In March 2024, the Financial Reporting Council (FRC) finalised its periodic review of UK and Ireland accounting standards. The amendments arising from this review apply to accounting periods commencing on or after 1 January 2026. Early adoption is permissible provided all the periodic review amendments are applied at the same time.

Consequently, the SORP-making bodies are required to update their SORPs, as necessary, to cater for the periodic review amendments. Some have also made additional amendments to take on board feedback from their initial consultations.

The ‘headline’ changes arising from the periodic review are, of course, on-balance sheet lease accounting for lessees and the new comprehensive five-step revenue recognition model.

Charities SORP

The Charities SORP 2026 (issued October 2025) applies to accounting periods starting on or after 1 January 2026.

The most notable changes arising from the amended Charities SORP are:

• A three-tier reporting regime which introduces increased disclosure and presentation requirements for larger charities;
• Changes to lease accounting; and
• Changes to income recognition.

Three-tier reporting regime

The reporting requirements have been split into three tiers to reflect the size of charities within the sector. The tiering is as follows:

The Euro (€) amounts are relevant for charities in the Republic of Ireland which apply the SORP. The SORP-making body has set the € amounts at the same level to avoid complications with varying exchange rates.

The SORP clarifies that a charity must assess their tier each year based on their annual gross income only. There are no exemptions similar to the Companies Act 2006 thresholds where consideration is given to two out of three criteria (turnover, balance sheet total and employee headcount) for two consecutive years. Hence, charities in tiers 1 and 2 will need to consider if they meet the other small company criteria to determine if they are exempt from certain requirements permitted by FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (eg from preparing a cash flow statement).

Lease accounting

Lease accounting is dealt with in Module 10B Lease accounting. This module reflects the provisions contained in FRS 102 (September 2024) and will require charities that are lessees to account for most leases on-balance sheet. It should be borne in mind that under the new lease accounting treatments, there is no distinction between an ‘operating lease’ and a ‘finance lease’ for lessees as there is now under FRS 102 (January 2022).

This will mean that many charities will see an increase in right-of-use assets with matching liabilities in the balance sheet.

FRS 102 (September 2024) provides an exemption from on-balance sheet recognition of leases for short-term leases (ie those with 12 months or less to run from the inception of the lease); and for leases of assets of low value. A low value asset is where the underlying asset is of low value on an absolute basis, regardless of whether such leases would be material to the lessee. It should also be noted that the value of lease payments has no bearing on the assessment of whether an underlying asset is of low value.

In addition, the SORP introduces charity-specific guidance on ‘peppercorn arrangements’. For the purposes of the SORP, a ‘peppercorn arrangement’ is considered to have the form of a lease. However, any consideration paid lacks economic substance (e.g. nil or nominal amounts), which means the arrangement is unlikely to meet the definition of a lease in FRS 102; but they are considered to be a form of non-exchange transaction.

The SORP-making body has produced guidance on what charities should do where lease accounting is considered as follows:

• Refer to FRS 102 and to resources provided by the FRC
• Review current leasing arrangements
• Establish whether any leases may qualify for exemption from on-balance sheet lease accounting (e.g. short-term leases or leases of assets of low value)
• Identify which leases will need to be recorded on-balance sheet
• Identify and understand the approach that will need to be taken to identify the value for the leases and relevant transactions
• Consider what record-keeping would be helpful to implement now to assist with future preparation of the charity’s financial statements
• Consider whether the change in asset position will impact on any financial arrangements (e.g. debt covenants)
• Consider whether any potential changes in the charity’s total asset value will result in the charity needing to have an audit
• Obtain professional advice from auditors/independent examiners where required

Revenue recognition

FRS 102 (September 2024), Section 23 Revenue from Contracts with Customers introduces a comprehensive five-step model approach for income from exchange contracts. The five steps in the model are as follows:

• Step 1: Identify the contract(s) with a customer
• 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 revenue when (or as) the entity satisfies a performance obligation

