Accounts Updated

Updated December 2019 View full section
The purpose of this section is to explain the considerations which influence the format of accounts and other forms of reporting by housing associations registered with the Regulator of Social Housing (RoSH).

FRS 102, which changed the financial reporting requirements for housing associations, came into effect for financial years commencing on or after 1 January 2015. A Triennial Review of FRS 102 was issued by the FRC in March 2017, and amendments were finalised in December 2017, effective for periods commencing on or after 1 January 2019.

The National Housing Federation (NHF) issued a Statement of Recommended Practice (SORP) in September 2014 reflecting the changes in FRS 102. In October 2017, the NHF published and issued an updated Housing SORP – Housing SORP 2018 Update: Statement of Recommended Practice for registered social housing providers. This is effective for financial years beginning on or after 1 January 2019.

Housing Associations are required by Section 127 of the Housing and Regeneration Act 2008 (the Act) to comply with a direction given by the regulator regarding the preparation of their accounts. The document Accounting Direction for private registered providers of social housing 2015 set out the Regulator’s directions about how associations must prepare their accounts. RoSH issued a new accounting direction in January 2019, reflecting changes in the Housing SORP 2018. This included revisions to take account of a new value for money standard, and to accommodate the legislative abolition of the Disposal Proceeds Fund, as well as to further outline disclosure matters which housing associations are required to follow in their accounts. This applies for periods beginning on or after 1 January 2019.

The format of the accounts of housing associations is also determined by their statutory legal status. Most housing associations are registered societies and are regulated by the Financial Conduct Authority. However some housing associations are registered charities and companies limited by guarantee or registered charitable trusts. A summary of each type of legal entity outlining the laws which associations are required to comply with is as follows.

Registered Society Charitable Company Charitable Trust
Legal Acts • The Co-operative and Community Benefit Societies Act 2014
• The Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969
• The Companies Act 2006
• The Companies Act 2006 (Amendment) (Accounts and Reports) Regulations 2008
• The Small Companies and Group (Accounts and Directors’ Report) Regulations 2008 (if a small company)
• The Large and Medium-Sized Groups (Accounts and Reports) Regulations 2008 (if a large or medium company)
• The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
• The Charities Act 2011
• The Charities (Accounts and Reports) Regulations 2008
• The Charities Act 2011
• The Charities (Accounts and Reports) Regulations 2008
Regulators • Financial Conduct Authority
• Regulator of Social Housing
• Companies House
• Charities Commission
• Regulator of Social Housing
• Charities Commission
• Regulator of Social Housing
Accounts Filing Deadlines • Six months from the end of the financial year (HCA)
• Seven months from the end of the financial year (FCA)
• Six months from the end of the financial year (HCA)
• Nine months from the end of the financial year (CH)
• Ten months from the end of the financial year (CC)
• Six months from the end of the financial year (HCA)
• Ten months from the end of the financial year (CC)
Charitable Status • Can be an exempt charity dependent on society rules • Registered charity • Registered charity

Registered societies

The Industrial and Provident Society Acts were replaced by the consolidating Co-operative and Community Benefit Societies Act 2014 which came into effect on 1 August 2014 and replaced the following Acts:

Before 1 August 2014 all societies registered under the Industrial and Provident Societies Act 1965 (or its predecessors) were legally referred to as ‘industrial and provident societies’. Since 1 August 2014 they have been referred to as ‘registered societies’.

Any new society registered on or after 1 August 2014 is referred to as a ‘co-operative society’ or a ‘community benefit society’. There are no significant changes to accounts and disclosures as a result of this Act.

The Industrial and Provident Societies (Group Accounts) Regulations 1969 affecting group registered societies were also replaced on 1 August 2014 by the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969. Again there were no significant changes to accounts or disclosures as a result of these regulations.

Registered societies are required to keep proper books of account and submit their accounts for audit at least once a year. They are required to submit their accounts to the FCA with their annual return. They must additionally present a revenue account and balance sheet at the AGM for its members to approve.

Registered societies with charitable rules are known as exempt charities; while they are subject to the Charities Act 2011, they are neither regulated by nor required to register with the Charity Commission.

Charitable trusts

Housing associations classified as charitable trusts are required to comply with the following legislation:

Such associations are registered with the Charity Commission and must operate in accordance with their trust deeds as approved by the Charity Commission.

