Charity News: Charity SORP Information Sheets
Information Sheets are published by the joint SORP-making body and seek to clarify the application of the SORP, or cover matters not addressed in the SORP but are relevant to charity reporting. Two new Information Sheets have been published, although are likely to be of limited application to most charities. However where relevant, preparers of charity accounts should read them.
Information Sheet 5 is of relevance to charitable companies and addresses the implications of a new requirement to disclose details of energy usage contained within The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. These new regulations will apply to charitable companies across the UK that meet the Companies Act 2006 definition of a large company, which is broadly defined as one that meets two or more of the following criteria for two consecutive financial years:
- gross annual income of more than £36 million;
- gross assets of more than £18 million; or
- more than 250 employees.
Additional guidance on determining the size of a charitable company is included in Information Sheet 3. Note that charities that do not meet the large company criteria are not prevented from including disclosure on their energy use in their annual report if they believe it will be useful in improving transparency and where it provides the users of the annual report with a greater understanding of the charity’s performance.
For accounting periods commencing on or after 1 April 2019, those charitable companies which are subject to these new regulations are required to include as part of the ‘Achievements and Performance’ part of their trustees’ report information on their UK energy use and associated greenhouse gas emissions relating to gas, electricity and transport fuel, including an intensity ratio, and details of any energy efficiency action taken. Alternatively the information could be presented as part of a separate environmental report, although one that is clearly marked as forming part of the charitable company’s directors’ report.
The guidance included within the Information Sheet explains in greater detail each of the disclosure requirements, as well as the exemption from disclosure that exists for low energy users, such as those which have consumed 40MWh or less of energy during the reporting period. There is also guidance on the application of the regulations to charitable groups. Additionally there is a link to more detailed government guidance that has been published that applied to all organisations that are required to report on their energy usage, not just charities.
Information Sheet 6 confirms that charitable companies registered in the Republic of Ireland are unable to use merger accounting where they enter into a business combination with a third party, the same as charitable companies incorporated in the United Kingdom. Unincorporated charities and Charitable Incorporated Organisations will continue to apply merger accounting to business combinations where the qualifying criteria set out in the Charity SORP are met, as will charitable companies registered outside of the UK and the Republic of Ireland where the local statutory framework does not prevent the use of merger accounting.
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