The New Charities SORP

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Elfreda Matthews
5 years ago
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1 The New Charities SORP

2 Content History and structure Trustees Annual Report Statement of financial affairs Other disclosures Fixed and heritage assets Total return approach Pension scheme deficits Inter-co and long term liabilities

3 History and Structure Need to adopt new UK GAAP (FRS 102) Large consultation ended December 2013 Two SORPs FRS 102 Version / FRSSE Version FRSSE (2015) may have a short life (2016?)

4 History and Structure Effective periods commencing 1 January 2015 Your year ended 31 March 2016 but comparatives 31 March 2015 Modular based can be tailored Must, should and may principles

5 Trustees Annual Report Risks and uncertainties Impact Use of designated funds Reserves policy Strategic Reports (signature) Name of Chief Exec

6 SoFA Terminology Governance costs Realised and unrealised investment gains Comparative info Legacies Government grants Donated goods and services Accrued holiday pay

7 Old and new versions of the SoFA Income 2005 SORP (SoFA extract) FRS 102(SoFA extract) Voluntary income Activities for generating funds Investment income Incoming resources from charitable activities Other incoming resources Total incoming resources Donations and legacies Other trading activities Income from Investments Income from Charitable activities Other income Total income and endowments

8 Old and new versions of the SoFA Expenditure 2005 SORP (SoFA extract) FRS 102(SoFA extract) Cost of generating voluntary income Expenditure on Raised funds Fundraisingtrading: cost of goods sold And other costs Investment management costs Resources expended on Charitable activities Governance costs Other resources expended Expenditure on Charitable activities Other expenditure

9 Old and new versions of the SoFA Gains/(losses) on investments 2005 SORP (SoFA extract) FRS 102(SoFA extract) Net gains/(losses) on investments Net incoming/outgoing resources before transfers Gross transfers between funds Gains on revaluation of fixed assets for charity s own use Gains/losses on investment assets Net income/(expenditure) Transfers between funds Gains/(losses) on revaluation of fixed assets

10 SoFA Terminology Governance costs Realised and unrealised investment gains Comparative info Legacies Government grants Donated goods and services Accrued holiday pay

11 Legacies Portfolio approach Non-portfolio approach Agreement of the estate s accounts Notification by the executors that payment will be made

12 SoFA Terminology Governance costs Realised and unrealised investment gains Comparative info Legacies Government grants Donated goods and services Accrued holiday pay

13 Government Grant Disclosure A charity in receipt of government grants must also disclose: the nature and amounts of government grants recognised in the accounts; unfulfilled conditions and other contingencies attaching to grants that have been recognised in income; and an indication of other forms of government assistance from which the charity has directly benefited.

14 SoFA Terminology Governance costs Realised and unrealised investment gains Comparative info Legacies Government grants Donated goods and services Accrued holiday pay

15 Donated Goods SORP Extract Estimating the fair value of donated goods for resale is often impractical because of the volume of lowvalue items received or the absence of detailed stock control systems or records. In such circumstances, donated goods for resale are not recognised on receipt. Instead, the value to the charity of the donated goods sold is recognised as income when sold. The proceeds of sale are categorised as Income from other trading activities in the SoFA.

16 SoFA Terminology Governance costs Realised and unrealised investment gains Comparative info Legacies Government grants Donated goods and services Accrued holiday pay

17 Other Disclosures Salary banding all charities Key management salaries Related parties Going concern -material uncertainties De facto Trustees

18 De facto Trustees De facto trustee is a person who has not been validly appointed as a trustee but is acting as the trustee of the charity and is exercising the functions that could only be properly discharged by a trustee. This may have come about due to an error, omission or oversight in the appointment process of that trustee. A trustee who is a de facto trustee of a company charity may alternatively be known as a de facto director.(glossary)

19 Fixed assets Opportunity for one-off revaluation of fixed assets Valuation must be at (or prior to) date of transition to FRS 102 i.e. start of comparative period Subsequent depreciation on revaluedamount (unless justification for non-depreciation)

20 Heritage Assets (definition) A heritage asset is a tangible or intangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture. (18.3) An asset may have the attributes of a heritage asset, for example it may be of historic or artistic importance, but unless it is also held and maintained for its contribution to knowledge and culture then it will not fall within the definition of a heritage asset. (18.4) Assets with heritage attributes may be used operationally for purposes unconnected with the promotion of knowledge and culture or even held as investments. In such instances, the asset is accounted for within tangible fixed assets or investments as appropriate. (18.5)

21 Heritage Assets (definition) Heritage assets may include abbeys, monasteries, cathedrals and historic churches and monuments where a contribution to knowledge and culture is ancillary to faith or other purposes. (18.9) Similarly, the artefacts contained within, or associated with, such assets may also be heritage assets. (18.10) Charities that do not have preservation or conservation purposes should account for an asset as a heritage asset only if that asset: has historic, artistic, scientific, technological, geophysical or environmental qualities; contributes to knowledge and culture through its retention and use; and is accessible to the public for viewing and/or research. (18.11)

22 Heritage assets Heritage assets may now include buildings and artefacts where their preservation and contribution to culture is ancillary to other purposes This is good practice (a should requirement) True and fair Disclosures

23 Total return approach Unapplied total return allocated to income can now be shown either within the investment income line or the transfer line on the SoFA

24 Permanent Endowment Standard Rules Investments Income Capital Gain SoFA

25 Permanent Endowment Total Return Approach Investments Unapplied Total Return SoFA

26 Total return approach New disclosures in Trustees Report: Date of initial gift and when unapplied total return established Method used to identify initial amount of unapplied total return Explanation of policies/factors used in determining allocation to income Name and qualification of professional advisors

27 Pension deficits New requirement under FRS 102 to recognise an agreed liability to contribute to past service deficits in multi-employer schemes that are accounted for as a defined contribution scheme

28 Other issues Summarised financial statements PYA if material (vs. destroying T&F)

29 Inter-company and long term liabilities FRS 102 requirement to discount long term liabilities where these are not arms length Mainly applies to intercompany balances which carry no (or low) rate of interest Public Benefit Concessionary Loans Exemption available under certain circumstances May be tricky to apply in practice

30 Questions

Review of Changes in SORP Legislation

Review of Changes in SORP Legislation Contents Background and Transition... 1 Changes to the Trustees Annual Report... 2 Comparison of the Statement of Financial Activities... 3 Changes to Headings on