Does a charity need a cash flow statement?

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to understand when a charity requires a Statement of Cash Flows (often referred to as a cash flow or a cash flow statement).

Members may also wish to refer to the following related helpsheets:

• Charities – financial reporting and scrutiny (England and Wales)
• Charities - financial reporting and scrutiny (Northern Ireland)
• Charities - financial reporting and scrutiny (Scotland)

Both company and non-company charities preparing accruals accounts have to comply with the Charities SORP (FRS 102) and practically are excluded from applying FRS 102 Section 1A.

For periods commencing before 1 January 2026, Charities SORP (FRS 102) – second edition 2019 is applicable and it requires larger charities to provide a statement of cash flows. It defines a larger charity as one with gross income exceeding £500,000 and so any charity breaching this threshold will require a statement of cash flows.

For periods commencing on or after 1 January 2026 (or if the periodic review amendments are early adopted) charities preparing their accounts on an accruals basis will instead apply FRS 102 (September 2024) and the Charities SORP 2026, unless another SORP is more appropriate. This SORP introduces the concept of ‘tiering’ in paragraph 35, as follows:

Tier 1 and Tier 2 charities are not required to include a statement of cash flows, provided that they also meet the definition of a ‘small entity’ in FRS 102.

A small entity is defined in para 7.1B of FRS 102 (2024) as:

1. a company meeting the definition of a small company as set out in section 382 or 383 of the Companies Act 2006 and not excluded from the small companies regime by section 384;
2. an LLP qualifying as small and not excluded from the small LLPs regime, as set out in LLP Regulations; or
3. any other entity that would have met the criteria in (i) had it been a company incorporated under company law.

A charity which is not specifically required to prepare a statement of cash flows may still opt to do so and may benefit from the analysis.

All Tier 3 charities must include a statement of cash flows in their accounts.  Note, the exemption in paragraph 7.1B of FRS 102 is not available to tier 3 charities even in those cases where they meet the definition of a small entity in FRS 102 (Table 14.1A in Charity SORP 2026).

It should be noted that the threshold for a larger or Tier 3 charity is different from the relevant audit thresholds. Please refer to the Charities – financial reporting and scrutiny (England and Wales), Charities - financial reporting and scrutiny (Northern Ireland) and Charities - financial reporting and scrutiny (Scotland) helpsheets for further discussion on audit requirements for charities.

The Charities SORP (2019) does not restrict the use of the reduced disclosure framework in respect of cash flow statements. Where the charity is a parent entity and produces consolidated accounts, it is likely to be a qualifying entity as defined in the glossary of FRS 102. Where this is the case, the parent charity may choose to take advantage of the reduced disclosure exemption in paragraph 1.12(b) of FRS 102, meaning it does not need to produce an individual cash flow statement.

This exemption would also be available where the charity is itself a subsidiary and still meets the definition of a qualifying entity.

However, for entities using the Charity SORP 2026, only charities in tier 1 and tier 2 are able to benefit from this exemption if they meet the criteria for a qualifying entity under FRS 102. The exemption is not available to tier 3 charities (para 14.29 in Charity SORP 2026).

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.