The upcoming changes to the Further Education (FE)/Higher Education (HE) SORP 2026, released in November 2025, are effective from accounting periods beginning on or after 1 January 2026. For most institutions, this means year ends from 2027 onwards. Key changes include a refreshed revenue recognition model and recognising most leases on balance sheet.

What are the practical steps that FE and HE institutions can take now?

Project planning

Start early. Create a clear project plan that:

• Assigning responsibilities to ensure you have enough resources for the implementation, including appropriate staff training and professional external support.
• Establishing clear milestones and deadlines.
• Communication with key stakeholders – governing bodies, audit committees, auditors and lenders early.
• Undertaking a SORP impact assessment early on to understand how the changes may impact the financial statements on a line-by-line basis.

Leases

The new SORP requires most leases to be recognised on balance sheet. Actions:

• Create a complete and up-to-date register of leases, including terms, service components and identify and include any leases where payments are significantly below market rent.
• Review other contracts to determine whether they contain a lease.
• Determining the discount rate methodology that will be used.
• Identifying practical expedients and exemptions that could be taken such as those for low-value assets and short-term leases.
• Consider the use of specialist software or spreadsheets to calculate your lease liabilities, right-of-use assets and associated expenses.

Revenue recognition

Review – and where needed revise – how you account for key income streams. Actions:

• Undertake a contract analysis for each of your revenue streams to evaluate the application of the new revenue recognition model.
• Determine how to adopt the revenue amendments, either by revising your comparatives or applying the model only to incomplete contracts as of the adoption date.
• Understand where arrangements include non-cash consideration.
• Gain a clear understanding of how fee waivers, scholarships and bursaries will be treated under the new requirements.

Processes and controls

Update processes and controls to ensure:

• Systems and templates are updated to reflect the new reporting requirements.
• The appropriate data is collected in order to ensure that any adjustments can be calculated and new disclosures requirements complied with.
• Accounting policies and finance manuals are updated for the changes.

Broader Institution implications

The amendments may have broader implications for your institutions, such as:

• KPIs.
• Covenant compliance.
• Distributions from subsidiaries.

Identify wider implications early and plan mitigations—such as renegotiating covenants or updating agreements and contracts.

How we can help you prepare for the FE/HE SORP 2026?

Our team of accounting and financial reporting experts are here to support your institution with the changes, including:

• Workshops to help your people understand the changes.
• SORP impact assessments to help your team identify and understand the amendments, quantify the changes and explain the impact to your key stakeholders.
• Detailed revenue or lease analysis.
• Accounting papers and policies to apply the new standard to your institution.
• Financial statement preparation, incorporating the new disclosure requirements.

To discuss how we can help your institution prepare for the changes to the updated SORP, please get in touch with Richard Lewis or your usual RSM contact.

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