The Department for Education (DfE) has recently published the Academies Accounts Direction 2025 to 2026 (AAD), applying to academy trusts for accounting periods ending 31 August 2026.
Most of the changes are intended to clarify existing requirements and do not represent a step-change in any policies or disclosure requirements. The changes suggest that the regulatory requirements continue to mature, with a focus on:
- Targeted transparency where risk and public interest are highest (particularly disclosures relating to pay)
- Governance and behavioural accountability (through updating the definitions of regularity and propriety)
- Aligning academy reporting more closely with wider charity and public‑sector norms.
In addition, a new annex (Annex B) has been added which has been designed to prepare Trusts for the introduction of the revised FRS 102 and the new Charities SORP 2026 which will be incorporated into the Academies Accounts Direction for 2026 to 2027. While this will first affect most Trusts for their accounting periods ending 31 August 2027 the new annex provides details of the transition requirements.
Updated definitions of regularity and propriety
The definitions of regularity and propriety have been updated to align with the latest publication from HM Treasury on Managing Public Money (June 2025).
The definition of regularity now specifically refers to transactions requiring sufficient legal basis, Parliamentary authority, and Treasury authorisation as well as being in line with agreed spending budgets, wider legal frameworks, and the Accounts Direction.
The definition of propriety has been updated to focus more explicitly on the high standards of public conduct, Parliamentary expectations and the standards of conduct and governance set out in the Accounts Direction.
These updated definitions do not, in practice, alter the responsibilities of Accounting Officers but do reinforce the requirement for documented controls and procedures to support the statement of regularity, propriety and compliance.
Staff restructuring costs: payments in lieu of notice (PILON)
Staff restructuring costs should now include payments in lieu of notice (whether contractual or non-contractual). PILON was previously excluded from the definition of severance payments for disclosure purposes.
Restructuring costs must now include:
- Redundancy payments
- Severance payments
- PILON
- Other costs associated with staff departures, including pension payments.
The analysis in staff cost notes will be impacted for accounting periods ending 31 August 2026, noting that comparative restatement of 2025 staff cost disclosures is not required.
Disclosure of benefits for higher paid staff
Previously, disclosure of employee benefits for staff earning over £60,000 applied only to those receiving salary and taxable benefits exceeding £60,000.
Clarification has now been included in the AAD for the following:
- part-time members of staff who received less than £60,000 in the year, but would have received at least £60,000 pro rata on a full time basis; and
- members of staff who only worked for part of the year, but the full-year value of their remuneration would have been at least £60,000 on a pro rata basis
Trusts must now provide narrative disclosure for each of the above scenarios.
The disclosure must state in which £10,000 band the FTE would fall. The Academies Model Accounts 2026 provides example wording for this disclosure.
Key management personnel: expanded disclosure requirements
While the definition of key management personnel (KMP) remains unchanged, disclosure requirements have been expanded.
Amounts payable to the accounting officer or to key management personnel that have been accrued but not yet paid must now also be disclosed separately from in-year remuneration. An accompanying narrative explanation is required for these amounts. This also applies to amounts paid to the AO or KMP in the current period but accrued in earlier periods.
The definition of “off payroll” arrangements has been updated to explicitly include former KMP who continue to receive remuneration from the academy trust in a consultancy or similar capacity. This requires individuals in this type of arrangement to be included in KMP disclosures as if they were an employee, and in this change, the prior year figure should also be reported.
Other minor changes affecting 2026 year-ends
The AAD also includes a small number of other clarifications affecting 2026 year-ends.
Trusts are no longer required to disclose Trade Union facility time as part of the Trustees’ Report.
The AAD now clarifies that remuneration paid to the Chief Executive, in their capacity as a member of staff, must be disclosed as a related party transaction where the Chief Executive also acts as a Trustee of the trust.
New Annex B: preparing for the Charities SORP 2026
The content of Annex B to the AAD has no impact on financial statements for accounting periods ending 31 August 2026. It is designed to prepare Trusts for changes in the new SORP and updated FRS102 that will be applicable for 2026-27 financial statements.
Key upcoming changes that are highlighted include:
- The recognition of most leases on the balance sheet – where a modified retrospective approach is adopted, meaning that the comparative information is not restated. The opening balances at the start of 2026-27 would reflect what the 2025-26 closing balances would have been if the change had been applied.
- A revised five-step revenue recognition model – where there is a choice to apply a full retrospective approach (requiring restatement of the 2025-26 comparative figures) or a modified retrospective approach (as per leases).
We will continue to publish further guidance and alerts throughout the 2026 audit cycle and beyond, ensuring that all impacts of this transition are considered in advance of the start of the 2026-27 financial statements.
Conclusion
Although the changes to the Academies Accounts Direction are minor, they reinforce expectations around transparency, governance, and high-quality financial reporting.
Early consideration of the clarified disclosure requirements and forward planning for the updated FRS 102 and new Charities SORP 2026 will help ensure a smooth transition in the 2026-27 year.
Please join us at our Annual Academies Conference on 25 June 2026 where there will be further opportunities to discuss these changes and understand the implications to your Trust.
If you have any questions about the updates to the AAD or would like to discuss how the changes may affect your academy trusts specifically, please get in touch below or with Rebecca Crowther.
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