total accumulated funds which have been highlighted will appear as a separate line on the SOFA, supported by the analysis derived from the database. To allow for the continued use of the second column to highlight designated funds a new database option is available. Where this option is not taken, if the designated fund movements have been posted to the nominal accounts associated with the material fund column, but the individual fund movements have been posted to the database, there will be a mismatch as illustrated by the following screenshot: The illustration above shows the presentation that would be given if the option illustrated below has not been taken. The total of designated funds, 2,410,999, has been analysed within the designated funds table in the database and the movements in designated funds have been posted to the nominal ledger codes in the 2000 range. In this illustration the nominal ledger postings are shown under a separate heading (in this example the narrative correctly describes these amounts as designated within the unrestricted funds heading, using the database entries described at the beginning of the section) but the analysis of unrestricted funds is based on the assumption that the designated funds posted in the database are a part of the main unrestricted fund analysis. Therefore this amount is subtracted from the total unrestricted funds. A database option has the effect of reorganising the balance sheet disclosure so that the correct analysis is restored. CCH Accounts Production Charity FRS 102 User Guide 18

22 Answering Yes to the Use material funds column to highlight designated funds? Option restores the position The effect is to remove the total of codes 2000 to 2999 from the second category and add them to the unrestricted funds category in the balance sheet presentation. In effect the original presentation, as if the funds had not been highlighted, is restored External reporting The choice between types of external reporting (e.g. audit or independent examination report) is controlled through the database. Different options are presented for incorporated and unincorporated charities. This screenshot above shows the heading Reporting requirement for charitable company ) which appears when the charity is also a company (see section 2.1). For unincorporated charities, the relevant node is described Reporting requirements for unincorporated charity. Selecting the final of the options shown above opens the table illustrated below. 19 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

23 Much of this display is for future development, the main active input is in the choice of the report type (the selection itself is not currently automated). The equivalent display for unincorporated charities excludes the final line, but incorporated charities often have a choice over the regime under which they are audited. Put simply, the Charities Act audit thresholds are much lower than those in the Companies Act. All charities over these thresholds are required to have an audit under the Charities Act, except that charitable companies which are required to, or elect to have an audit under the Companies Act may do so instead. All charities which are below the Charities Act audit threshold and do not have an audit, must then consider whether they are required to have an independent examiner's report. It follows that for charitable companies: a) those which are over the Companies Act small company thresholds must be audited under the Companies Act; b) those which are below these thresholds, but above the Charities Act thresholds can: i) not take the Companies Act exemption and be audited under the Companies Act; or ii) take the exemption and be audited under the Charities Act. There are some technical differences between the requirements for audit under the Companies Act and under the Charities Act but these are not particularly significant. The distinction is important because the requirements under which the audit is undertaken must be described in the audit report itself. Given that the differences between audits under the two regimes are not particularly significant, it is normally preferable for charitable companies to be audited under the Companies Act requirements. This is because the Companies Act requires that where a Companies Act audit is not undertaken, a statement must be made on the balance sheet that the trustees have taken advantage of the relevant exemption. Where a Charities Act audit is undertaken it looks odd to state that an exemption from audit has been taken when an audit has nonetheless been done. Although incorporated charities may be audited under the Charities Act, they will still be following the accounting requirements of the Companies Act. Therefore different parts of the wording in the audit report will vary with: #cy755 #cy22 which reflects whether the charity is incorporated or unincorporated; which reflects the type of audit undertaken; CCH Accounts Production Charity FRS 102 User Guide 20

24 2.4.6 Qualified audit reports For all charities there are two separate database fields which determine the presentation of a qualified report. Here the Select Qualified or Unqualified Report Type node links into #cy155 which simply determines whether the report is or is not qualified (0 = unqualified, -1 = qualified). The qualified audit report type node links to #ar8 which determines what kind of qualification is given, there are four types: 1 = Adverse 2 = Disagreement 3 = Limitation of scope 4 = Disclaimer (the drop-down lists these options alphabetically). Strictly only Disagreement and Limitation of scope opinions should be referred to as qualified all four opinion types can be referred to as modified. Unlike the main FRS 102 formats, on the audit report page itself the lines for qualified and unqualified opinions are combined (i.e. there is not a separate sequence for each type), a combination of coding within the standard paragraphs and line suppression on the format page itself give the correct text in each situation. The analysis given by #ar8 derives from a detailed analysis of the examples in APB Bulletin 2010/2 as subsequently updated by the FRC. Although the contents of the qualification must reflect the specific circumstances of the charity (and the FRC stresses that firms should use their own wording where this better describes the situation), the overall structure for each type of report is largely consistent and can be used as a framework within which the more specific wording can be placed. The determination of the type of audit report should be the starting point for drafting the specific wording. 21 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

