Charity SORP 2026: What Charities Need to Know

From the Professional Accounting Team

In October 2025, the eagerly awaited 2026 version of the Charity Statement of Recommended Practice (2026 SORP) was published. This update follows the publication of the September 2024 version of FRS 102 and a SORP consultation in mid-2025, which attracted over 100 responses.

The 2026 SORP contains some significant changes to how charities will report on their activities compared to the requirements of the 2019 SORP. This article looks at some of the key changes that charities who apply the SORP will need to be aware of as they begin their journey of reporting under the new SORP.

Why was the SORP updated?

As the SORP provides guidance on how charities can apply FRS 102, the SORP-making body must always ensure that it remains consistent with FRS 102. As a result, an amendment made to FRS 102 will prompt the need for similar amendments to be made to the SORP. Following the publication of the September 2024 edition of FRS 102, the SORP making body has set about updating the SORP to incorporate the various changes contained in the new edition of FRS 102.

The Charity SORP 2026 represents the most significant overhaul of financial reporting for charities in Ireland and the UK for many years (and certainly the most significant change since the introduction of FRS 102). It will reshape how charities explain their activities, report on their impacts, recognise income, and account for leases.

Changes made to the Charity SORP 2026

A New Tiered Reporting Structure

The previous edition of the Charity SORP included the concept of a “larger charity” (charities with gross income exceeding £/€500,000). For those charities classed as “larger”, there were additional mandatory disclosure requirements compared to their “smaller charity” counterparts, particularly in relation to the disclosures in their Trustees Annual Report.

Charity SORP 2026 builds on this concept and introduces a three-tier system, designed to further scale disclosure requirements according to charity size. Depending on the tier in which they fall, charities will have increased or decreased reporting requirements across five specific modules. The new tiers are as follows:

• Tier 1: Gross income up to £/€500,000
• Tier 2: Gross income more than £/€500,000 but less than £/€15 million
• Tier 3: Gross income of more than £/€15 million

This new system will result in some charities requiring more details in their Trustee’s Annual Report. These requirements are intended to be proportionate to the size of the charity.

A Refocused Trustee’s Annual Report

One of the most visible differences between a set of financial statements which have prepared solely under FRS 102 compared to the Charity SORP is the presence of a Trustee’s Annual Report in the SORP. The Trustee’s Annual Report is a key component of a charity’s Annual Report and aims to provide a narrative account of what has happened in the charity during the year.

In the 2026 SORP, The Module dealing with the Trustee’s Annual Report (Module 1) has been rewritten to improve clarity, narrative quality, and alignment with financial information. One of the key goals of the SORP-making body in doing this is to help charity trustees to understand the narrative reporting requirements placed on them and to encourage trustees to link the narrative information to the financial details in the accounts. The emphasis of the Trustee’s Annual Report is firmly on impact reporting — communicating not just what a charity does, but also the difference it makes.

Some specific changes relating to the Trustee’s Annual Report contained in the updated SORP include.

• Prompt questions to encourage charities to explain the impact that they are making. Within Module 1, there are now some “prompt questions” which should help charities to tell their story in a meaningful way. The purpose of this is to ensure that the charity does not see the module as simply a compliance checklist but rather a means by which they can explain the difference they are making in a way that is unique to their specific charity. The questions focus on areas such as, objectives, activities undertaken, strategy, measurement of success and wider societal benefits.
• Sustainability Reporting. In recognition of the fact that stakeholders are increasingly interested in how charities are responding to environmental, social and governance issues, the 2026 SORP introduces some mandatory and encouraged disclosures which address how the charity is responding to, and managing, these issues. Only charities in tier 3 (i.e. gross income exceeding €/£15 million) are required to explain this, with charities in tiers 1 and 2 having the option to do so.
• Legacy income. Where a charity is in receipt of legacy income and this income has been recognised in the accounts prior to the resources being received, the impact of this must be disclosed.
• Disclosure of auditors and exemption from disclosing certain information. Under the 2026 SORP there is now a specific requirement to provide the name of the charity’s auditors, if applicable. Furthermore, where certain disclosure exemptions are availed of (such as omitting the names of the CEO, senior staff members etc) due to a risk to their personal safety, there is no longer a requirement to explain why such information has been omitted from the Trustee’s Annual Report. Where a charity is availing of this option, they should be aware of the relevant local legislative requirements and should consult their regulator where necessary prior to availing of this exemption.

Reserves and Going Concern

Modules 1 and 3 include some changes in relation to reserves and going concern.

The 2026 SORP introduces further clarity regarding the treatment of reserves. First, there is now a specific definition of reserves included in the glossary. Consideration of reserves is also better incorporated into going concern assessments and where a charity has no (or negative) reserves, there is now a requirement to explain why it is still operating as a going concern. Furthermore, there is now a recommendation for charities to consider their reserves and going concern assessment when explaining their plans for the future.

In order to align with the FRS 102 Periodic Review amendments, there are some amendments to going concern disclosures, including a requirement to disclose significant going concern judgements as well as confirmation that the charity has considered at least 12 months of information in making its going concern assessment. Some going concern disclosures which were a “should” disclosure under the 2019 SORP are now a “must” disclosure.

Revenue Recognition

In order to align the SORP with the updates to FRS 102, Module 5 (“Recognition of income including contract income and income from legacies and grants”) has been updated and restructured. The updated Module provides clarity on how to account for the various income streams from which charities benefit. Module 5 has been split into 2 sections.

• Section 1: Exchange transactions
• Section 2: Non-exchange transactions

Most charities will be in receipt of income from either (or both) types of transactions, and it is important to identify these appropriately, as the resulting accounting treatment is fundamentally different for each income stream.

