Charities SORP 2026

The new Charities SORP (Statement of Recommended Practice), published on 31 October 2025, applies to reporting periods beginning on or after 1 January 2026, with early adoption permitted.

These amendments represent the most significant changes to charity reporting in recent years. The updates align the SORP with FRS 102 and will affect how many charities recognise income, account for leases and report on their activities.

At Forvis Mazars Ireland, we are working with charities to help them understand the implications, manage transition and embed sustainable compliance.

New three-tier reporting structure

The 2026 SORP introduces a three-tier system based on gross income, affecting the reporting requirements of expenses and disclosures:

Income recognition

A new five-step model

Section 5 of the SORP has been fundamentally restructured to align with both FRS102 and IFRS. Income is now categorised as:

• Income from exchange transactions.
• Income from non-exchange transactions.

The previous recognition principles of entitlement, probability and measurability have been replaced.

For exchange transactions, charities must now apply a five-step model, recognising income either at a point in time or over time, depending on when performance obligations are satisfied.

Income from non-exchange transactions remains broadly consistent with the previous SORP and continues to focus on the fulfilment of performance conditions.

What this means for your organisation

Charities will need to:

• Review all contracts and funding agreements, including verbal arrangements.
• Identify performance obligations within contracts.
• Assess whether obligations are satisfied over time or at a point in time.
• Consider the impact of complex pricing structures or bundled arrangements.
• Evaluate whether comparative figures and opening reserves require adjustment (see below on transition options).

For some organisations, particularly those with service delivery contracts, grant funding arrangements or multiple performance obligations, this could significantly affect reported income patterns.

Lease accounting

Bringing leases onto the balance sheet

The distinction between operating and finance leases for lessees has been removed.
Most leases must now be recognised on the balance sheet through:

• A right-of-use asset.
• A corresponding lease liability.

Recognition exemptions are available for:

• Short-term leases (less than 12 months).
• Leases of low-value assets.

Additional guidance addresses complex or non-standard arrangements, including:

• Peppercorn or concessional leases.
• Below-market value arrangements.
• Rent-free periods.

Strategic and financial implications

The impact may include:

Significant change to the look and feel of the balance sheet with increased reported assets and liabilities.

• Reassessment of company size thresholds.
• Replacement of operating lease expense with depreciation and finance costs.
• Changes to reported surplus or deficit.
• Potential implications for reserves policies.

For charities operating multiple leased sites, retail networks or large property portfolios, the administrative and systems impact may be significant and requires early consideration and planning.

However, this transition also presents an opportunity to reassess lease arrangements and consider renegotiation or rationalisation strategies.

Expanded Trustees’ Report disclosures

The SORP introduces enhanced narrative reporting requirements, including:

• Impact reporting.
• Volunteer contributions.
• Sustainability matters.
• Legacy income, where applicable.
• Reserves policies and their link to going concern.
• Future plans.
• Separate presentation of social investments.

These changes will require early planning and coordination across finance, operations and governance teams.

Transition options

The SORP follows the transition rules set out in FRS 102:

Income recognition

• Full retrospective adoption.

Or

• Modified retrospective adoption.

Lease accounting

• Modified retrospective adoption only.

Practical expedients are available, but careful evaluation is required to determine the most appropriate approach for your organisation.

How to prepare

We recommend charities:

• Establish a transition project as early as possible.
• Identify all relevant contracts and lease agreements.
• Assess system readiness and data requirements.
• Consider transition method options.
• Review accounting policies.
• Evaluate the impact on reserves and governance reporting.
• Plan for expanded narrative disclosures.

Starting early will reduce risk, avoid year-end pressures and support a smoother transition.

How Forvis Mazars can support you

The scale of change varies depending on the nature of your funding, contracts and lease portfolio. Early preparation is essential. Our dedicated charities and not-for-profit team can support you with:

• Contract reviews under the new five-step income model.
• Technical accounting assessments.
• Lease portfolio analysis and modelling.
• Transition strategy design.
• Impact assessments on reserves and financial metrics.
• Trustees’ Report enhancement.
• Training for Boards and finance teams.
• Systems and process review.

We work alongside management and Trustees to ensure the transition is controlled, well-governed and aligned with your organisation’s broader strategy.

If you would like to discuss how the upcoming SORP changes may affect your organisation, please contact a member of our not-for-profit team. We would be pleased to support you through this important transition.