DH1/11/31042
23/02/2011
SECTION B: HSC ANNUAL ACCOUNTS
FORM & CONTENT OF THE ACCOUNTS
Section B: HSC Body Annual Accounts 2010-11
Contents
The Primary Statements ................................................................................................................... 2
Prior Year Adjustments ................................................................................................................... 6
Notes to the Financial Statements.................................................................................................... 7
Note 1: Statement of Accounting Policies ....................................................................................... 7
Note 2: Segmental Reporting........................................................................................................... 7
Note 3: Staff numbers and related costs .......................................................................................... 8
Note 4: Other Operating Expenses ................................................................................................ 14
Note 5: Income ............................................................................................................................. 19
Note 6.1- 6.4: Property, Plant & Equipment (PPE) (Purchased and Donated) .............................. 22
Note 7.1 to 7.4: Intangible Assets (Purchased & Donated) .......................................................... 24
Note 8: Financial Instruments ....................................................................................................... 25
Note 9: Assets held for sale ........................................................................................................... 26
Note 10: Impairments .................................................................................................................... 27
Note 11: Inventories ...................................................................................................................... 27
Note 12: Trade Receivables ........................................................................................................... 28
Note 13: Cash and Cash Equivalents ............................................................................................. 30
Note 14: Payables .......................................................................................................................... 31
Note 15.1: Public Sector Payment Policy for HSC organisations - Measure of
Compliance ........................................................................................................................ 33
Note 16: Provisions for Liabilities and Charges ............................................................................ 35
Note 17: Capital Commitments ..................................................................................................... 37
Note 18: Leases Commitments ...................................................................................................... 38
Note 19: Commitments under PFI and other service concession arrangements ............................ 39
Note 20: Other Financial Commitments ........................................................................................ 41
Note 21: Financial Guarantees, Indemnities and Letters of Comfort ............................................ 42
Note 22: Contingent Liabilities ..................................................................................................... 44
Note 23: Related Party Transactions ............................................................................................. 45
Note 24: Third Party Assets ........................................................................................................... 46
Note 25: Financial Performance Targets ....................................................................................... 47
Note 26: Analysis of Losses and Special Payments ...................................................................... 49
Note 27: Post Balance Sheet Events .............................................................................................. 51
1
The Primary Statements
Presentation of Financial statements- General principles
The objective of IAS 1 is to prescribe the basis for presentation of general purpose financial
statements to ensure comparability with the entity’s financial statements of previous periods
and with the financial statements of other entities.
1. There are 4 primary statements, Statement of Comprehensive Net Expenditure, Statement
of Financial Position, Statement of Changes in Taxpayers Equity, and the Statement of
Cash flows.
2. Pro forma statements are shown at Appendix 1
a) Statement of Comprehensive Net Expenditure
IAS 1 requires entities to prepare a statement of comprehensive income; HSC Bodies &
NDPB’s shall prepare a Statement of Comprehensive Net Expenditure in accordance
with the format shown in Appendix 1
Charitable funds should follow the requirements of the Charities SORP.
General interpretation
In applying IAS 1, entities should be aware of the following general interpretation for
the public sector context:
Profit on disposal of an asset can be accounted for as negative expenditure to the extent
that the profit represents a final adjustment of depreciation. Where this is not the case,
profits should be accounted for as income
The Statement of Comprehensive Net Expenditure includes 2 sections, the first
detailing Net expenditure against the Revenue Resource Limit and the second detailing
revaluation movements re Property, plant and equipment and intangibles.
b) Statement of Financial Position
IAS 1 requires entities to prepare a Statement of Financial Position and provides
guidance on the minimum presentation required on the face of the Statement of
Financial Position.
2
Interpretation of the Statement of Financial Position requirements in IAS 1 for the
public sector context
For the public sector, the flexibility provided in IAS 1 to select the order of presentation
of line items on the statement of financial position and to present on a liquidity basis is
withdrawn. To ensure consistency and comparability, reporting entities should prepare
their Statements of Financial Position in accordance with the format shown in appendix
1, with additional line disclosure as necessary (agreed with the Department) so as
properly to reflect the entity’s financial position, capital and reserves.
c) Statement of Changes in Taxpayers Equity
IAS 1 requires entities to prepare a Statement of Changes in Taxpayers Equity.
Interpretation of the Statement of Changes in Taxpayers Equity requirements in IAS 1
for the public sector
All reporting entities will present a Statement of Changes in Taxpayer's Equity
following the format in IAS 1. To ensure consistency and comparability, reporting
entities should prepare their Statements of Changes in Taxpayers Equity in accordance
with the format shown in appendix 1.
Revaluation movements re Property, plant and equipment and intangibles which had
been included within the Statement of Changes in Reserves (pre 2010/11) are now
disclosed within the Statement of Comprehensive Net expenditure.
Comparative information
IAS 1 provides guidance on the comparative information to be disclosed in the financial
statements. The IAS 1 comparative information requirements should be applied in full
except where directed by the Department.
