When preparing a charity's accounts on an accruals basis you must decide on which SORP to use. For accounting periods (financial years) starting on or after 1 January 2015 preparers had to decide whether to prepare the accounts under the Financial Reporting Standard for Smaller Entities (FRSSE) or the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102). Due to the differences between the FRSSE and FRS 102 a SORP was developed to provide application guidance for each accounting standard. The FRSSE was withdrawn for accounting periods beginning on or after 1 January 2016 and so the Charities SORP (FRSSE) can no longer be used. For accounting periods beginning on or after 1 January 2016 all charities must use the Charities SORP (FRS 102) together with Update Bulletin 1. For accounting periods beginning on or after 5 October 2018 all charities must use the Charities SORP (FRS 102) together with Update Bulletin 1 and Update Bulletin 2.
Charities adopting the FRSSE may face changing their accounting policies twice in succession. Charitable companies in the Republic of Ireland were not able to use the FRSSE. All other charities could use the FRSSE if they met 2 of the following 3 criteria:
FRS 102 may be followed by any charity. Charities following FRS 102 are often required to provide more information in the notes to the accounts and initially had to provide a Statement of Cash-flows irrespective of their level of income. Update Bulletin 1 amended the Charities SORP (FRS 102) and a Statement of Cash-flows is now only required of larger charities.
It is important to make the right choice for 2015 accounting years - for information as to the main differences between the FRSSE SORP and FRS 102 SORP refer to the help sheets. It is also recommended that charities speak with their auditor, independent examiner or advising accountant to explore which standard is best for them.
It is essential to make this choice before downloading, customising or selecting SORP modules. Although the two SORPS have the same structure and order of modules, the requirements differ significantly due to underlying differences in terminology, accounting policies and disclosures required by the FRSSE and FRS 102.