Guidance for ICAS members acting for Scottish charities
The ICAS Charities Panel has published revised guidance for members acting for Scottish charities.
About the guide
This 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 useful to you if you undertake the following assignments:
- Accounts preparation
- Independent examination
This edition of the guide has been updated to reflect the legal and regulatory environment, accounting standards, and guidance in issue on 1 December 2023. It also highlights related developments expected to impact the sector in the near future, where commencement dates are unknown or uncertain.
With significant changes to FRS 102, and the Charities SORP (FRS 102) not expected until periods beginning on or after 1 January 2026, this edition of the guide is relevant with immediate effect.
The Charities (Regulation and Administration) (Scotland) Act 2023
This Act received Royal Assent in August 2023 and makes changes to the Charities and Trustee Investment (Scotland) Act 2005. The changes are intended to:
- Make charities more accountable and transparent.
- Strengthen OSCR’s powers.
- Bring Scottish charity law up to date with certain aspects of the law in England and Wales, and in Northern Ireland.
The provisions of the 2023 Act will be brought into effect through two commencement orders. The timing of these orders and the dates for implementing each provision have not been announced. However, commencement of the 2023 Act is expected to occur in two tranches. The first tranche is expected in 2024, and the second in 2025.
OSCR’s regulatory priorities and annual return changes
OSCR has published updated regulatory priorities for 2024 to 2026. These include a focus on charity trustees’ understanding of core governance matters and activities, and the risk that these can be flawed and incomplete in areas such as:
- Trustee disqualification
- Governing documents
- Trustee quorum
- Narrative reporting and accounts
Companies House reforms
Amendments to Section 444 of the Companies Act 2006, under the Economic Crime and Corporate Transparency Act 2023, remove the option for small non-charitable companies, including trading subsidiaries, to prepare abridged accounts. Small companies will also no longer be permitted to file filleted accounts, which removes any dubiety around the ability of charitable companies to file filleted accounts with Companies House.
The effective date of amendments to Section 444 has not been made public.
The periodic review of FRS 102 and the next edition of the Charities SORP (FRS 102)
The FRC is finalising amendments to FRS 102, following its periodic review of UK GAAP and public consultation on its proposed changes.
The next edition of FRS 102 is due to be published in the first six months of 2024 and is not expected to be effective before periods commencing on or after 1 January 2026. This should mean that there is at least 18months between notice of the amendments and implementation.
The Charities SORP (FRS 102) will be updated, and its effective date will coincide with the effective date of the next edition of FRS 102. A consultation draft of the Charities SORP (FRS 102) will be published after the final amendments to FRS 102 are known.
Supplier finance arrangements
FRS 102 is to be amended to introduce additional disclosure requirements to be made alongside the statement of cash flows in relation to supplier finance arrangements. The amendments are being made to reflect changes to IFRS accounting standards. The new disclosure requirements are not expected to be relevant to many charities, and do not apply if a charity does not prepare a statement of cash flows.
These amendments are expected to be published alongside the periodic review amendments, but with an effective date of periods commencing on or after 1 January 2025. Charities with supplier finance arrangements preparing a statement of cash flows will therefore need to comply with these new disclosure requirements, in advance of the periodic review amendments to FRS 102 and the next edition of the Charities SORP (FRS 102).
Keeping up to date
In addition to checking icas.com on a regular basis for developments, members using the guide should monitor the OSCR website and the Charities SORP website to keep up to date with changes to accounts and scrutiny requirements, as well as any new guidance.