International Financial Reporting Standards
HM Treasury announced in the 2007 budget report that UK public sector will move to International
Financial Reporting Standards
Why Change?
• Consistency and comparability in the global economy
• Following private sector best practice (listed companies have produced IFRS compliant accounts since 2005)
Background
Timetable
2008/09 2009/10 2010/11
Central Government
Comparatives IFRS IFRS
NHS Comparatives IFRS IFRS
Whole of Government Accounts
IFRS IFRS
Local Government inc Police
Comparative & WGA
IFRS
Summary Implementation Timetable for Local Government
30 June 2011 –First IFRS accounts approved by members
IFRS transition
date
IFRS transition
date
Need comparatives at this date
Need comparatives at this date
Full disclosure at this date
Full disclosure at this date
TODAY
01/04/0901/04/09 31/03/1031/03/10 31/03/1131/03/11
Prepare Code
Comparatives First IFRS accounts
Prepare Code Preparation Implementation
Summary Implementation Timetable for Local
GovernmentDate of Transition - 1st April 2009
IFRS 1 requires 3 IFRS compliant Balance Sheets:
1st April 2009
31st March 2010
31st March 2011
Key Focus Areas
Urgent Priority Medium Priority Lower Priority
PFI
Format of Accounts
Leases
Fixed Assets
Investment Properties
Intangible Fixed Assets
Government Grants
Income Recognition
Financial Instruments
Accounts Disclosures
Impairments
Stocks (Inventory)
Post Balance sheet events
Related Party Disclosures
Provisions
Employee Benefits
Group Accounts
Source: Grant Thornton
Guidance Available
The Chartered Institute of Public Finance and Accountancy (CIPFA) is developing the detailed guidance to allow local authorities to implement IFRS.
N.B. Not all the guidance is in place, some will not be available until after May 2009.
Areas with a significant impact for Devon and Cornwall Police
• Employee Benefits - Untaken leave
• Format of Accounts• Fixed Assets & Investment Properties• Leases• Intangible Fixed Assets
Employee BenefitsThere is a new requirement to accrue for holiday and flexi leave earned in the financial year but untaken at the balance sheet date.
A project is under way to quantify the impact for Devon and Cornwall Police of :• Police Staff leave & flexi leave• Police Officers leave & time on card
Employee Benefits Implications for Devon and Cornwall Police
Accounting for untaken leave may have a significant (one off) impact in the year of introduction, as the cost will be an additional charge against the income and expenditure account.
There is a larger pro-rata impact for Police Authorities as compared with other local authorities because staffing represents a higher portion of the budget.
(Cont’d)
Consultation is taking place with the government on whether:
• cost should not be a charge against the council tax
• if the cost is a charge against the council tax - phasing of the impact.
(Decision expected September 2009-January 2010)
Format of Accounts
Main Changes:• Changes to the names of the main accountancy statements• Changes to the content and format of notes
Implications - staff resources required in year of introduction (2010/11)
Fixed Assets & Investment Properties
Main Issues:• Valuation at fair value• Component Accounting• Valuations to be undertaken more frequently
Implications - additional cost of more frequent and more detailed valuations
LeasesMain Issues:• Equipment Leases• Property Leases
All leases to be re-evaluated to test if they are finance or operating leases.
Implications -• no significant revenue budget implications
• staff resources to evaluate existing and future lease agreements
Intangible Assets
Allows capitalisation of costs that previously must be charged to revenue, for example, internally generated software/systems. Detailed guidance is lacking at present.
Implications - may impact on treatment of Programme costs.
Implementation Plan
WHO?• Project Board - Director of F&R & Treasurer• Implementation Team• Advisory Consultants
HOW?• Project Plan & Implementation Timetable• Risk Assessment• Impact Assessment• Links to Devon County Council Project
Work in hand
•Project to assess impact of accounting for leave entitlement not taken• Revaluation of fixed assets in 2009/10 to incorporate IFRS requirements• Project plan and risk assessment to be complete by 30 April 2009