25 2.4.7 Incorporation of directors and strategic report into trustees report The SORP requires the preparation of a trustees report whereas the Companies Act requires the preparation of a directors report. It has always been understood that for a charitable company a single trustees report can meet the requirements for a directors report, and that no particular declaration need be made. However in these formats the title of the trustees report includes the phrase including directors report for all charitable companies. Charitable companies which are not small are also required to prepare a strategic report (there is no equivalent for unincorporated charities). Although the legislation suggests that the strategic report should always be a separate report from the directors report the Charity Commissions have agreed with the FRC that a compliant trustees report would also meet the requirements for a strategic report, so that a separate report need not be prepared. However, in order to meet the strict legal requirements it is necessary to highlight within the trustees report those paragraphs which meet the requirements for a strategic report. This is controlled by the following database trigger: This triggers additional disclosures within the trustees report. The main additional disclosure is to insert a new paragraph above the Achievements and performance section stating that this, and the Financial review section meet the requirements for a strategic report. In addition to this: a) the title of the trustees report also refers to the inclusion of a strategic report; and b) the signature section of the trustees report refers to the fact that the trustees are also approving the strategic report included within it. CCH Accounts Production Charity FRS 102 User Guide 22

26 2.5 Officers The Trustees of the Charity are entered as Officers in the same way as Directors are entered in the main FRS 102 formats. Delegated management In addition to the trustees, charities are also required to display key delegated management. The formats allow a user-defined title to be disclosed for up to 2 members of delegated management. To enable these titles to be given the field must be enabled within Central by the system administrator (within Maintenance / User defined / Extra fields set up a new field called the DMTitle as a field with no group and Text data type, under Applies to tick the Contact box.) Once the field has been enabled, set up the member of delegated management as a contact in the normal way, then within the contact record open the Extra field tab and enter the title of the role in the Value column. A Central contact can only have one Delegated Manager Title; this could be a problem if they work with more than one charity in a different role. In that case it will be necessary to edit the format and hard type the Title. 23 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

27 2.6 Specific matters within the financial statements Notes are included below only where the formats are significantly different from those found in standard limited financial statements. "Accounts" vs "Financial statements": The default description used in this pack (except for the cover page) is "accounts" and this has been used in the formats. However, the wording can be changed throughout by changing the default for "aw3" in the system "Maintenance" menu, within "Word items". CCH Accounts Production Charity FRS 102 User Guide 24

28 3. Transition to FRS 102 We recommend users read the standard Limited Company FRS 102 User Guide as much of the transitional information will be the same and we only intend to draw your attention to matters specific to Charities in this User Guide. Included in the standard Limited Company FRS 102 User Guide: Transitional procedures Retrospective restatement and how to do this within CCH Accounts Production Posting Restatement Journals Analysing the Restatement Balances in the Statutory Database Reconcile the Transition to FRS 102 format Amending the Cash Flow Statement Prior Period Errors 25 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE

29 4. Main differences for users of legacy Charity Master Pack For CCH Accounts Production users that previously have used the ukgaap Charity master packs, this section illustrates some of the layout changes in the FRS 102 formats. 4.1 General SOFA analysis notes Two versions of a fairly simple donations and legacies note are set out below. Pre FRS102 format: The old presentation used sub-codes to allow for an open-ended analysis of some types of income and expenditure. The basic structure of this note is repeated throughout the formats. Analysis is given at two levels: a) the note starts with an overall analysis which sets out the main categories fund by fund. b) further analysis can then be given separately for each fund using sub-codes within each of the main headings. CCH Accounts Production Charity FRS 102 User Guide 26

30 The advantage of this method is it its flexibility. The headings can be set up within the client nominal ledger without amendment to the format page itself. In principle, although pagination issues would have to be considered, the analysis can include up to 99 lines within each fund. However the use of multiple entity specific sub codes makes the sharing of data with other packages (such as Audit Automation) more difficult and a full fund by fund columnar analysis for a greater number of lines gives a clearer result. In practice, although some fairly extensive analyses were given in some cases, many charity accounts did not use the additional analysis. FRS102 formats: In the new version of the formats: a) the number of lines in the main analysis table has been expanded to some degree; b) greater flexibility he has been allowed by making some line descriptions user definable through the database; c) for key lines where further more detailed analysis is likely to be required, additional tables, based on database entry, have been added (in this example a more detailed analysis of Donations and gifts is shown). 27 CCH ACCOUNTS PRODUCTION CHARITY FRS 102 USER GUIDE