Operis provided accounting advice to the Viridis Living consortium on the University of Manchester’s Fallowfield campus redevelopment, which reached financial close in July 2026. Here, we break down the recently updated Higher Education SORP that will impact Higher Education Institutions (HEIs) this year.
The Statement of Recommended Practice for Further and Higher Education (FEHE SORP 2026) was published on 3 November 2025 and is applicable to financial periods beginning on or after 1 January 2026. Most Higher Education Institutions (HEIs) have a yar-end of 31 July, so they will need to consider the impact of the new SORP from 1 August 2026, ahead of the year-ending 31 July 2027.
What has changed?
The new SORP aligns with the March 2024 amendments to FRS 102. The main change likely to impact student accommodation projects is an amendment to bring the treatment of leases more in line with IFRS 16. There are also revised revenue recognition principles to better reflect performance obligations and the timing of service delivery, moving the recognition of revenue closer to the approach set out in IFRS 15. This could impact how HEIs recognise revenue.
Accounting for leases
Under the new SORP there is not a distinction allowing HEIs to account for leases as either an operating or finance lease where an HEI is acting as a lessee. Instead, most leases will be recognised on balance sheet with a right-of-use asset and lease liability being shown on the statement of financial position. There are exceptions for short term leases of less than 12 months or low value leases but these are unlikely to apply to leases entered into as part of student accommodation projects.
As a result of the recognition of a right-of-use asset and lease liability, the income statement will now show both the depreciation of the right-of-use asset and interest relating to the lease liability rather than only showing a lease expense.
Recognition of Student Accommodation Projects
The new SORP still contains guidance as to whether a student accommodation agreement is a service concession arrangement or lease. Where a number of tests are satisfied, the agreement can be accounted for as a service concession arrangement and the HEI would recognise an initial lease liability and associated infrstructure asset on the statement of financial position. Alternatively, if the tests are not satisfied, the arrangement will probably be accounted for as a lease with a lease liability and matching right-of-use asset being recognised.
Impact on income statement and financial covenants
The inclusion of a lease liability on the statement of financial position is likely to have a negative impact on gearing. On the other hand, EBITDA is likely to be positively impacted as the new depreciation and lease interest charges will not be included in EBITDA whereas the previous single lease costs would have been included in the income statement above EBITDA.
How Operis can Help
The tax and accounting team at Operis have detailed knowledge of lease accounting and have reviewed a number of student accommodation agreements to assess the impact of the new FEHE SORP. Together with expert financial modellers within our analytical team, we can assess whether transactions should be accounted for as a service concession arrangement or as a lease and therefore calculate the impact that the changes to lease accounting are likely to have on transactions.
If you have any questions regarding the above or would like to speak to someone at Operis about how the new FEHE SORP might impact on transactions you are working on, please get in touch info@operis.com
