Guidance for ICAS members acting for Scottish charities
ICAS Charities Panel Guidance for ICAS members acting for Scottish charities for accounting periods commencing on or after 1 January 2019.
About the Guide
The Guide covers the accounting, reporting and scrutiny requirements placed on Scottish charities, both company and non-company, including charitable incorporated organisations (SCIOs). It will be of assistance to ICAS members undertaking the following assignments:
- Accounts preparation
- Independent examination
The Guide was first published in December 2018 and has been updated for recent developments, most significantly the publication of the Charities SORP (FRS 102) (Second Edition – October 2019).
Guidance for Members - Scottish Charities
The Guide has been prepared to reflect changes to accounting and auditing standards and guidance applicable to Scottish charities, including:
- The withdrawal for the Financial Reporting Standard for Smaller Entities (FRSSE) and the associated Charities SORP (FRSSE) for periods commencing on or after 1 January 2016.
- Revised International Standards on Auditing (ISAs) (UK) for reporting periods commencing on or after 17 June 2016 and a revised Practice Note 11: The Audit of Charities in the UK (published in November 2017).
- The publication of a second revised edition of the Charities SORP (FRS 102) in October 2019.
Withdrawal of the FRSSE and smaller charities preparing true and fair accounts
Following the withdrawal of the FRSSE and the Charities SORP (FRSSE), charities preparing ‘true and fair’ accounts must comply with both FRS 102 and the Charities SORP (FRS 102).
Section 1A of FRS 102 provides presentation and disclosure concessions to companies eligible to apply the Companies Act small companies’ regime and to other entities which meet the size criteria for a small company.
As charities must comply with the Charities SORP which is based on full FRS 102, for all intents and purposes, charities cannot apply Section 1A.
There are some concessions under the Charities SORP (FRS 102) for charities with a gross income of £500,000 or less.
Charities are not eligible to apply FRS 105: The FRS applicable to the micro-entities regime and charitable companies are not permitted to prepare Companies Act abridged accounts.
Revised ISAs (UK) and revised Practice Note 11
Practice note 11 was revised to provide charity auditors with assistance in complying with the revised ISAs (UK). It provides additional contextual material on the application of auditing standards to the audits of UK charities. It, therefore, supplements auditing standards and is not a substitute for those standards.
The FRC has not produced illustrative charity auditor’s report examples, although it has done so previously.
The ICAS Charities Panel has published Auditor’s report guidance for ICAS firms acting as auditors of Scottish charities, including two illustrative reports. The guidance and illustrative reports apply to reporting periods commencing on or after 17 June 2016, but prior to 15 December 2019.
The Charities SORP (FRS 102) (Second Edition – October 2019)
This second edition of the Charities SORP (FRS 102) incorporates amendments arising from Update Bulletin 1 and Update Bulletin 2.
Update Bulletin 1 deals with:
- Minor amendments arising from changes to FRS 102.
- A new Charities SORP definition of a ‘larger’ charity as a charity with gross income of more than £500,000. Concessions are available to charities which are not ‘larger’.
- The removal of references to the Charities SORP (FRSSE) and FRSSE to reflect their withdrawal for periods commencing on or after 1 January 2016.
Update Bulletin 2 deals with:
- Clarifying amendments.
- Amendments arising from the Financial Reporting Council’s first triennial review of FRS 102.
Applicability to earlier accounting periods
This edition of our Guidance for ICAS members acting for Scottish Charities applies to requirements relevant to accounting periods commencing on or after 1 January 2019.
However, it does contain information relevant to accounting periods commencing on or after 1 April 2017 but before 1 January 2019 i.e. reporting periods with a filing deadline on or after 31 December 2018 but before 31 December 2019. For example, the accounts and scrutiny thresholds set out in the Guidance apply.
For periods commencing on or after 1 April 2017 but before 1 January 2019, the Charities SORP (FRS 102) consists of the following two documents:
- Charities SORP (FRS 102) (effective 1 January 2015); and
- Update Bulletin 1 (published February 2016).
…plus the clarifying amendments in Update Bulletin 2 (published October 2018) for periods commencing on or after 5 October 2018.
If you are referring to the Guidance in respect of an accounting period commencing prior to 1 January 2019 additional care should be taken to determine if a particular aspect is relevant to that accounting period.