3
Capital
Interpretation of the capital disclosures requirements in IAS 1 for the public sector
context
The financing of public sector entities is ultimately tax-based and an IAS 1-based
notion of capital does not apply to many of them. Capital disclosures should be given
only with the agreement of the Department
d) IAS 7 Statement of Cash Flows
Applicability
IAS 7 applies in full to all reporting entities covered by the requirements of this Manual.
Objective of IAS 7
The objective of IAS 7 is to require the provision of information about the historical
change in cash and cash equivalents of an entity by means of a statement of cash flows
that classifies cash flows during the period from operating, investing and financing
activities.
Other requirements
The following requirements should be observed by all entities;
Entities should prepare the statement in accordance with the format shown in appendix
1.
In reconciling the operating cost to operating cash flows, entities should exclude
movements in receivables and payables relating to items that do not pass through the
Statement of Comprehensive Net Expenditure ( receivables and payables linked to loans
from the National Loans Fund, capital expenditure, finance leases and PFI and other
service concession arrangement contracts);
In analysing capital expenditure and financial investment, entities should adjust for
receivables and payables relating to capital expenditure and those relating to loans
issued to or repaid by other bodies; and
In analysing financing, entities should adjust for receivables and payables relating to the
capital expenditure in respect of finance leases and on-balance sheet PFI and other
service concession arrangement contracts.
4
3. Notes to the accounts: IAS 1 requires that entities present a summary of accounting
policies which will disclose the measurement basis used in preparing financial
statements and all other accounting policies that are significant to the understanding of
the financial statements. Entities should disclose key sources of estimation uncertainty
and judgements made in applying accounting policies.
Further notes shall be provided as required by other IFRSs or as necessary to provide
additional information that is not presented on the face of the Statement of Financial
Position, Statement of Comprehensive Net Expenditure or Statement of Cash Flows but
is relevant to provide an understanding of such statements. The following chapters give
guidance on the notes to accompany the 4 primary statements.
4. Comparative information - With the exception of the first year of operation, the
statements will also present the transactions/balances of the previous financial year so that
users of the accounts may make year on year comparisons in accordance with IAS 1
5. A heading or subheading can be omitted where it is inapplicable for both the current year
and previous year (see note 8 below).
6. Expenses and any deficits arising should be shown in brackets on the face of the primary
statements
7. Gross Expenditure - Unless specifically stated otherwise, income and expenditure
should be reported and published on a gross basis, i.e. figures should not be netted off.
This means that income from all types of activity should be shown as "income from
activities" or as "other operating income", as appropriate, whilst the associated costs of
activities should be reported under "operating expenses".
8. ZERO NOTES – Where a note in the proforma accounts is not applicable to an HSC
body, a statement should be included to say that the note is not relevant. (This will keep
note numbers consistent across all HSC bodies). Similarly, where tables or lines within
tables are zero for current year and prior year, the tables or lines should be deleted,
with narrative if necessary, for e.g. “ The HSC body has no finance leases” . It is not
appropriate to populate zero lines. If a HSC body finds something, which does not fit
into the template, they should seek advice from the Department on how to account for
this.
9. Also no need to refer to accounting policies if they don’t apply.
5
Prior Year Adjustments
IAS 1, Presentation of Financial Statements, details the requirements surrounding the
disclosure of comparative information.
1. The comparative information must include, as a minimum, two statements of financial
position, two of each of the other statements, and related notes. When an entity applies
an accounting policy retrospectively or makes a retrospective restatement of items in its
financial statements or when it reclassifies items in its financial statements, it should
include three statements of financial position, two of each of the other statements, and
related notes. Therefore with regard to the statement of financial position, when a
restatement or a reclassification is made, two periods of comparative information will
be shown.
2. This requirement extends to the notes to the financial statements. However, many of the
notes to the statement of financial position will be unaffected by the restatement or
reclassification, therefore only the notes to the additional statement that have been
impacted by the restatement or reclassification should be presented provided that the
HSC body states in its financial statements that the other notes have not been impacted
by the restatement or reclassification.
3. The accounts template therefore includes 3 columns for the statement of financial
position and for each of the notes relating to the statement of financial position, being
the current period and the 2 preceding periods. The figures for the earliest comparative
period may or may not be relevant dependant upon the circumstances of the HSC body.
If there are no restatements or reclassifications, the columns relating to the earliest
comparative period should be omitted. If there are restatements or reclassifications, the
statement of financial position for the earliest comparative period should be included
and also the earliest comparative period columns for the relevant notes (ie. the notes
that have been impacted by the restatement or reclassification) should be completed.
6
Notes to the Financial Statements
Note 1: Statement of Accounting Policies
1. IAS 1 requires that entities present a summary of accounting policies which will disclose
the measurement basis used in preparing the financial statements and all other accounting
policies that are significant to the understanding of the financial statements. Each body
should disclose key sources of estimation uncertainty and judgements made in applying
accounting policies.
