10 October 2008
The implementation of International Financial Reporting Standards by councils requires dedication, hard work and application. It's an Olympian task but the prize will be worth it
It's two months since the end of the Olympics, and most of us will have forgotten about those less popular sports that we watched so avidly only a few weeks ago. We won't notice the years of hard work that the athletes will put into preparing for the 2012 games, until once again they (briefly) become the centre of attention.
So what has this got to do with implementing International Financial Reporting Standards? There are several similarities — high-profile dates such as April 1, 2010, the first day local authorities will account under IFRS, and June 30, 2011, the date by which the first IFRS-based accounts must have been approved.
In between these dates will be a lot of hard work, much of it unnoticed by anyone not directly involved. Some people might also feel it's like pursuit cycling — you go round in circles chasing a target that seems to be constantly moving away from you — but hopefully they are in the minority.
Fortunately, though, there are differences. In particular, with the right preparation and effort, we can all succeed with IFRS — there isn't just one gold medal to be won.
So how are the preparations going so far? As with most training programmes, you need to set targets to measure progress, and adjust the programme as necessary. To date, CIPFA has met three key targets.
The first was to ensure the right governance arrangements were in place — a bit like selecting the right team. Following a consultation earlier this year, CIPFA/Local Authority (Scotland) Accounts Advisory Committee agreed to move from a Statement of Recommended Practice overseen by the Accounting Standards Board to a Code of Practice overseen by the Financial Reporting Advisory Board.
Frab is the independent body that advises the Treasury and devolved governments on central government and NHS accounting, and the addition of local government means that it now provides consistent oversight across most of the public sector. The new framework also formalises for the first time the role of International Public Sector Accounting Standards in the UK.
Negotiations are now complete and (after what has at times felt like a marathon) the change has been made. So the 2010/11 Code of Practice is now being prepared under the oversight of Frab, and will no longer be badged as a Sorp. However, the Code will continue to be the authoritative guidance on accounting for local authorities, and CIPFA will continue to provide detailed guidance notes on its application.
The second target was to consult on the accounts format. 'Back to Basics' was launched in the spring, and the CIPFA/Lasaac board has considered the 100-plus responses. We are now setting up work groups to help develop the new format.
So what have been the key headlines from the consultation? Simplification was your main priority, and we will simplify the accounts. Removing some of the notes was welcomed, and we are proposing to do this in 2009/10 if possible. There will continue to be council-only accounts — producing consolidated accounts only wasn't favoured. And the suggested changes to accounting for council tax and non-domestic rates were supported.
There was less agreement over the housing revenue account — in fact the judges couldn't separate the two finalists, with equal votes cast for the options of including HRA information within service information and of producing a separate statement. Following the review by the Department for Communities and Local Government, a play-off is in prospect...
The third target was to have started preparing the IFRS-based Code by now. This isn't a sprint, or even a marathon — more a series of events like the decathlon. The first events have been completed, with CIPFA/Lasaac approving draft sections of the Code on leases, intangible assets and impairment, and approving the accounting arrangements for Private Finance Initiative schemes to be included in the 2009 Sorp consultation. Other sections of the Code are being prepared, and sections on property, plant and equipment (fixed assets in current parlance) and investment property will be considered in December. Progress reports are on the CIPFA/Lasaac website (www.cipfa.org.uk/pt/cipfalasaac/).
That's our progress to date — how about yours? Is your team in place, or are you still looking for the selectors? Is your development programme ready? There is a lot of work ahead, but the prize is worth it. And you don't have to be an Olympic athlete.
Paul Mason is technical manager, local government accounting, in CIPFA's policy and technical department