Colleges and universities prepare their accounts under FRS 102 as interpreted by the Statement of Recommended Practice: Accounting for Further and Higher Education, the FE and HE SORP. The 2026 edition applies to accounting periods beginning on or after 1 January 2026, which for a college with a 31 July year end means the year to 31 July 2027, and funders and regulators layer their own accounts directions on top.
Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.
What is the FE and HE SORP and who issues it?
The FRC recognises the FE/HE SORP Board as the SORP making body for further and higher education, with further information published through Universities UK, and lists the current edition as the Statement of Recommended Practice: accounting for further and higher education 2026 edition. Like every SORP, it carries an FRC statement that it does not conflict with an FRC standard. It supplements FRS 102 rather than replacing it, so the standard’s requirements on leases, revenue, pensions and financial instruments still apply in full. The base standard is described in FRS 102 explained.
The Department for Education’s College Accounts Direction for 2025 to 2026 records that the new SORP was published on 3 November 2025 and takes effect alongside the FRS 102 amendments for periods beginning on or after 1 January 2026. It states that colleges must not adopt the new SORP earlier, so their 2025 to 2026 accounts are still prepared on the previous edition.
Which institutions must follow it?
For colleges in England, the College Accounts Direction requires the financial accounting framework of FRS 102, the FE and HE SORP and the current Direction itself. A small number of colleges that are registered charities refer to the Charities SORP instead. Higher education institutions part funded by DfE are treated as meeting the Direction if they comply with the Office for Students accounts direction.
Most institutions are exempt charities. The Charity Commission’s guidance lists most English universities, further education corporations and sixth form college corporations among them, and names the Office for Students as principal regulator for higher education providers and DfE for further education corporations in England, with the Welsh Government in Wales. Exempt charities do not file accounts with the Commission each year, but must produce accounts and meet audit requirements under their own framework or their principal regulator’s requirements. The charity sector equivalent is covered in the Charities SORP explained.
Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.
From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.
See my price in 2 questions or call 01795 841 310.
★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews
What do the accounts contain?
The College Accounts Direction lists the statements required by the SORP:
- a statement of principal accounting policies and estimation techniques;
- a statement of comprehensive income, for the college and for the consolidated group where there is one;
- a statement of changes in reserves, again for the college and the group;
- a statement of financial position for the college and the group;
- a statement of cash flows for the college and the group; and
- notes to the financial statements.
Alongside them, colleges must publish a strategic report, a statement of corporate governance and internal control, a statement of the responsibilities of the members of the college, the independent auditor’s report and a reporting accountant’s assurance report on regularity. The strategic report must include a going concern assessment and be written in terms a non accountant would understand. Colleges must use an accounting reference date of 31 July.
How is grant and fee income recognised?
Government grants follow Section 24 of FRS 102, which lets an institution use the performance model or the accrual model, chosen class by class. Other grants and donations fall under the public benefit entity rules in paragraph PBE34.67: income is recognised when receivable unless the funder imposes specified future performance related conditions, in which case it waits until those conditions are met. Paragraph PBE34.68 adds that a restriction on how money is spent does not by itself delay recognition, which is why restricted donations and endowments can arrive as income in one year and sit in restricted reserves for many years afterwards.
The 2026 changes bring FRS 102’s five step model for revenue from contracts with customers. The Direction notes that this will generally not change the recognition of grant income, which is a non exchange transaction, but tells colleges to consider carefully which funding streams the new model applies to. It also requires separate disclosure of deferred income on government grants, split between amounts due within and after one year and between capital and revenue grants, and an analysis of grant income from DfE and from other government bodies. The grant models are compared in FRS 102 Section 24: government grants.
How are pension schemes handled?
Colleges typically participate in the Local Government Pension Scheme, and the Direction notes that reporting a deficit there has been the norm for some years. For that scheme, the Direction reminds colleges that paragraph 28.41(a) of FRS 102 requires a description of the plan, including the funding policy, and that they must disclose the amount and timing of future payments under any agreement to fund a deficit.
Where a scheme reports a surplus, the Direction points to paragraph 28.22 of FRS 102, which allows a surplus to be recognised as an asset only to the extent it can be recovered through reduced contributions or refunds. Colleges should explain the judgement in their accounting policies and say how much of any surplus has or has not been recognised. More detail is in accounting for defined benefit pension schemes.
What about historic buildings, groups and loans?
Paragraph 34.50A of FRS 102 says an asset with heritage characteristics that the institution uses itself, giving historic buildings used for teaching by education establishments as the example, is accounted for under the normal property rules rather than as a heritage asset, though heritage disclosures are encouraged. Collections held for their contribution to knowledge and culture are covered in heritage assets accounting.
Many institutions run trading subsidiaries, and the FRC’s own basis for conclusions mentions higher education institutions when explaining how Gift Aid from a subsidiary is accounted for. For colleges, the Direction sets aside the SORP’s exemption at paragraph 25.5, derived from FRS 102 paragraph 33.1A, for transactions with wholly owned subsidiaries: all intra group transactions and balances must be disclosed. Where a college refinances commercial debt with a DfE loan, it must consider whether the loan is a concessionary loan, for which FRS 102 gives public benefit entities a choice between fair value and measurement at the amount received adjusted for accrued interest.
What does the timetable look like for a college?
The Direction’s dates for the year ended 31 July 2026 show how the cycle runs:
| Step | Date or rule |
|---|---|
| Year end | 31 July 2026, on the previous SORP |
| Submit signed audited accounts, regularity report, audit findings and subsidiary accounts to DfE | By 31 December 2026 |
| Publish audited accounts on the college website | No later than 31 January 2027, keeping at least two years online |
| First year under the 2026 SORP | Year to 31 July 2027 |
Colleges registered with the Office for Students should also note its requirement, cited in the Direction, to publish audited accounts within five months of the year end, and registered charity colleges must file with the Charity Commission within ten months. On transition, the Direction explains that revenue changes may be applied fully retrospectively, restating 2025 to 2026 comparatives, or on a modified retrospective basis adjusting opening balances, while for leases the modified retrospective approach is required and comparatives stay as originally presented.
What mistakes come up most often?
- Adopting the 2026 SORP early in college accounts for 2025 to 2026, which the Direction prohibits.
- Delaying restricted donations because they are restricted, when only performance related conditions justify deferral.
- Recognising an LGPS surplus in full without testing recoverability under paragraph 28.22.
- Relying on the wholly owned subsidiary exemption for related party disclosure, which DfE has set aside for colleges.
- Missing the 31 December submission, which DfE says risks intervention.
Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.
Related Accountapedia entries
- The housing SORP for registered providers
- Academy trust accounts
- Recognising donations and grants in charity accounts
- Changes in the new Charities SORP
- Contract and exchange income in charity accounts
Sources
- Financial Reporting Council: Sorps
- GOV.UK: College accounts direction
- GOV.UK: Exempt charities
- Financial Reporting Council: Frs 102
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.