2. The note on HSC accounting policies must comply with IAS 8 “Accounting Policies”.
HSC accounts must be produced to reflect the accounting policies given in Note 1 to the
accounts.
3. A pro forma accounting policies will be included at Appendix 1 of the manual, based on
Trusts but which can be adopted for use by any HSC body.
4. Any material changes to the Accounting Policies note must be authorised by Financial
Accounting Unit.
Note 2: Segmental Reporting
IFRS to be applied in full.
The objective of IFRS 8 is to require an entity to disclose information to enable users of its
financial statements to evaluate the nature and financial effects of the business activities in
which it engages and the economic environment in which it operates
Entities to agree what their segments are and report accordingly, provided the information is
readily available. If it is not possible to identify net expenditure per segment, this should be
done to the extent that it is possible and agree approach with the auditors. Prior year figures
are to be provided for comparative purposes. Entities to follow the format in the template of
accounts.
The analysis of fees and charges information included within the FReM is not required.
7
Notes to the Financial Statements
Note 3: Staff numbers and related costs
1
The purpose of this note is to analyse the number and cost of employees employed either
directly or indirectly by the HSC body, including the details of senior employee’s
remuneration.
2
Remuneration must be the amount payable in respect of the Reporting Year and any bonus
payments will be amounts paid in 2010-11 although all or part of the bonus may relate to
activity in earlier years.
Definitions
Permanently / Directly Employed – Staff permanently / directly employed by the HSC
body, include those on outward secondment or loan to other organizations. Generally
this includes all staff paid through the payroll, including NED’s if paid through payroll.
Note for HSCB – Permanently / directly employed staff to include prescribing advisors.
Others / Indirectly Employed – Others temporarily engaged on the objectives of the
HSC body. This will include those on inward secondment or loan from other
organisations, agency/temporary staff and contract staff.
Circular HSC(F) 47/2010 issued on 21 December 2010 includes the following
definitions for seconded staff:
Seconded Out Staff are those staff on your HSC payroll who are working for another
HSC organisation (including the Department) and whose salaries and related costs are
being recharged to that HSC Organisation (including the Department). These should be
shown in the “Permanently/ Directly employed” column.
Seconded In Staff are those staff on another HSC (including Department) payroll who
are working for your HSC body and whose salaries and related costs are being recharged
to your HSC body. These costs should be shown in the “others” column
‘Contract staff’ means staff directly engaged by the HSC body on a contract to
undertake a particular assignment or task. These costs are staff costs as the HSC body
has control over the number and type of staff it engages. These costs should be shown in
the “others” column
A distinction should be drawn between such arrangements and those in which the HSC
body is buying a service and has no direct interest in the numbers or type of personnel
engaged in providing that service.
8
Notes to the Financial Statements
Such services may include the provision of cleaning or security, and the development of
IT systems or management consultancy in which the numbers of individuals engaged on
the service may fluctuate depending on the complexity of the issue and are outside the
direct control of the HSC body. Amounts paid in respect of such services should not be
included within staff costs but reflected within operating costs.
Note 3.1 Staff Costs
1
Staff costs should include amounts relating to all full time and part time, directly and
indirectly employed (including board members, and also non-executive board members, if
paid through payroll.) The figures that are reflected within the Statement of
Comprehensive Net Expenditure exclude capitalised staff costs and exclude recoveries
in respect of seconded out staff.
2
Gross Wages and Salaries. This is the total gross pay of all full and part-time employees
earned within the business including any bonus payments. The figures exclude all
redundancy payments made in year, as it is not an in year salaries or wages cost.
Redundancy costs and the costs of early retirements should be shown at note 3.4 (see
below).
3
Social Security Costs. This is the total of the HSC bodies Employer’s National Insurance
Contributions less Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP).
4
Pension Costs include the total of the HSC bodies employer contributions to pension
schemes (other than NI contributions).
Wages & Salaries, Social Security costs and pension costs are analysed between
permanently employed and Other.
Wages & Salaries, Social Security costs and pension costs will include the costs of any
staff that have been capitalised and the amount should also be disclosed separately in the
text below this note. The total staff costs reported in the Statement of Comprehensive Net
Expenditure will exclude capitalised staff costs.
Wages & Salaries, Social Security costs and pension costs will include the costs of
seconded out staff. The total staff costs reported in the Statement of Comprehensive
expenditure will include these costs. However the recovery of cost for these staff must
also be shown in note 3.1 and reflected within income shown in the Statement of
Comprehensive Expenditure
9
Notes to the Financial Statements
5
Capitalised staff costs – any staff costs that have been capitalised and included above
should be listed here so that they can be deducted from the gross costs in arriving at the
amount to be included in the Statement of Comprehensive Net Expenditure. There is no
need to analyse this between ‘Permanently employed’ and ‘Other’.
