The exposure draft of the SORP was published in summer 2006 and it was expected that the final SORP would have been published at the end of this month with RSLs encouraged to adopt early in their March 2007 accounts. However, the proposals, particularly in respect of shared ownership accounting, have met with significant opposition. It seems unlikely that the shared ownership accounting proposals will be dropped completely, but the SORP working party is reviewing the proposals carefully and is likely to come up with a slightly revised consultation draft of the SORP in the next couple of months with another Exposure Draft in the autumn. Although the SORP has not been issued in final form, a number of RSLs are already accounting for first tranche sales through the income and expenditure account and it is likely that more will be adopt this accounting policy in this year’s financial statements.

FRS 18 permits this treatment provided that the directors can justify that inclusion of first tranche sale proceeds in the income and expenditure account gives a fairer view of the performance of the RSL rather than the previous treatment. It should not be simply because it would allow the RSL to meet its debt covenants or show a surplus rather than a deficit! FRS 18 requires an RSL adopting this treatment to disclose the rationale for and fact of the departure from the 2005 SORP in their financial statements, and, if this treatment is adopted for the first time this year and the effect is material, to restate the prior year accounts to reflect a change in accounting policy.

For further information, download our publication Reporting and accounting update for registered social landlords (PDF, 249 KB).