Exchange transactions

For exchange transactions, charities will be required to apply the five-step model of revenue recognition whereby the transactions will go through the new model which has been derived from IFRS 15 Revenue from Contracts with Customers. The SORP includes guidance at each step of the process to help charities in applying the requirements. The five-steps of revenue recognition are:

• Step 1- identify the presence of a contract with a third party
• Step 2- identify the performance obligations in the contract
• Step 3- determine the transaction price
• Step 4- allocate the transaction price to the performance obligations in the contract
• Step 5- recognise income when or as a charity satisfies a performance obligation

Charities who receive income from exchange transactions will need to bring these sources of income on the 5-step “journey” to determine the appropriate accounting treatment. In many cases, this will be a very straightforward exercise, with a clear path through each step. In some cases, charities will require a deeper consideration of each step. This might include, for example;

• A charity considering how many performance obligations exist in a contract with a customer and whether the series of goods/services are distinct. Consider a charity providing residential care services to individuals. If the contract with the customer includes additional goods and services beyond residential care services (such as meals, classes, medical sessions etc) then charities will need to consider the number of performance obligations in the contract and how these should be treated under step 2 of the model.
• Where a charity determines that it has multiple performance obligations in a contract, it must then allocate the transaction price to the performance obligations in the contract. This might involve estimation techniques if there are no observable standalone prices for that performance obligation.
• A charity will need to consider whether it satisfies its performance obligations over time or at a point in time as this will impact on the timing of revenue recognition.

For non-exchange transactions, charities are not required to apply the five-step model and instead must recognise income based on when performance-related conditions are met. Under the SORP,

• Non-exchange transactions that don’t impose future performance-related conditions on the recipient are recognised in income when the resources are received or receivable
• Non-exchange transactions that impose future performance-related conditions on the recipient are recognised in income only when the performance-related conditions are satisfied
• When resources are received or receivable before the performance-related conditions are satisfied, a liability is recognised

While it is written more generally for an FRS 102 audience, and not specifically for charities, the FRC’s Factsheet 10 – Revenue from Contracts with Customers is a useful source of further reading on revenue recognition and the five-step model.

Leasing

Another significant change in the Periodic Review of FRS 102, which now makes its way into the Charity SORP, is in relation to lease accounting, and specifically lessee accounting.

The updated SORP removes the operating vs finance lease distinction for lessee accounting and instead requires that most leases (with some exemptions) will be required to be recognised as a right-of-use asset on the balance sheet, with a related liability also recognised for future lease payments. A new Module 10B has been added to the SORP to address this.

While much of the theory in relation to the new lease accounting rules is addressed in FRS 102, the SORP provides guidance and commentary on what this might mean for charities and deals with some circumstances that might be more prevalent in charities. Some specific circumstances addressed in the SORP include:

• Peppercorn leases whereby a charity has leased an asset for nil or for a nominal amount
• Social donation leases where the lease payments are below market rent
• Rolling leases with no specified end date
• The appropriate interest rate that a charity should use to determine the present value of lease payments
• Special conditions imposed on a lease because the tenant is a charity

The new module 10B includes a useful flow chart which should help users to navigate the rules and signpost readers to where they can find further information.

Not all assets leased by charities will be required to be recognised as right-of use assets and there are two prominent exemptions which (if applicable to the charity) will allow the charity to expense the lease in the year it is incurred. The two exemptions are;

• Low value leases. While not providing monetary guidance on what constitutes a “low-value” lease, the SORP sets out some asset types which would not typically be expected to be “low-value”. Furthermore, the SORP also highlights some assets which might be expected to be classed as "low-value”.
• Short-term leases. Leases which have a term of 12 months or less at the commencement date may avail of the option to not recognise a right-of-use asset in relation to the lease and instead can expense the lease payments on a straight-line basis over the lease term. A lease containing a purchase option cannot be treated as a short-term lease.

• Information gathering- can the charity locate all of its leases?
• Determining the lease term- is there a legally enforceable lease in place? Has the charity a lease in place which has simply “rolled forward”.
• Leases where the charity is not paying full market value- How should a charity account for the “donation” element of this?
• Systems for recording leases- Does the charity have a system in place which can capture and record the relevant information for lease accounting or is a new system required?
• How to present value the lease liability at the beginning of the lease term.

The FRC’s Factsheet 11 – Lease accounting for lessees is a useful source of further reading on the new lease accounting rules in FRS 102.

Statement of Cash Flows

Under the previous version of the SORP, a charity was required to prepare a statement of cash flows when it had income in excess of £/€500,000. The 2026 SORP increases this threshold to £/€15 million (ie. a Tier 3 charity). This change means that only the very largest charities will be required by the SORP to prepare a cash flow statement, and this change is broadly consistent with the requirements placed on companies of a similar size under FRS 102. In making the change the SORP making body noted that the change will have a positive impact on charities as it will reduce the reporting requirements for smaller charities.

However, it is important to note that the increased threshold does not override any existing requirement that a charity might have to prepare a statement of cash flows. So, for example, a charity who operates as a company may have income below £/€15 million but may still be required by company law to prepare a statement of cash flows because it does not meet the definition of a small entity.

The exemption is also voluntary and a charity who is in tier 1 or 2 may choose not to avail of this and prepare a statement of cash flows.

Get ready for implementation

The 2026 Charity SORP is effective for reporting periods beginning on or after 1 January 2026, leaving charities with limited time to prepare. Charities who apply the SORP should act now to familiarise themselves with the new requirements, assess the impact on their reporting processes, and plan any updates needed for a smooth transition. By acting early, charities can ensure they are ready to implement the revised SORP and meet their reporting obligations.