6
Less recoveries in respect of outward secondments. The line should disclose the
recovery of costs for staff on outward secondment. Netting off is no longer permitted.
There is no need to analyse this between permanently / directly employed and Other.
7
Total net costs. This figure is for information purposes only. This figure does not feed
into the Statement of Comprehensive Net Expenditure.
Note 3.2 Average number of Employees
1
The figures should relate to all persons with a cost included at note 3.1 above as either
‘permanently employed’ (if they are on the payroll) or ‘other’ (if not on the payroll).
Separate lines have been included to deal with the average staff number relating to staff
costs that have been capitalised and to the numbers on outward secondment. The relevant
staff numbers should be included within the analysis of total average number of persons
employed; they should then be disclosed on the separate lines to enable them to be
deducted in arriving at the total net average number of persons employed. There is no
need to analyse the staff numbers relating to capitalised costs and outward secondments
between Directly employed and Other.
2
The entries in Note 3.2 are the average numbers of staff employed in each of the following
staff groups:
FOR TRUSTS
Proposed staff classifications (if appropriate)
medical and dental;
nursing and midwifery;
professions allied to medicine;
ancillaries;
administrative and clerical;
ambulance staff;
works;
other professional and technical;
social services staff;
other;
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Notes to the Financial Statements
FOR OTHER ORGANISATIONS
3
Other organisations may use their own classifications, for e.g. HSCB could simply use
“staff for commissioning”
4
The average number of employees is calculated as the whole time equivalent number of
employees under contract of service in the financial year using daily figures for full time
staff.
5
The ‘contracted hours’ method of calculating whole time equivalent number should be
used for staff working reduced hours. This is calculated by taking the contracted hours of
each employee and dividing by the standard working hours to obtain the whole time
equivalent.
6
The sum of the entries of all staff groups should be entered as the total.
7
The average number of employees should be split between:
Directly Employed – Staff who would normally appear on the payroll of the HSC body.
Other – Others engaged in the objectives of the HSC body. This will include those on
inward secondment or loan from other organisations, agency staff and contract staff.
Note 3.3 Senior Employees' Remuneration
1
Please refer to the ‘Remuneration Report’ section of the HSC bodies Annual Report
(Section C of the Manual) for guidance on this Note. If the accounts are published
together with the Annual Report as one document, there is no need to reproduce this
note as a note to the accounts. Rather it will be shown within the Remuneration Report
section of the Annual Report. Otherwise if the annual accounts are published separately
from the Annual Report, this note must be populated with the accounts.
Note 3.4 Reporting of compensation schemes – exit packages
1
An analysis of the exit costs paid during the year by amount and number, within the
bands listed. Comparative data for the prior year should be disclosed in brackets.
Please note that the table should be completed to provide numbers of exit packages as
opposed to costs, with the exception of the bottom row, where total costs should be
shown. There are 2 versions of the table and note to be used as follows:
Version 1 – For use by Trusts where the costs of exit packages are funded from existing
RPA/CSR provisions and will therefore have no impact of the net expenditure position
11
Notes to the Financial Statements
in the year in which they are agreed and paid – the table will be completed to show the
numbers of packages approved and agreed during the year and the total cost charged to
the provision account in the Statement of Financial Position (and disclosed as a
utilization at note 16 – provisions).
Version 2 – For use by HSCB/PHA/BSO and other bodies which do not hold a
RPA/CSR provision to cover exit costs. Therefore the table will be completed to show
the numbers of packages approved and agreed during the year, the costs of which will
be charged to the net expenditure account in that year. These costs will be included
within Note 4 – operating expenses. It is possible that they may be reflected as a non
cash cost representing the creation of a new provision.
2
The numbers and costs included within the table will be the costs of compulsory
redundancies (2nd column), and voluntary redundancies and early retirements (3rd
column). It should be noted that the costs of ill health retirement are met by HSC
pension scheme and not included in HSC Accounts.
Note 3.5 Staff Benefits.
1
This relates to non-pay benefits which are not attributable to individual employees, e.g.
group membership of a club. If there are no staff benefits, state that there are no staff
benefits.
2
Where non pay expenditure including, for instance, gifts of other than token value,
employee entertainment or social events and the provision of amenities for the use of all
employees, is linked to incentive schemes and exceeds £100,000 in the year, the details of
the amount and type of expenditure should be stated.
3
Where total non-pay expenditure is less than £100,000 no disclosure is required.
Note 3.6 HSC body Management Costs
1
Management Costs – for HSC Trusts The definition to be used is based on that
circulated under HSC (THR) 2/98 and HSC (THR) 5/98 by Organisations and Human
Resources Directorate of the Department, as amended by HSC (THR) 2/99.
2
Management Costs – for HSCB – Management costs for the HSC Board should also be
calculated on the same basis as previously calculated.
