Charity SORP 2026: What Charities Need to Know (and Do Now)
- 5 hours ago
- 4 min read
The release of the Charity SORP 2026 marks one of the most significant developments in charity financial reporting in Ireland and the UK in recent years. Published in October 2025 following updates to FRS 102, the new SORP introduces wide-ranging changes that will reshape how charities report, communicate impact and present their financial information.
With the new requirements effective for periods beginning on or after 1 January 2026, charities have limited time to prepare. Here's a practical breakdown of what's changing and what it means in practice.
Why the Update Matters
The SORP exists to help charities apply FRS 102 correctly, so updates to accounting standards inevitably trigger changes in charity reporting. The 2026 version reflects the latest FRS 102 amendments and aims to improve clarity, consistency, and transparency across the sector.
The new SORP places stronger emphasis on:
Clear narrative reporting
Demonstrating impact
Improved consistency in recognising income and leases
A New Three-Tier Reporting System
One of the most notable changes is the introduction of a three-tier reporting structure, replacing the simpler “small vs large charity” approach.
Tier 1: Income up to €500,000
Tier 2: €500,000 to €15 million
Tier 3: Over €15 million
This tiered model tailors reporting requirements more proportionately to charity size. Larger charities will face additional disclosure expectations, particularly in their annual reports, while smaller organisations may benefit from reduced complexity.
A Stronger Focus on Narrative and Impact
The Trustee’s Annual Report has been significantly overhauled.
Key enhancements include:
Prompt questions to guide storytelling and explain objectives, activities, and outcomes (Module 1)
Greater alignment between narrative and financial statements
A clear focus on impact reporting, not just activity reporting
Sustainability and ESG
For larger charities (Tier 3), sustainability reporting becomes mandatory, reflecting increasing stakeholder expectations around environmental, social and governance (ESG) issues.
Smaller charities are encouraged, but not required, to follow suit.
Reserves and Going Concern: Greater Transparency
The 2026 SORP introduces clearer expectations around reserves and going concern assessments.
Notable changes include:
A formal definition of reserves
Stronger linkage between reserves and future planning
Mandatory disclosure of key judgments in going concern assessments
Explicit requirement to explain how a charity continues to operate if reserves are low or negative.
This means charities will need to be more transparent not just about their position, but about how they plan to remain viable.
Revenue Recognition: A More Structured Approach
Changes to income recognition are among the most technical, but also the most impactful.
The updated SORP divides income into two categories:
1. Exchange Transactions
These must follow a five-step revenue recognition model, including:
Identify the contract
Identify performance obligations
Determine transaction price
Allocate the price
Recognise income when obligations are fulfilled
2. Non-Exchange Transactions
For grants and donations:
Income is recognised when conditions are met, not necessarily when cash is received
If conditions remain outstanding, income is deferred as a liability
The key takeaway: classification matters, and charities must carefully assess each income stream.
Lease Accounting: A Fundamental Shift
Lease accounting also sees a major overhaul.
The distinction between operating and finance leases is largely removed, with most leases now:
Recognised as a right-of-use asset
Accompanied by a lease liability on the balance sheet
While exemptions exist for:
Short-term leases (under 12 months)
Low-value assets
Charities will need to:
Identify all lease arrangements
Determine lease terms and discount rates
Implement systems to track lease data
This could have a significant impact on reported assets, liabilities, and financial ratios.
Cash Flow Statements: Relief for Smaller Charities
There is some welcome simplification.
The threshold for requiring a statement of cash flows increases from €500,000 to €15 million, meaning only Tier 3 charities must prepare one under SORP.
However, charities must still consider other legal obligations (e.g. company law), which may still require a cash flow statement.
What Should Charities Do Now?
With the implementation date already in effect, preparation is critical.
Key actions include:
Assess which tier applies to your organisation
Review the Trustee’s Annual Report for narrative improvements
Evaluate the impact of new revenue recognition rules
Identify and document all lease arrangements
Consider systems and processes needed for compliance
Early engagement will help avoid last-minute challenges - particularly for charities with complex funding or leasing structures.
Final Thoughts
The Charity SORP 2026 is more than an accounting update - it’s a shift towards greater transparency, accountability, and storytelling in the sector.
Charities that embrace these changes proactively won’t just remain compliant - they will be better positioned to:
Demonstrate impact
Build stakeholder trust
Strengthen governance and sustainability
The message is clear: start now, not later.
Sylwia Willis is an Associate Director at UHY Farrelly Dawe White, specialising in charity and not-for-profit audit and advisory services.
She works with charities of all sizes, helping trustees and management teams navigate financial reporting requirements, strengthen governance and remain compliant with an evolving regulatory landscape.
If you'd like to discuss how the Charity SORP 2026 changes could affect your organisation, get in touch with Sylwia and our team!
