SORP Full form in banking industry is Statement of Recommended Practice. Financial reporting in banking relies heavily on the Statement of Recommended Practice. The regulators, the industry players as well as accountants created its principles and standards. SORP is a standardization, improvement and compared bank financial statements in order to help regulators, investors, as well as the general public to make better decisions. SORP provides banking institutions with specific guidelines on financial reporting, such as the valuation of assets, provisioning for risk management, provisioning, and transparency. SORP is a strong advocate of accounting for the more complex financial instruments in banking.
What Else Should You Know About SORP?
SORP helps increase transparency in financial statements of banks. Transparency can help stakeholders evaluate the financial health of a bank, its risk and performance. SORP requires banks to document the risk of liquidity, market, credit as well as operational risk. Information on risks as well as risk management methods and best practices are presented. Through providing accurate and clear information, banks help those involved in making an informed decision about lending, investing and regulatory decisions. SORP’s asset assessment and provisioning requirements for NPLs and distressed loans are essential. NPLs are advances or loans which have stopped earning because of financial problems or default. NPL management is essential to the bank’s financial stability and profitability. SORP aids banks to identify the need to evaluate and provide for damaged assets in order to show their actual economic value on financial statements. SORP’s requirements can increase the accuracy of provisioning as well as credit risk in the loan portfolio for banks.