12
Notes to the Financial Statements
3
Total income is calculated as RRL per note 25.1, excluding the non cash RRL provided
for the in year charge in respect of the clinical negligence provision plus income included
at notes Note 5.1 to 5.3 less interest receivable.
4
There is no requirement for Agencies and NDPB’s to provide management costs. Due to
the size of these bodies it will continue that only the HSC Board and HSC Trusts which
will provide these figures.
13
Notes to the Financial Statements
For HSC TRUSTS
Note 4: Other Operating Expenses
Entities shall analyse the total of other operating expenses, as recorded in the Statement of
Comprehensive Net Expenditure. Entities shall also disclose expenditure in respect of the
service charges under PFI and other service concession arrangement contracts, rental under
operating leases, interest charges, research and development expenditure, the individual
components of non-cash items, and an analysis of other significant expenditure items as
detailed below:
1.
Purchase of care from non HSC bodies - This includes health care and personal social
services purchased from the private and voluntary sectors.
2.
Revenue grants to voluntary organisations- This is revenue grants paid to voluntary
organisations (includes Surestart) during the financial year.
3.
Capital grants to voluntary organisations- This is amount of capital grants paid to
voluntary organisations during the financial year.
4.
Personal Social Services. This will include all expenditure on the Director of Social
Services, supporting professional staff together with their personal support staff (e.g. personal
secretaries).
5.
Recharges from other HSC organisations. This includes services bought in (recharged)
from other Organisations, etc. The services are other operating income to the selling
organisation.
6.
Supplies and Services - Clinical. This is the total revenue expenditure of the HSC body
on supplies and services for clinical use, including maintenance contracts.
Examples include:
 occupational and industrial therapy;
 drugs;
 medical gases;
 dressings,
 medical and surgical equipment;
 X-ray film and equipment;
 patient's appliances;
 laboratory equipment and instruments;
 fluoridation payments to water authorities, and
 blood products and fresh blood;
14
Notes to the Financial Statements
7.
Supplies and Services - General. This is the HSC bodies total revenue expenditure on
such things as:
 cleaning equipment, materials and external contracts;
 provisions; catering etc
 contract catering;
 staff uniforms and clothing (including contracts for making up etc);
 patient's clothing;
 laundry equipment, materials and external contracts;
 hardware and crockery, and
 bedding and linen (both disposable and non-disposable).
8.
Establishment. This is the HSC bodies total revenue expenditure on administrative
expenses including:
 printing and stationery,
 postage, telephones;
 advertising, travel;
 subsistence;
 removal expenses;
 staff cars.
9.
Transport. This is the HSC bodies total revenue expenditure on:
 Vehicle insurance;
 fuel and oil;
 maintenance equipment, materials and external contracts;
 hire of transport,
 hospital car services,
 and miscellaneous transport expenses.
10.
Premises. This is the bodies total revenue expenditure on:
 coal;
 oil;
 electricity;
 gas;
 other fuel;
 water and sewerage;
 general supplies and services;
 furniture;
 furnishings and fittings;
 office equipment;
 computer hardware and software*;
 data processing services;
15
Notes to the Financial Statements





rates;
rent;
property insurance;
engineering and building maintenance, and
other miscellaneous.
*Where not capitalised in accordance with the DHSSPS Capital Accounting Manual.
Bad Debts - This is the total of any bad debts written off in the year (previously
unprovided for)
OTHER ORGANISATIONS
Should use the above where applicable, other headings should be added where
expenditure is significant.
HSCB
Rather than classifying costs as operating costs HSCB costs are analysed into 4 smaller
headings; 4.1 Commissioning, 4.2 operating expenses, 4.3 Non cash.
Note 4.1 Commissioning
 GMS, FDS, FPS, FOS – Expenditure for FHS, excluding salary costs and non cash.
 NHS Trusts – Expenditure incurred with NHS Trusts, excludes HSC and ROI Trusts
 Other providers of healthcare and PSS- Includes revenue grants to voluntary bodies
 Capital grants to voluntary bodies – This is capital grants to voluntary organisations.
 Misc – any other Commissioning exp not included above.
Note 4.2 – Operating expenses – As for Trusts; HSCB can use this analysis if applicable
or can analyse according to significant areas of spend. If expenditure is not material in any
heading could be disclosed within miscellaneous.
Note 4.3 - Non cash items – see below – as for Trusts
The following headings are mandatory for ALL Organisations;
11.
Rentals under operating leases This is the total amount charged to operating expenses in
respect of operating leases.
12.
Interest Charges This is the total interest paid and payable in respect of the reporting year
on:
 IBD
 Further Government borrowing,
 Other borrowing, e.g. PFI and other service concession arrangements
16
Notes to the Financial Statements



Finance leases
Late payment of commercial debt
Any Other Interest payments
PFI and other service concession arrangements service charges – This is the amount
in respect of the service element (excludes interest – shown above) of both on and off
balance sheet PFI and other service concession arrangements schemes
13.
