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COVID-19: new charities SORP guidance issued

1 April 2020: the disruption caused by coronavirus has led the Charities SORP-making body to issue a new set of guidelines aimed at helping trustees understand the pandemic’s potential ramifications to its annual accounts.

In its guidance, the regulator said government measures to limit harm from the virus would have “potential implications for charity income, expenditure and commitments, and the value of charity assets and liabilities” and in some instances, “the implications may be so severe as to cast doubt upon a charity’s financial sustainability”.

It suggests that during “these unprecedented times” when preparing a set of accounts that had yet to be approved, trustees “should consider whether information needs to be included to explain the impact of the COVID-19 situation on their charity”.  

It also flagged that there “could be changes to the financial statements needed as a result of the COVID-19 situation and it is important that trustees understand and consider these”.

The guidance, which is advisory only, covers the implications for the trustees’ annual report, going concern and the alternative basis to going concern when preparing accounts under the SORP.

Specific areas it deemed worthy of close consideration include:

  • In reporting the main achievements of the charity (paragraph 1.20) explaining how the virus control measures affected the charity’s activities 
  • Taking the opportunity to explain any financial uncertainties regarding the charity’s financial sustainability and consideration of going concern (paragraph 1.23) and the steps being taken to address these uncertainties
  • Explaining how the contribution of volunteers, where appropriate, assisted the charity in its work in managing in the changed circumstances (paragraph 1.39)
  • The impact on the charity’s ability to fundraise (paragraph 1.41) and how the trustees managed this situation
  • How the outbreak of the virus has affected staff, volunteers and beneficiaries and the implications for the charity’s operations and activities for the coming year (paragraph 1.45)
  • How the financial and operational effects of the virus and the control measures relating to the virus affected the principal risks and uncertainties facing the charity during the reporting period (paragraph 1.46)
  • Give consideration whether there are any implications for any existing or potential defined benefit pension liability (paragraph 1.47) and investments the charity holds (paragraph 1.47)
  • Consider any impact on the charity’s reserves policy, level of reserves and any change to designated funds set aside for future commitments (paragraph 1.48)
  • Consider the likely impact of the virus control measures and potential duration of the control measures on the future aims and activities of the charity (paragraph 1.49)
  • The impact of the virus-related control measures on any wider network of which the charity is a part and how this affects the charity’s operations (paragraph 1.51)

The regulator also recommended trustees consider the FRC’s guidance to company directors when looking at going concern.
For the latest news and guidance on the ongoing impact of COVID-19 for businesses and accountants, visit ICAEW’s dedicated coronavirus hub.