Since the first Charities SORP was issued in 1988 there has been a single SORP. Since the last SORP was issued in 2005 there has been a fundamental change in UK-Irish Generally Accepted Accounting Practice (GAAP). From 1 January 2015 GAAP will be more closely aligned with international financial reporting standards. To ease the change for small companies and organisations, the Financial Reporting Council has retained old style GAAP in the form of the Financial Reporting Standard for Smaller Entities (FRSSE).
The FRSSE is very different to the new GAAP Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102). The FRSSE differs from FRS 102 in the terminology it uses, in a number of accounting treatments for items and transactions and with regard to the amount and nature of information which must be disclosed in the notes to the accounts (termed financial statements in FRS 102). The differences are sufficiently great as to require a Charities SORP to apply each accounting standard, so there is a choice to be made between the FRSSE SORP and FRS 102 SORP.
Although the FRSSE SORP and FRS 102 SORP share the same requirements for the form and contents of the trustees' annual report, fund accounting and common formats for the balance sheet, there are many areas of difference which are due to dissimilarities between old GAAP FRSSE and new GAAP FRS 102. These include a different treatment for treatment of realised and unrealised gains and losses on investments in the statement of financial activities.
Before preparing the accounts, a charity must choose the SORP that best applies to the charity's circumstances.
See Why the SORP had to change for more information.