Charitable companies limited by guarantee

Housing associations may be incorporated under the Companies Act 2006 as 'companies limited by guarantee with charitable status.' Their constitutions are their memorandum and articles of association, and they are governed on behalf of their members by boards of directors who are required to submit annual returns and accounts drawn up in accordance with the Companies Act 2006 to Companies House.

Housing associations which are companies limited by guarantee are also required to comply with the following Acts:

Role of the RoSH

The regulatory powers under the Housing and Regeneration Act 2008 to regulate housing associations in England are vested in the Regulator of Social Housing. (For coverage of the regulatory system in Scotland and Wales see the separate Scotland and Wales sections.)

The RoSH’s regulatory role includes having the power to define the form and content of the accounts of housing associations, which it sets out periodically in Accounting Directions.

One of the requirements contained in Accounting Directions is that accounts should comply with the disclosure requirements of the Housing SORP. It is also a requirement that any departure from the Housing SORP should be disclosed in the accounts.

Filing of accounts

Housing associations’ accounts must be filed both with the RoSH – within six months of the year end – and with other regulatory bodies. More specifically, companies must file their accounts within nine months with Companies House, and registered charities within ten months with the Charity Commission. Registered societies file their accounts within seven months of the year end with the Financial Conduct Authority.

There is further guidance on the filing of accounts on the RoSH website and on the National Register of Social Housing (NROSH) website.

Accounting records

The requirements of housing associations classified as registered charities or as registered societies are contained in the Housing Act 1996 Schedule 1 Part III paragraph 18, and in paragraphs 75 and 76 of the Co-operative and Community Benefit Societies Act 2014. These requirements are as follows:

  • proper books of accounts are to be kept showing all transactions, assets and liabilities
  • a satisfactory system of control is to be established and maintained
  • these records must enable a true and fair view to be given of the entity’s state of affairs.

The obligations of companies are contained in Section 386 of the Companies Act 2006.

In April 2010, Sections 127 to 143 of The Housing and Regeneration Act 2008 replaced the Housing Act 1996, in respect of accounting requirements for housing associations. These requirements were not changed much by this, but a number of clarifications were made in relation to the powers of the 1996 Act.

Additional returns to the Regulator of Social Housing

Additionally, the RoSH requires all housing associations to submit an annual statistical data return, and to file with them a copy of their annual accounts.

On top of this, associations which own or manage 1,000 or more units are required to submit a financial forecast return (FFR), and to send in an electronic summary return (FVA).

There are some exceptional associations with less than 1,000 units which are also required to submit an FFR.

The Regulation section contains further detail on this.

General accounting principles apply to the preparation of accounts in the social housing sector, regardless of whether the entity is a housing association or not. This means that all accounts must meet the requirements of Financial Reporting Standards (FRSs) issued by the Financial Reporting Council (FRC). These standards are part of UK GAAP.

Financial Reporting Standards FRS 100, FRS 101, FRS 102, FRS 103, FRS 104 and FRS 105 were issued by the FRC to apply to financial years beginning on or after 1 January 2015, and replaced all previous FRSs, SSAPs and UITFs. They form the standards for UK GAAP, which is more aligned with International Financial Reporting Standards (IFRSs).

The standard with the greatest bearing on the housing sector is FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland. It introduced the following four primary statements with the corresponding nomenclature:

  • Statement of Financial Position (SOFP)
  • Statement of Comprehensive Income (SOCI)
  • Statement of Cash Flows
  • Statement of Changes in Reserves.

FRS 102 prescribes the appropriate layout of each of the above statements, however the titles may be amended.

A Triennial Review of FRS 102 was issued by the FRC in March 2017, with a consultation period during 2017. Draft amendments to FRS 102 were published in FRED 67 and FRED 68. Amendments were finalised in December 2017. It is effective for periods commencing on or after 1 January 2019. Early adoption is allowed, but the amendments must either be adopted in their entirety or not at all, aside from two areas which can be adopted individually: directors’ loans and the tax treatment of gift aid payments.

Gift aid payments

As set out in a technical release issued by ICAEW (Tech 16/14BL), donation payments made by a subsidiary company to its parent charity are considered to be distributions, and therefore subsidiary companies must not pay more to the charity than the level of profits available for distribution, even if the taxable profit is higher.