Miscellaneous – This includes any expenditure that has not been analysed in the other
headings, in 2010/11 it will include the cost of audit fees associated with the National
Fraud Initiative which will be invoiced by NIAO.
Any material items of miscellaneous expenditure should be supported by a separate note
detailing their nature and amount.
Non Cash items
14.
Depreciation. This is the total charged to the Statement of Comprehensive Net
Expenditure in respect of the depreciation of (purchased and donated) PPE and should
equal the depreciation per the PPE notes.
15.
Amortisation. This is the total charged to the Statement of Comprehensive Net
Expenditure in respect of the amortisation of any intangible (purchased and donated)
assets, such as deferred development expenditure (amortisation of deferred assets
arising from PFI and other service concession arrangements schemes should be shown
under the ‘other’ heading). This should equal the amortisation per the intangible note
16.
Impairments. This involves impairment losses in respect of tangible & intangible
purchased and donated assets due to a clear consumption of economic benefits. This will
also include impairments due to price changes where there is no corresponding positive
balance on the revaluation reserve under IAS 36. Please note in 2010-2011 treatment of
impairments as a result of economic consumption are now directly charged against Net
expenditure. It is no longer permitted to offset such impairments against revaluation
reserves.
Impairments in operating expenses plus impairments in revaluation reserve =
impairments in property, plant & equipment and intangible asset note
17.
(Profit) on disposal of property, plant & equipment assets (excluding profit on land).
The profit is the difference between the sale proceeds (after disposal costs) and the
amount at which the asset is recorded i.e. the net book value based on the revalued or
indexed amount. This can be recognized as a credit to expense items (depreciation) –
17
Notes to the Financial Statements
not within income, if the depreciation charge is considered inaccurate. A profit on sale
of land is recognized as income.
18.
Loss on disposal of property, plant & equipment (including loss on land). The loss is
the difference between the sale proceeds (after disposal costs) and the amount at which
the asset is recorded i.e. the net book value based on the revalued or indexed amount,
not the historic cost. The loss is recorded as an expense within the Statement of
Comprehensive Net Expenditure.
19.
Provisions provided for in year – This equals arising and write back of all provisions
(including clinical negligence) in the year and can be linked to the provisions note.
20.
Unwinding of discount on provisions – This equals the unwinding of discount for all
provisions and can be linked to the provisions note.
21.
Audit Remuneration. This is the notional amount of fees payable to the external auditor
for the reporting year in respect of fees for auditing the annual accounts and notional fees
for any work other than auditing the accounts and returns.
This will not include any fees that are directly invoiced by NIAO for e.g. for audit work
associated with the National Fraud initiative as this will be invoiced by NIAO and
included within miscellaneous expenses as noted above.
To note Cost of Capital is no longer applicable and prior year will be restated to nil.
Therefore this line is no longer relevant.
18
Notes to the Financial Statements
Note 5: Income
1. All reporting entities should provide an analysis of operating income, together with
commentary where appropriate, that enables users of the financial statements to
understand the nature of the entity’s operating income.
2. As from 1st April 08 (1 April 09 for HSCB,BSO,PCC,PHA), any income classified as
Grant in Aid is excluded from the Income note and treated as financing and credited to the
General Fund.
Refer to circular HSS (F) 11/2009 for examples of income that are reflected within the
Income note. Please refer to this circular for funding to be treated as Grant in Aid and
processed through reserves and therefore NOT reflected within this note.
This note therefore excludes SBA income, NIMDTA, SUMDE, DHSSPS funding (cash
draws) which are classified as Grant in aid and treated as financing and credited to the
General Fund.
3. From 1st April 2010, cash required to cover the cost of clinical negligence settlements will
be treated as grant in aid and therefore excluded from the Income note and treated as
financing and credited to the General Fund. Circular HSC(F) 58/2010, issued on 22nd
December 2010 refers.
Note 5.1 Income from Activities (excluding Grant in Aid)
1. This note discloses Non Grant in Aid income of HSC bodies from their main HSC
functions. All income normally relates to continuing activities.
The headings below apply primarily for HSC Trusts. These can be used by all HSC
bodies if appropriate. Other headings can be added with the agreement of Financial
Accounting Unit in the Department. Headings must be included for all significant
areas of income >£1m
HSC TRUSTS
1. GB/Republic of Ireland Health Authorities. This entry records the amount received or
receivable from other GB or Republic of Ireland Health Authorities.
2. HSC bodies. This entry comprises income received and receivable from other HSC
bodies for contracted services (except common services) provided by the Trust.
19
Notes to the Financial Statements
3. Non-HSC:

Private Patients. This entry records all income received and receivable from private
patients.

Other. This entry records all income received and receivable for the provision of
patient care etc, from agencies other than the Department, UK NHS bodies or UK
private patient organisations. This includes road traffic act income and amenity total
income.
4. Clients Contributions. This includes income received and receivable from clients
receiving personal social services e.g. residential care.
