FEHE SORP 2026: Key changes for Further Education Colleges

The introduction of the new FEHE SORP 2026 marks an important change for colleges across the Further Education sector. While it may not significantly change financial results for every organisation, it will change how income is recognised, how leases are reported, and how finances are presented.

The FEHE SORP 2026 applies to accounting periods starting from 1 January 2026, meaning colleges will first implement it in their 31 July 2027 year-end accounts (as required by the Colleges Accounts Direction). Although this may seem some way off, preparing early will make the transition much smoother.

What’s changing under FEHE SORP 2026?

There are two key areas colleges need to understand:

Revenue recognition

Revenue will no longer be based on when risks and rewards transfer. Instead, it will be recognised when a college delivers on its performance obligations.

In simple terms, this means:

• Looking more closely at what is promised within a contract,
• Breaking this down into individual elements where needed, and
• Recognising income as each element is delivered

This change introduces greater judgment and may require colleges to rethink how and when certain income streams are recorded.

Lease accounting

Lease accounting is also changing significantly. Most leases will now appear on the balance sheet as:

• A “right of use” asset, and
• A corresponding liability

This will increase the size of balance sheets and change how costs are reported over time.

For many colleges, this could affect:

• Reported surpluses or deficits,
• Financial ratios and key performance indicators, and
• Loan covenants and funding metrics

Where will the biggest impact be?

For most colleges, the impact will be felt in two main areas.

Tuition fees, apprenticeship and commercial income

Changes to revenue recognition will have the greatest effect on:

• Tuition fees
• Apprenticeship income
• Commercial activities such as catering or facility hire

Colleges will need to consider whether income should be split across different services or delivered over time, rather than recognised in one go.

Estates and leased assets

Colleges with significant estates or long-term lease arrangements are likely to see the biggest impact from the new lease rules. This includes not only property, but also equipment and some digital or IT contracts.

Understanding the full range of lease arrangements will be essential to avoid surprises.

What should colleges do now?

Although implementation will not apply until the 2026/27 financial statements, there are some practical steps colleges can take now to prepare.

Start by reviewing your existing contracts and income streams. Understanding how income is currently recognised will help identify where changes may be needed.

Next, consider the different elements within those contracts. Identifying performance obligations early will make it easier to apply the new rules consistently.

It is also important to take a fresh look at your lease portfolio. This should include all property, equipment and relevant digital arrangements, along with key judgements such as lease terms, whether items are “low value”, and which discount rates will apply.

Finally, modelling the potential impact on your financial position will help ensure there are no unexpected changes to key metrics or covenants.

A practical opportunity, not just a compliance exercise

While the FEHE SORP 2026 introduces additional complexity, it also provides colleges with an opportunity to strengthen their financial processes, improve transparency, and align more closely with best practice.

Those who take early action will be better placed to manage the transition confidently and avoid last-minute challenges.

Talk to Bishop Fleming

Preparing for the FEHE SORP 2026 does not have to be complicated. With the right support, you can take a practical and proportionate approach that works for your college. Contact Bishop Fleming today to discuss how we can help you plan ahead with confidence.