Gift aid payments - FRS 102 Triennial review

In the Triennial Review of FRS 102, Financial Reporting Council (FRC) published amendments to the accounting for gift aid payments (from a subsidiary to its charitable parent) and reminded entities of existing requirements.


In relation to the accounting for gift aid payments made, or expected to be made, from a subsidiary to its charitable parent, the FRC has ratified the proposed amendments published in FRED 68.


In the basis for conclusions, the FRC reminded entities about particular aspects that arise when accounting for gift aid payments from a subsidiary to a parent charity.

Although gift aid payments are a donation for tax purposes, they are legally a form of distribution to owners and so should be accounted for consistently with dividends – ie. as a deduction from equity.

Consequently, an expected gift aid payment should not be accrued unless a legal obligation to make the payment exists at the reporting date.

Creating a legal obligation

A legal obligation may be created, for example, by entering into a deed of covenant:

  • where it is a provision in the company’s articles; or
  • where it has been approved by the shareholder prior to the year end and is no longer at the discretion of the entity.

 A board decision to make a gift aid payment to a parent charity, that has been taken prior to the reporting date, is not sufficient to create a legal obligation.

For further information, please speak to your usual RSM contact.