5. HSCBThe headings below have been agreed for HSCB to replace above



Income from Dept of Education – This is income for Surestart
CAWT – Cooperation and working together
Family Health Services Receipts – FHS receipts and recoveries re medical, dental,
pharmaceutical and ophthalmic services
Note 5.2: Other Operating Income – all bodies (Excluding Grant in aid)
1. This represents the income arising out of the HSC Bodies other day-to-day operational
activities. Organisations should use the headings below where applicable. New headings
to be added for any significant areas of income >£1m.
2. Income from non patient services - This entry should include income for services that
do not include episodes of patient care. (Netting off of such items against expenditure for
the service should be kept to a minimum.) Examples of such items could include the
manufacture and sale of drugs; general services and common services charges (such as for
the use of a laundry managed by the HSC body), and income generation receipts
3. Charitable and other Contributions to Expenditure. This entry is the total of all
revenue grants and monies received from any source in support of the activities of the
HSC Body. Such activities may include research and development grants, education
research and training grants from third parties. Material items should be disclosed
separately.
4. Seconded Staff - This should include income received in respect of staff seconded to
other bodies. This should equate to the seconded staff recoveries reflected within the
salaries and wages note.
20
Notes to the Financial Statements
5. Profit on disposal of land. The profit on sale of land is the difference between the sale
proceeds (after deducting any sales expenses) and the amount at which the asset is
recorded i.e. the net book value based on the revalued or indexed amount, not the
historic cost.
6. Interest Receivable. This is no longer relevant
7. Other Income. This covers any other income not chargeable to the above headings.
Material amounts must be specified as appropriate.
Note 5.3 Transfers from reserves for donated property, plant and equipment and
intangibles:
1. Donated asset reserve transfer for Impairment. This entry is the amount transferred
from the donation reserve to the Statement of Comprehensive Net Expenditure Account in
respect of the impairment of donated assets. This has no impact on the Statement of
Comprehensive Net Expenditure because it is matched by the charge in note 4, included
within the impairment figure.
2. Donated asset reserve transfer for Depreciation. This entry is the amount transferred
from the donation reserve to the Statement of Comprehensive Net Expenditure in respect
of the depreciation of donated assets. The current year figure is linked to Donated Assets
note. This has no impact on the Statement of Comprehensive Net Expenditure because it
is matched by the charge in note 4, included within the depreciation figure.
FOR HSCB, the following may also be listed under Other Income;
 Accommodation- This is accommodation income previously shown in note 2.5
 Canteen- This is income from canteen , previously shown in note 2.5
5.4 Reimbursements receivable in respect of provisions
1. Movements in reimbursable income from Clinical Negligence Central Fund - This is no
longer applicable from 2010/11 onwards as arrangements for funding clinical negligence
has been revised (circular HSC(F) 58/2010 refers). This line has been included in excel
spreadsheet for ease of reference in making the prior year adjustment but should not be
included in the final accounts as it should have a nil balance. Prior year 2009-10 will be
restated to nil. Up to 2009/2010, this line was used to disclose the movement in the
amount receivable from the Central Fund. It was equal to the arising, discount and
reversed unused per the provisions note.
21
Notes to the Financial Statements
Note 6.1- 6.4: Property, Plant & Equipment (PPE) (Purchased and Donated)
1.
The purpose of this note is to identify by category the property, plant & equipment assets
held by the HSC Body (including those held under finance leasing arrangements), and the
movements in the value of property, plant & equipment assets during the reporting year.
The note is split into two parts; Purchased Assets and Donated Assets.
2.
IAS 16 requires the full disclosure of the comparative PPE note, therefore note 6.1 is for
current year (purchased) PPE, 6.2 for prior year (purchased) PPE, whilst 6.3 for current
year (donated) PPE and 6.4 for prior year (donated) PPE.
3.
Assets should be valued in accordance with the Capital Accounting Manual updated for
any IFRS changes. Where changes to the value of existing non-donated [also described as
purchased] assets are recorded as a result of indexation or revaluation, corresponding
entries should be made to the revaluation reserve. HSC bodies should note that assets in
the course of construction are not subject to indexation.
4.
On disposal of an asset, the profit or loss should be taken to the Statement of
Comprehensive Net Expenditure Account for the reporting period.
5.
Categories of asset Land – this includes land underlying and land associated with buildings,
 Buildings (excluding dwellings) – hospitals, office accommodation and storage
facilities fall into this category.
 Dwellings – buildings used primarily or entirely as residences, including any associated
structures such as garages and parking areas. Nurses’ hostels are to be included here.
Temporary accommodation (e.g. for staff working shifts) is not included, nor is any
accommodation situated in a hospital where the main function of the building is a
hospital. Accommodation (even self-contained) for patients should be considered as
hospital buildings and so excluded from the “dwellings” category.
