DRAFT

BOROUGH OF POOLE

AUDIT COMMITTEE

22SEPTEMBER 2009

INTRODUCTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

PART OF THE PUBLISHED FORWARD PLAN: YES

1PURPOSE

1.1The purpose of this report is to:

(a)Outline the processes being followed to ensure the Council will be compliant with the requirements relating to IFRS for the implementation date of 2010/11.

2DECISIONS REQUIRED

2.1It is recommended that members note;

(a) the processes being followed to achieve compliance with IFRS

3 BACKGROUND

3.1In the last three years the Statement of Accounts has become unrecognisable compared to previous statement production. All changes have been intended to achieve the government’s ultimate intention that all Public Sector bodies report on a consistent basis and comply with International Financial Reporting Standards (IFRS). This evolution will be complete in 2010/11 when Local authorities accounts are required to be fully compliant with IFRS. In practice this means that a Balance Sheet as at 1st April 2009 will also need to be prepared which is IFRS compliant.

3.2The CIPFA/LASAAC (local authority Scotland accounts advisory committee) Local Authority Code Board is established as a standing committee of CIPFA and LASAAC for the purpose of preparing, maintaining, developing and issuing the Code of Practice on Local Authority Accounting for the United Kingdom. – the Statement of Recommended Practice (SORP). In addition this board has been given responsibility for developing the IFRS based code of practice that will apply from April 2010. The Code is being prepared under the oversight of the Financial Reporting Advisory Board (FRAB). For previous codes the external quality oversight role was undertaken by the Accounting standards Board (ASB). The FRAB is an independent body that has for many years overseen central government and NHS accounting guidance.

3.3The Board has released the 2010 Code Exposure Draft and has issued an invitation to comment. Any comments to be submitted by the 11th September 2009.

3.4CIPFA/LASAAC is planning to publish the actual new code in early December 2009. The Code will then be updated annually. The moving of Local Authority Accounts to an IFRS basis completes the Government schedule for all Public Sector Accounts to be completed within the same framework.

4PROCESS FOLLOWED, REQUIREMENT IDENTIFICATION, AREAS OF CHANGE

4.1To date the accountancy team have been regularly reviewing the CIFPA website for any updates on what the requirements under IFRS are likely to be. In addition two members of the team have attended a CIPFA seminar which assisted with highlighting areas likely to be subject to review.

4.2A high level review of International Accounting Standards (IAS) was also carried out to try to identify areas where additional information may have been required.

4.3The issue of the draft guidance has firmed up some of the requirements of IFRS, as they are currently known, and these may result in a number of areas of change but certainly all areas will need to be reviewed. Principally these include:

  • Format changes to the Financial Statements
  • Property, Plant and Equipment
  • Leases
  • Investment Property
  • Intangible Assets
  • Impairment
  • Non-Current Assets Held for Sale
  • Employee Benefits
  • Group Accounts

4.4The consultation provides samples of the format changes. The potential changes are summarised below.

SORP 2009 Requirement / IFRS Code Requirement / Potential Impact of Change
The core financial statements are the Income and Expenditure Account, Statement of Total Recognised Gains and Losses, Balance Sheet and Cash Flow.
Notes to the accounts are also reported. / The core financial statements are the Movement in Reserves Statement, Comprehensive Income and Expenditure Statement, Balance Sheet and Cash Flow Statement.
The format of the statements has changed. Notes to the accounts are produced, and include more detail than under the SORP. / The Statement of Accounts for 2009/10 will need to be produced under both the old and the new method.
Segment reporting is included on the face of the Income and Expenditure Account / Service information is included on the face of the Comprehensive Income and Expenditure Statement, based on BVACOP.
Additional segment reporting based on internal management arrangements including a subjective analysis and reconciliations is included in the notes. / The Accounts will need to present more information than under the SORP. Resources required to produce will increase.
Two Balance Sheets are reported, one at the reporting date and one at the previous reporting date. / As per the SORP, however where there has been a change in accounting policy that requires comparative information to be restated, a third balance sheet (as at the start of the comparative period) is reported. This also applies on transition to IFRS / We will need to produce an opening IFRS balance sheet, and also produce a balance sheet as at the start of the comparative period where there are material changes to the accounting policy. Aside from the immediate IFRS impact this is likely to result in three balance sheets being produced on occasions

4.5 The consultation also highlights the proposals where changes to systems or procedures may be required. These are detailed in Appendix A along with our action below each heading (the number reference refers to the consultation chapter/paragraph).

4.6 There have been concerns that the move to IFRS could potentially impact on Council Tax and housing rents. CIPFA has therefore had discussions with the Department for Communities and Local Government and the devolved administrations in Scotland, Wales and Northern Ireland to ensure any impacts can be minimised, if not avoided. Initial proposals are set out in the consultation document. In essence, the expectation is that any potential bottom line impacts will be negated via statutory provisions that allow any impact to reversed. CIPFA press release dated 23 July 2009 stated that ‘it does not expect to see an increase in the council tax as a result of the move to International Financial Reporting Standards….it is confident that the Government will act to stop this happening’

5 FINANCIAL IMPLICATIONS

5.1 None.

6LEGAL IMPLICATIONS

6.1The Authority is expected to comply with the new accounting standards

7RISK MANAGEMENT IMPLICATIONS

7.1 Failure to comply may result in a qualified Audit Opinion

9EQUALITIES IMPLICATIONS

9.1 There are no equality implications.

E WILKINSON

CHIEF FINANCE OFFICER & HEAD OF FINANCIAL SERVICES

12 June 2009

Contact Officers

Liz Wilkinson

Chief Finance Officer & Head of Financial Services

Telephone (01202) 63.3105

Mandy May

Senior Finance Manager

Telephone: (01202) 63.3178

email:

Background Papers

Nil

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