Don't wait for year-end: why charities should engage with the new Charities SORP now

However, delaying engagement could make the transition significantly more difficult and costly. Early planning will not only reduce pressure on finance teams but also help charities avoid unexpected reporting issues, minimise audit disruption and ensure trustees have sufficient time to understand the implications of the new requirements.

Many charities continue to operate with lean finance teams, while others rely heavily on volunteers or staff with broad responsibilities. Funding constraints have led many organisations to focus resources on frontline service delivery, leaving back-office functions with limited capacity to undertake major accounting projects.

While these pressures are understandable, postponing implementation until year-end will add significant technical assessments into an already busy reporting timetable. Finance teams, trustees and auditors could find themselves working through complex accounting judgements simultaneously, increasing the risk of delays and additional audit procedures, and lead to higher audit costs.

For charities that have started their current financial year on or after 1 January 2026, the risks are even more urgent, as that’s when the new SORP took effect. These organisations should already be applying the new SORP requirements within their management accounts, particularly for areas such as lease accounting and income from contracts. However, we hear from our members in practice that many charities are still preparing their internal finance reports based on outdated standards.

These charities may find that significant adjustments are only identified during the year-end reporting process, creating avoidable challenges for finance teams, auditors and trustees. Late changes can also affect the quality of management information presented to boards and reduce the time available for trustees to understand the financial implications of the new accounting treatments before approving the annual report and accounts.

A phased approach allows charities to spread the workload over several months. Reviewing accounting policies, identifying transactions affected by the new requirements and discussing potential issues with auditors in advance can help avoid last-minute surprises. Trustees also benefit from having sufficient time to understand how the changes affect the charity's financial reporting and governance responsibilities.

Committee members have identified several areas where charities are likely to need additional support. Lease accounting remains one of the most significant challenges, particularly for smaller and medium-sized charities. Social donation and peppercorn leases introduce accounting considerations that many finance teams have limited experience of applying in practice.

Recognising this, the Charity Commission is expected to publish an information sheet on lease accounting to complement the guidance contained within the Charities SORP and FRS 102. This will provide additional practical support as charities work through the new requirements. Our SORP hub also includes a recorded training session on the changes to lease accounting, accompanied by linked third party resources, such as the FRC’s factsheet on lease accounting for lessees and Crowe UK’s Better Lease Accounting guide, which includes a complimentary Excel workbook (Crowe’s FRS 102 Lease Implementation Tool).

Revenue recognition is another area where charities should begin reviewing existing arrangements. Understanding whether income arises from an exchange transaction or a non-exchange transaction can have a significant impact on when and how income is recognised. Similarly, distinguishing between grants and contracts requires careful consideration of the substance of each arrangement rather than simply relying on the terminology used in funding agreements. Membership income also deserves particular attention. In some cases, membership subscriptions may represent donations that support the charity's overall objectives rather than payments made in exchange for goods or services. Applying the appropriate accounting treatment requires careful analysis of the rights and obligations associated with each membership scheme.

If you haven’t started yet, don’t panic. We have many resources on our free SORP hub to help you and guide you through the transition.

At our 2026 Charity Conference, speakers from Sayer Vincent suggested the following preparatory steps in their session about the new SORP:

1. Identify the tier for your charity
2. Consider new requirements for the Trustees’ Annual Report
3. If the charity is Tier 1, decide whether to use the natural or activity basis for the Statement of Financial Activities
4. Review FRS 102 income and lease changes
5. Determine if a statement of cashflows is required
6. Consider the transition and take advice

The session recording (‘Charities SORP 2026: Practical updates in action’) is freely available on our SORP hub and signposts to other resources, including recordings on specific areas of the new SORP:

• Lease accounting (‘Lease accounting changes: next steps for charities’)
• Revenue (‘Income recognition: what’s changing in the Charities SORP 2026?’)
• Trustees’ Annual Report (‘Trustees' annual report: prepare for Charities SORP 2026’)
• Tier 1 charities (‘Small charities: preparing for change’)
• Impact and sustainability reporting (‘Impact and sustainability reporting: turning principle into practice’)
• Reserves reporting (‘Charity Reserves: from basics to best practice’)
• Transitioning to receipts and payments accounts – if eligible (‘SORP 2026: time to switch to Receipt & Payments accounts?’)

The new SORP presents an opportunity for charities to strengthen financial reporting processes and improve the quality of information available to trustees and stakeholders. By engaging with the requirements now, charities can make the transition more manageable and reduce the risk of increased professional fees and unwelcome surprises for trustee boards at year-end.

• Access ICAEW’s free Charities SORP 2026 hub