Identifying exchange and non-exchange transactions - Trustees' Short Guide Series.

As charities prepare for the implementation of SORP 2026, correctly identifying whether income arises from an exchange or non-exchange transaction is crucial. Our Identifying Exchange and Non-Exchange Agreements Guide provides trustees and charity leaders with a practical overview of the distinctions between these income types, helping ensure income is recognised correctly and reported in accordance with the latest accounting requirements.

This concise guide is designed to help you understand the nature of different funding arrangements, apply the correct accounting treatment and strengthen the accuracy of your charity’s financial reporting. Using this guide, you’ll learn:

• How to distinguish between exchange transactions and non-exchange transactions under SORP 2026, and why the distinction is important for financial reporting
• The key characteristics of exchange transactions, including contractual arrangements where goods or services are provided in return for consideration
• How to determine whether a contract exists and when the five-step revenue recognition model applies
• Why grants, memberships and other funding arrangements can sometimes be challenging to classify, and the factors trustees should consider
• How non-exchange income, such as donations and certain grants, should be recognised under the performance model
• The role of performance-related conditions in determining when income can be recognised or when a liability must be recorded
• How restrictions differ from performance-related conditions, and why restrictions alone do not prevent income recognition
• The implications of correctly categorising income for SORP compliance, audit requirements, reporting thresholds and wider governance responsibilities.