Further and Higher Education SORP 2026: Update and implications
4 Nov 2025 • Charities and Not-For-Profits • Charity and Not-For-Profit Audit • Education
The revised FEHE SORP 2026 was released on 4 November 2025, incorporating recent changes to the underlying FRS 102. Watch our on-demand webinar, that was recorded when the exposure draft was issued in May 2025, to understand the key changes to income recognition, lease accounting and how the implementation timeline may affect your organisation.
The implementation date for SORP 2026 is for accounting periods beginning on or after 1 January 2026, so this will affect year ends from 31 July 2027 onwards (including the comparatives for the 2025/26 financial year). A sector-wide consultation closed on 30 April 2026 and following the release of the exposure draft, we explored the key impacts of this on both Universities and Colleges during our recent webinar.
The most significant changes for institutions will be the following:
Income recognition – SORP 2026 introduces the five-step model for contract income recognition to match the timing of income recognition with progress on delivery of the contract. This will require a review of income streams to determine whether income is being recognised at the appropriate time. There are also some presentational changes, with the most significant being around how bursary payments are reported (i.e. netted against the income they relate to).
Lease accounting – SORP 2026 requires recognition of the assets leased on the balance sheet as a ‘right of use asset’ with a corresponding liability reflecting the discounted value of the future payments. For institutions with leased property and/or vehicles, this is a significant change and will require significant work to prepare for implementation.
Implementation timeline – Institutions need to start thinking about the impact on their financial statements for period beginning 1 August 2025 as the comparative year. Collating a comprehensive list of all leases within the organisation and its core terms (e.g., length, payment profile, break clauses etc.), alongside an assessment of all income streams against the new five step recognition principles is highly encouraged. Institutions should begin to document these comprehensively to arrive at conclusions around the proposed accounting treatment for each lease and type of income within the institution, which would be a starting point for the accounts preparation and audit.