TRUSTEES' REPORT AND ACCOUNTS 2022 51
Notes to the accounts
Year ended 31 December 2022
1. Accounting policies
The particular accounting policies adopted are described below.
a) Basis of accounting
The financial statements have been prepared under the historical
cost convention, as modified by the revaluation of investments to
market value.
The accounts (financial statements) have been prepared in accordance
with Accounting and Reporting by Charities: Statement of Recommended
Practice applicable to charities preparing their accounts in accordance
with Financial Reporting Standard applicable in the UK and Republic of
Ireland (FRS 102) issued October 2019 and the Charities Act 2011, UK
Generally Accepted Practice and the RSPCA Rules. The charity is a public
benefit entity.
The financial statements have been prepared to give a 'true and fair' view
and have departed from the Charities (Accounts and Reports) Regulations
2008 only to the extent required to provide a 'true and fair view'. This
departure has involved following Accounting and Reporting by Charities
preparing their accounts in accordance with the Financial Reporting
Standard applicable in the UK and Republic of Ireland (FRS 102) issued
on 16 July 2014 rather than the Accounting and Reporting by Charities:
Statement of Recommended Practice effective from 1 April 2005 which
has since been withdrawn.
The charity is a qualifying entity for the purposes of FRS 102, being a
member of a group where the parent of that group prepares publicly
available consolidated financial statements, including this entity, which
are intended to give a true and fair view of the assets, liabilities, financial
position and result of the group. The charity has therefore taken
advantage of exemptions from the following disclosure requirements
for parent entity information presented within the consolidated financial
statements: Section 7 'Statement of Cash Flows': Presentation of a
statement of cash flow and related notes and disclosures.
The financial statements and corresponding notes are prepared in the
functional currency of the entity (sterling), and all monetary values are
rounded to the nearest whole £1,000.
b) Going concern
The trustees assess the reasonableness of the assumption of the charity
to continue as a going concern for a period of 12 months from the date
the financial statements are signed.
It is widely acknowledged that the current economic environment is not
one of optimism. The global energy and food supply shocks resulting from
Russia's invasion of Ukraine intensified throughout 2022, leading to rising
energy, food, and other goods prices. CPI inflation peaked at a 40-year
high in October 2022, and the Bank of England responded by raising the
base interest rate to its highest level in 14 years.
The macroeconomic context presents challenges to the RSPCA in several
ways including: challenges to investment performance; a potential decrease
in donations and a fall in the value of legacies from falling property prices;
as well as continued inflationary pressure on the expenditure the RSPCA
incurs in carrying out its charitable activities.
Despite the ongoing uncertainties, the charity has had another successful
year with a net surplus of £13m for 2022, driven by continuing high levels
of legacy and donation income. The group also generated a surplus of
£14.1m for 2022. At 31 December 2022, free reserves within the charity were
£110.2m and £109.8m for the group.
Although the free reserves of the charity as at 31 December 2022 exceed the
top of the range of that specified by the Reserves Policy (£95m) detailed on
page 32 of the Trustees' annual report and accounts, it is deemed an appropriate
approach to take in the current economic climate and the long-term
transformational journey of the RSPCA. The surplus returned has allowed
trustees to further designate funds to support the investment in growing
engagement and income generation, and transform the RSPCA to ensure it
is able to deliver the impact set out in our strategy in a sustainable way.
The trustees have approved a three-year strategic 2023-2025 plan with
a balanced net operating position to support long-term financial
sustainability in the context of the above economic risks. An overall net
deficit is targeted in 2023 due largely to structural long-term investment.
A combination of a healthy level of reserves, designations to support
key strategic investments, a cautious budget and sufficient cash to meet
the charity's needs means that the trustees consider it appropriate for
the accounts to be prepared on a going concern basis.
c) Key judgements and estimates
In the application of the charity's accounting policies, trustees are required
to make judgements, estimates and assumptions about the carrying values
of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may
differ from these estimates. The significant estimates are:
Income recognition - The charity recognises income on a receivable basis
where the amount is reliably measurable and there is adequate probability
of receipt. Income recognition policies are detailed in the accounting policy
for income. When it is considered that the key criteria of entitlement,
probability and measurement for income recognition are not fulfilled for
a transaction, income recognition is delayed until these have been judged
to have been met.
Fixed assets - The charge in respect of periodic depreciation and amortisation
is derived after determining an estimate of an asset's expected useful life.
The useful economic life of an asset is determined at the time the asset is
acquired or brought into use and reviewed annually for appropriateness. The
lives are based on historical experience together with anticipation of future
events. Depreciation policy is detailed in the accounting policy for depreciation.
Defined benefit pension scheme - The RSPCA operates a pension arrangement
called the RSPCA Pension Scheme (the Scheme) which has defined benefit
and defined contribution sections. Although closed for further accrual,
the position of the defined benefit element of the Scheme at 31 December
each year is calculated by actuarial valuation. By nature, the actuarial
valuation includes estimates and assumptions which include: discount rate,
inflation rates (CPI and RPI), post-retirement mortality rates, commutation,
retirement ages and withdrawal rates. The position of the Scheme at the
balance sheet date is disclosed in the Pensions Note, Note 25.
Legacies - Legacies are recognised following a grant of probate.
All pecuniary legacy cases have an estimated value based on the amount
expected to be received as identified by the will. All residuary legacy cases
have an estimated value which is calculated based on the information available,
including the value of the estate and the contents of the will. Early stage
estimates will include a deduction for administration costs, estimated at
5%. Valuations on cases which are contentious include a further deduction
of 20% to take into account the risk. Estimates are regularly updated based
on information available at the time and aim to be as accurate as possible
at all times. The value of accrued legacy income at the balance sheet date
is separately disclosed in the Debtors Note, Note 8.