The application of this new model will mean that charities will need to recognise income from exchange contracts differently under FRS 102 (September 2024). Consequently, charities should start to carefully assess their revenue recognition accounting policies now to ensure they are compliant with the new requirements. The SORP-making body’s advice is as follows:

• Refer to FRS 102 and to the resources provided by the FRC
• Review current contracts and income streams
• Identify both the amount and timing of income using the five-step model approach
• Consider what record-keeping would be helpful to implement now to assist with the future preparation of the charity’s financial statements
• Consider whether the change in revenue recognition will impact any current or planned financial arrangements (e.g. debt covenants)
• Obtain professional advice from auditors/independent examiners where required

LLPs SORP 

On 3 November 2025, the CCAB issued a revised Statement of Recommended Practice – Accounting by Limited Liability Partnerships (LLPs SORP).

The updated LLPs SORP has been updated in response to the FRC’s periodic review as well as feedback received as part of the 2024 LLPs SORP consultation. The updated LLPs SORP also reflects changes made by The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 (SI 2024/1303).

Throughout the updated LLPs SORP, references to ‘should’ have been changed to ‘shall’ where a particular treatment or disclosure is required. This means that the accounting treatment or disclosure is mandatory under the SORP.

Small entity disclosures 

During the periodic review of FRS 102, the FRC amended Section 1A Small Entities, Appendix C Disclosure requirements for small entities in the UK to require additional disclosures. Notably:

• All the encouraged disclosures in Appendix E Additional disclosures encouraged for small entities (which is only relevant to small entities in the Republic of Ireland under FRS 102 (September 2024)) have been moved into Appendix C.
• Additional disclosure requirements for small entities in the UK in respect of:

            o   leasing

            o   provisions and contingencies

            o   revenue

            o   share-based payment arrangements

            o   taxation.

• Extended related party disclosure requirements.

The updated LLPs SORP at paragraph 27 clarifies that while FRS 102, Section 1A offers simplified disclosure requirements for small entities, the financial statements must, nevertheless, give a true and fair view. Consequently, a small LLP may need to provide additional disclosures beyond those required by FRS 102, Section 1A. Para 27 also requires all LLPs (including small ones) to provide the disclosures required by paras 30, 52, 54, 60, 63, 65, 67, 69 and 92 of the SORP.

A small LLP is not required to provide a specific disclosure if the information resulting from that disclosure is not material. The exception would be where the disclosure is required by the LLP Regulations, regardless of materiality.

Post-retirement payments to members

CCAB has amended the section on Retirement Benefits – Other post-retirement payments to members to improve the overall flow of the SORP. The amendments do not change the underlying requirements or guidance concerning retirement benefits.

Presentation of members’ remuneration

CCAB received comments during the consultation on the draft SORP in respect of the presentation of members’ remuneration. CCAB have taken on board these comments and have amended the LLPs SORP to require a parent LLP to include only amounts payable to members of the parent within the line item ‘Members’ remuneration charged as an expense’ in the consolidated financial statements.

Amounts shown as members’ remuneration charged as an expense in the subsidiary LLP’s financial statements must be included in the appropriate profit and loss account category depending on the nature of the underlying cost in the consolidated financial statements (unless the subsidiary LLP member is also a member of the parent LLP).

Additional disclosure requirements relating to the presentation of subsidiary LLP members’ remuneration in the parent LLP’s consolidated financial statements have also been included in the updated LLPs SORP.

Company law updates

The LLPs SORP has been updated to reflect changes to company law by The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 (SI 2024/1303). Among other things, SI 2024/1303 increased the company and group size thresholds. It should be noted that the size thresholds that apply for the purposes of energy and carbon disclosures have not been updated.

The updated size thresholds for micro and small LLPs for accounting years commencing on or after 6 April 2025 are as follows:

Conclusion

This article has considered some of the more notable changes arising in the Charities and LLPs SORPS. Of course, the ‘devil’ is in the detail of the various documents and preparers will need a sound awareness of the amendments to the SORPs as well as the amendments arising from the periodic review of UK and Ireland accounting standards in order to ensure correct accounting treatments and disclosures.

Steve Collings FCCA, Leavitt Walmsley Associates