MHCLG to consult on statutory override of IFRS 9

15 Mar 18

The Ministry of Housing, Communities and Local Government is planning to consult on a statutory override to aspects of a new accounting rule intended to improve the financial reporting of investments.

International Financial Reporting Standard 9 will apply to all corporate and public financial reporting and aims to improve transparency of investments. It will reclassify investment vehicles so gains and losses are chargeable to income and expenditure.

However, there has been concern that, in a local government context, this could result in a negative impact on council taxpayers as reserves would have to change to reflect any unrealised losses or gains.

Following feedback from treasurer societies, CIPFA has been working with MHCLG to support a statutory override.  

Gareth Caller of the MHCLG, said the department was planning to consult on statutory overrides to “elements” of IFRS 9, specifically with regard to pooled property investment funds. He was speaking at CIPFA’s Treasury Management Network conference yesterday.

“That’s because we recognise lots of local authorities have invested in these things historically under a different framework, and it’s unfair to penalise them for that,” he said.

The consultation going ahead was dependent on the approval of other government departments, Caller said, which is standard practice for all government consultations.

But he added that, assuming this was secured and there was a positive response from consultees, regulations to implement the override would be laid before the end of the next financial year.

Caller also discussed the recent changes to the prudential framework on capital finance. He said MHCLG needed to monitor trends and ensure it remained up-to-date.

“We do acknowledge that one size does not fit all and though we have introduced a lot more disclosure we are quite clear that it remains a local framework, it remains permissive.

“What we’re expecting is for local authorities to be more transparent about what they’re doing, why they’re doing it and the risks as well as the opportunities of that.”

He added that local authorities shouldn’t look to borrow to a “disproportionate level”.

Those that do so are “effectively assuming that government will step in and bail them out if everything goes wrong”, Caller said, warning that there was nothing in either the framework or statute that says central government has to do that.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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