Dividends are accrued when the shareholder’s right to receive payment is established. In the case of a gift aid payment made within a charitable group, income is accrued when the gift aid payment is payable to the parent charity under a legal obligation. FRS 102 requires a legal obligation for the subsidiary to make a payment to the parent to exist, for example by entering into a deed of covenant, in order for the expected gift aid payment to be recognised at the reporting date.

There has been inconsistency in the way that payments from subsidiaries to parents have been accounted for, as they are treated as distributions from an accounting point of view and donations from a tax point of view.

This has been addressed by the FRC in the amendments to FRS 102, which states the following:

  • The tax effects of any gift aid payment likely to be made in the nine months after the reporting date should be taken into account at the reporting date.
  • The tax effects of the gift aid payment should be recognised in profit or loss.
  • The gift aid payment should not be accrued at the reporting date, unless a deed of covenant is in place and should be recognised through the statement of changes in equity rather than the statement of comprehensive income.

Pensions

Multi-employer plans and state plans are classified either as defined contribution plans or defined benefit plans, depending on the basis of the terms of the plan. However, if sufficient information is not available to use defined benefit accounting for a multi-employer plan that is a defined benefit plan, an entity shall account for the plan as if it was a defined contribution plan.

An example of a multi-employer pension scheme for which sufficient information is not available to use defined benefit accounting is the growth plan, also administered by TPT Retirement Solutions.

For defined benefit multi-employer schemes that are accounted for as defined contribution schemes, there may be a contractual arrangement to meet the past service deficit between the scheme and the housing association. Where there is such an arrangement, the housing association must recognise a liability for the net present value of the contributions payable in the statement of financial position (SOFP) with movements charged in the SOCI.

Another common pension scheme among housing providers is the Social Housing Pension Scheme (SHPS), administered by TPT Retirement Solutions.

Historically, TPT Retirement Solutions has not been able to provide sufficient information for each social landlord’s share of SHPS to allow defined benefit accounting to be applied.

However, following a number of changes made to TPT’s systems and processes, a method was devised to calculate each employer’s share of the assets and liabilities; this figure is now included in the statement of financial position.

In the year of initial recognition, the guidance in FRED 71 paragraph 4 (FRS 102 paragraph 28.11B) states that the difference between the deficit funding liability and the net defined benefit deficit for SHPS should be recognised in other comprehensive income. This adjustment was to be applied from 1 April 2018.

Defined benefit pension accounting should be used going forward. This is where an entity recognises a net asset/liability for its obligations under defined benefit plans net of plan assets, and accounts for the movement of this net asset/liability each year.

The SORP Working Party considered this guidance and how it should be applied to SHPS. As a result, the four federations – National Housing Federation, the Scottish Federation of Housing Associations, Community Housing Cymru and the Northern Irish Federation of Housing Associations – have issued a guidance document for housing associations.


Housing associations are also required to disclose the particulars of and reasons for any material departure from an applicable statement.

Housing associations and other social landlords which are classified as charities but not registered with one of the social housing regulatory bodies should comply with the Charities SORP. However, the recommendations in the Housing SORP may still be relevant where there is no conflict with the Charities SORP. The SORP requires that where the principal activities of registered almshouses and Abbeyfield societies are not governed by the Landlord and Tenant Act 1985 and are predominantly for charitable purposes, they must follow the Charities SORP.

The Housing SORP supplements the general accounting principles of FRS 102. It provides authoritative guidance on the application of accounting standards to the social housing sector so as to meet the requirement to give a true and fair view. The Housing SORP requires the basis of preparation of the accounts to confirm that they have been prepared in accordance with the SORP.

The Housing SORP requires the boards of housing associations with over 5,000 units to publish a strategic report as part of their board report. The aim of this report is to provide a balanced assessment of the housing association’s development and future performance, including any risks and uncertainties faced.

The strategic report should outline the following information:

  • the housing association’s objectives and strategy
  • its business model
  • development and performance for the previous financial year
  • future prospects
  • its principal risks and uncertainties faced
  • use of both financial and non-financial key performance indicators
  • its governance.

Strategic reports were introduced as a requirement for medium and large companies to produce for accounting periods ending on or after 30 September 2013 following the introduction of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, therefore a number of associations have produced this report since that date.

