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