PKF teams up with Barclays and True to host Charity Roundtable on SORP changes
On 17 September 2025, PKF was delighted to partner with Barclays and True Limited to host an exclusive Charity Roundtable in Jersey. Hosted by Nicholas James, Danielle Bonhomme and David Moehle from PKF, the session focused on the Charities Statement of Recommended Practice (SORP) 2026, offering clarity on key changes, timelines, and practical steps for boards to take now.
Top insights and considerations for charities
The presentations included a deep dive into the upcoming changes and how this will affect the running of charities going forward. Some of the main SORP changes highlighted were:
Timings of the changes
Charities must begin applying the new SORP for accounting periods starting on or after 1 January 2026. However, charities with a 31 December 2025 year-end are encouraged to consider incorporation of certain trustee reporting requirements to ensure smooth transition and readiness.
Narrative enhancements in the “front half” of the annual report
A major emphasis of the new SORP will be on strengthening the information provided in annual reports that sits alongside the financial statements. Key areas include:
- Narrative enhancements – Provide greater emphasis on strategy, forward planning, and contextual financial review, with requirement that figures align with the accounts.
- Reserves policy – Every charity must explain their reserves policy, reconcile reserves to policy, and explain any variance, linking to going concern assessment
- Impact reporting – Charities must set out how their work has made a difference to beneficiaries and wider society.
- Sustainability and ESG – Disclosure of environmental, social and governance considerations will be required, reflecting growing public and regulatory expectations.
- Volunteer contributions – Charities will need to describe the contribution of volunteers, including the number of volunteers engaged during the year.
Tiered application by charity size
The new SORP framework applies to all charities but exact requirements may vary according to the size of the organisations:
- Tier 1 – Smaller charities (income ≤ £500,000): Simplified accounting policies, reduced disclosures, and a streamlined Statement of Financial Activities (SoFA).
- Tier 2 – Medium charities (income £500,001 to £15 million): Additional disclosures beyond Tier 1, with some narrative reporting required.
- Tier 3 – Larger/complex charities (income > £15 million): Full SORP compliance, with enhanced disclosures, comprehensive narrative reporting, and ESG considerations.
Key accounting treatments under SORP 2026
The draft SORP introduces several important updates to the way income, leases, funds, and disclosures are reported:
- Exchange transactions: The entitlement-based approach is replaced with a five-step income recognition model, aligned with IFRS 15 and revised FRS 102. This applies to contracts for services and trading activities.
- Grant income: Recognition depends on conditions:
- No performance condition: recognised when received or receivable.
- Performance condition: recognised only once the condition is met.
- If funds are received before the condition is satisfied: treated as a liability.
- In all cases, amounts must be measurable reliably.
- Legacy income: Recognised when receipt is probable and measurable. The portfolio approach and discounting for multi-year legacies remain unchanged.
- Donated goods and services: Recognised as income when received and measurable at fair value, provided any performance conditions are met. Volunteer time is excluded. Where valuation at receipt is impracticable (e.g. donated stock), goods are recognised when sold or distributed. Donated facilities or services should be recorded at no more than their open market value.
- Leases: All leases (except short-term and low-value) must now be brought onto the balance sheet as right-of-use assets and lease liabilities. Operating lease charges are replaced by depreciation and interest, impacting KPIs and debt covenants.
- Exemptions: short-term leases (≤12 months) and low-value assets (e.g. laptops, furniture).
- Disclosures: movements in assets and liabilities, commitments for exempt leases, and related interest/depreciation charges.
- Fund accounting: Charities must disclose the legal powers used to amend or reclassify restricted funds, with clearer explanations of fund movements.
- Statement of cash flows: Required for Tier 3 charities (income > £15 million). Optional for Tier 1 and Tier 2.
- Remuneration disclosures: Expanded requirements include banded disclosures of trustee and senior staff pay, plus related party transactions.
What trustees should be doing now
To prepare for SORP 2026, charities should take the following practical steps:
- Plan ahead: Consider incorporating the new trustee reporting requirements early for your 31 December 2025 financial year end.
- Assess your tier: Classify your charity by projected income to understand which reporting tier and obligations will apply.
- Collect new data points: Begin gathering information on volunteer numbers, reserves, impact measurement, and sustainability/ESG activities.
- Review leases: Identify current and future leases and assess how they will impact the balance sheet.
- Examine contracts: Review agreements to prepare for implementation of the five-step revenue recognition model.
Why this matters
These changes represent one of the most significant updates to charity accounting in recent years. Trustees will need to adopt a more forward-looking and transparent approach, ensuring that reporting not only meets compliance requirements but also clearly communicates purpose, performance, and impact.
Get in touch
If you would like to discuss what these changes mean for your charity, get in touch today, or email David Moehle, Head of Audit & Assurance or Nicholas James, Audit Director.