The Housing SORP recommends that housing associations with fewer than 5,000 units include in their board report on the performance of the housing association. This commentary may take the form of a strategic report, and should be commensurate with the size of the housing association.

Differences between Housing SORP 2014 and Housing SORP 2018

A new Housing SORP, Housing SORP 2018 Update: Statement of Recommended Practice for registered social housing providers was published in October 2017. This replaces the Housing SORP 2014 and is effective for financial years beginning on or after 1 January 2019. This updated SORP reflects the changes to Financial Reporting Standard 102, resulting from the Triennial Review amendments. Early adoption of this SORP is allowed in full.

of presentation and disclosure which were updated in the Housing SORP 2018 include the following:

  • financial statement presentation
  • formats and disclosure requirements
  • operating surplus
  • investment properties
  • net debt.

The changes to the treatment of property, plant and equipment (PPE) from the Housing SORP 2018 include removing the undue cost and effort exemption in valuing investment properties, and allowing an accounting policy choice to carry property rented to other group entities at either cost or fair value.

The Housing SORP 2018 includes a revised illustrative example of a statement of comprehensive income in section 5. This includes a small change in guidance on what should be included in operating surplus. Operating surplus should be “representative of activities normally regarded as operating” and it is inappropriate to exclude items clearly related to operations because they occur irregularly/infrequently, such as inventory write-downs, and profits/losses on sale of property, plant and equipment, investment properties and intangible assets.

There are no changes to the strategic report as a result of the new SORP.

Housing Associations are required by Section 127 of the Housing and Regeneration Act 2008 (the Act) to comply with a direction of the regulator regarding the preparation of their accounts. The document Accounting Direction for private registered providers of social housing sets out the Regulator’s directions about how associations must prepare their accounts.

The Accounting Direction states the requirement for a housing association to include within its narrative reporting an assessment of the performance for the year of how the association is achieving value for money in delivering its purpose and objectives and in accordance with the RoSH’s standard on value for money. The association must clearly reference a more detailed self-assessment if this has been included in a separate report.

Housing associations should also undertake an assessment of their compliance with the governance and financial viability standard at least once a year and must certify compliance with the standard within the narrative report, or else explain why they are not compliant.

The code of governance which has been adopted by the housing association should also be disclosed.

Remuneration paid in the accounting period to key management personnel, who are defined as “those persons having authority and responsibility for planning, directing, and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise)”, in relation to the period of account is to be disclosed. Where no such remuneration is payable, a statement to that effect should instead be made.

The aggregate amount of remuneration paid to key management personnel should separately identify sums paid to non-executive board members, where remunerated. Again, if non-executive board members are not remunerated, a statement to that effect should be made.

Gross social housing rent arrears should be disclosed, as well as the net present value adjustment where a repayment schedule is in place which is material as well as any provisions for bad and doubtful debts.

The Accounting Direction requires further analysis of the Statement of Comprehensive Income in the notes to the accounts. Firstly, income and expenditure should be classified and analysed to distinguish between social housing activities and non-social housing activities.

Secondly, income and expenditure from social housing activities must be analysed by type of social housing activities eg general needs, supported housing etc. This format is further analysed by constituent income and expenditure categories as set out in the Accounting Direction.

Changes between the Accounting Direction 20115 and the Accounting Direction 2019

The RoSH issued a new accounting direction in January 2019, reflecting changes in the Housing SORP 2018. This included revisions to take account of a new Value for Money Standard, and to accommodate the legislative abolition of the Disposal Proceeds Fund, as well as to further outline disclosure matters which housing associations are required to follow in their accounts. This applies for periods beginning on or after 1 January 2019.

Alongside the 2018 Value for Money Standard and associated Code of Practice, registered providers are expected to report on a suite of defined performance metrics to measure economy, efficiency and effectiveness on a comparable basis across the sector.

The metrics do not form part of the Value for Money Standard itself, but are a separate new tool to allow registered providers to demonstrate that they are making best use of their assets and resources to stakeholders, including tenants and the Regulator. To meet the Regulator’s statutory objective to be proportionate and minimise interference, the metrics are based on information collected through the providers’ existing annual accounts regulatory return.

Guidance has been published by the regulator setting out the FVA reference lines and location of figures in the statutory accounts, which providers can refer to when calculating the metrics.

The following publications and sources of information are relevant to the preparation of accounts and other financial returns within the social housing sector.