SORP/FRS 102 has arrived

14 July 2016

Which SORP?

Some smaller schools may be eligible to adopt the FRSSE SORP although should be mindful that the FRSSE is being withdrawn so this is likely to be a one-year only option.

You should also consider whether to adopt (or continue with) the FRSSE for your trading subsidiary accounts.

Think about your transition date

For schools with a 31 August year end your conversion date is 1 September 2014. Therefore the impact of any adjustments (such as property valuations or employee benefit accruals) needs to be considered at this date.

Presentation of your SOFA

The headings introduced by SORP 2005 have been replaced by the broader income headings; donations and legacies, charitable activities, other trading activities, investments and other.

Governance costs are no longer a separate SOFA heading and instead should be included within expenditure on charitable activities.

Investment gains and losses can now be shown in total with no requirement to split between realised and unrealised but now appear above the net income/expenditure total. 

Governors report 

The main headings and format required remain unchanged from SORP 2005. However some additional disclosures are required:

  • policy for Key Management Personnel;
    • the report must explain the arrangements for setting the pay and remuneration of the charity's key management personnel and any benchmarks, parameters or criteria used.
  • financial effects of any significant events (and ‘lessons learned’); and 
  • principal risks and uncertainties;
    • including the impact of pensions and going concern. 

Employee benefit accruals 

Often referred to as ‘holiday pay’ but more than that…

SORP FRS 102 requires:

An entity shall recognise the cost of all employee benefits to which its employees have become entitled as a result of service rendered to the entity during the reporting period.

All schools, irrespective of their year-end, should consider whether an accrual for staff costs is required in respect of non-teaching staff if the holiday year for these employees is not coterminous with the school’s financial year (some support staff may, for instance, have holiday pay entitlement running on a calendar year basis).

This briefing specifically deals with the issue of accruals for teaching staff costs where the school’s financial year end is not 31 August – most commonly 31 July (but in some cases 30 June). 

The need for an accrual should be assessed at the transition date and the comparative balance sheet date as well as the current balance sheet date.

If you would to discuss any of the points further, please contact Heather Wheelhouse, or your usual RSM adviser.

End of term report

Download the summer edition of our independent schools end of term report.