 Assets under construction – This category includes assets under construction and is
used for mainly buildings or machinery where cost has been incurred in commencing
the asset and it is not yet available for use.
 Plant and Machinery (Equipment) – This category includes all medical equipment.
Plant is taken to mean mobile or other heavy machinery that is no longer integral to a
building.
22
Notes to the Financial Statements
 Transport Equipment - This category includes all transport equipment including motor
vehicles.
 Information Technology (IT) – this includes hardware used for processing data and
communications.
 Furniture and fittings – this includes furniture and office fittings where these have
been capitalised as having a value over £5,000 of form a “grouped asset” as defined in
the Capital Accounting Manual. Also, the initial costs of setting-up (equipping) a new
building or refurbished building will be capitalised here.
It is now compulsory for HSC bodies to use these categories.
6.
The changes between the opening and closing net book value are given for each category
of asset. For each category total amounts should be given of additions, indexation,
revaluation and disposals. Depreciation should be in accordance with ‘The Capital
Accounting Manual’. Note that disposals are recorded at book value.
7.
Finance Leases/Hire Purchase - HSC bodies should identify the net book value of assets
held under such arrangements for each of the categories of assets shown above as at
31 March of the reporting year and previous year. The total amount of depreciation
charged to the Statement of Comprehensive Net Expenditure in respect of such assets for
the reporting year should be shown together with a comparative figure for the previous
year.
8.
Entities to include a note giving names and qualifications of the valuers of any
assets, what assets they valued and date on which they were value. The note should
also state that PPE are valued using indices (if approp).
23
Notes to the Financial Statements
Note 7.1 to 7.4: Intangible Assets (Purchased & Donated)
1. The purpose of this note is to identify by category the intangible assets held by the
Organisation, and the movements in the value of intangible assets during the reporting
year. The note is split into two parts; Purchased Assets and Donated Assets.
IAS 16 requires the full disclosure of the comparative intangible note, therefore note 7.1 is
for current year (purchased) intangibles, 7.2 for prior year (purchased), whilst 7.3 for
current year (donated) intangibles and 7.4 for prior year (donated) intangibles.
2. Categories of intangible asset are those with a life of more than 1 year i.e.



Software licenses (or any other licenses) – e.g. the right to use software
owned by 3rd parties, split between purchased intangible assets and donated
intangible assets.
Computer software – owned software either developed in house or by 3rd
parties (but not s/w licenses), split between purchased and donated.
Websites
Development expenditure. This would include AUC for intangibles
3. Goodwill is also included in the FReM, but this is not relevant to the HSC as goodwill
(in accounting terms) cannot be purchased and is not internally generated in the HSC.
4. Intangible assets held for operational use are valued at historical cost, unless a readily
ascertainable market value exists for the particular asset. As there is no active market
intangible assets are maintained at historical cost.
5. Intellectual property and licenses to use software could arise as intangible assets. In
these cases IAS 38 applies. If IAS 38 applies and the life is considered finite
amortisation should take place over the estimated useful life.
24
Notes to the Financial Statements
Note 8: Financial Instruments
HSC bodies should refer to chapter 9 of 2009-10 FReM for detailed guidance. Per the FReM
pro forma financial assets are investments and PDC is not an equity instrument and NIAS
should present as a form of financing.
25
Notes to the Financial Statements
Note 9: Assets held for sale
This is a new requirement per IFRS 5 Non current assets held for sale comprise non current assets
that are held for resale rather than continuing use in the business.
Assets held for sale should be analysed between land and buildings
1. Cost at 1 April – This is the cost figure brought forward from 31 March in previous year
(for those assets that have transferred from non current assets to assets classified as held
for sale).
2. Transfers from (disposals) – this is the amount relating to the cost element moving from
non current assets to assets classified as held for sale.
Depreciation
3. At 1 April - This is the depreciation figure brought forward from 31 March in previous
year relating to those assets that have transferred from non current assets to assets
classified as held for sale.
4. Transfers from (Disposals) – include here the depreciation in year up until date decision
is made that it is no longer a non current asset.
When a non current asset is classified as held for sale the factors or circumstances of the sale must
be disclosed along with the expected timing of sale.
Once a non current asset is classified as held for sale it is no longer depreciated.
26
Notes to the Financial Statements
Note 10: Impairments
This is a new note as a result of IFRS. Entities are required to disclose the total impairment charge
for the year showing how much has been charged direct to the Statement of Comprehensive Net
Expenditure and how much has been taken through to the revaluation reserve.
This should be analysed between PPE and intangibles, and by purchased and donated for current
and prior year
Note 11: Inventories
1.
IAS 2 applies, as interpreted, to all reporting entities covered by this Manual
2.
The objective of IAS 2 is to ensure that inventories are valued at the lower of cost and
net realizable value and that their sub-classification in the Statement of Financial
Position or in the notes to the financial statements indicates the amounts held in each of
the main categories in the standard statement of financial position formats
3.
This note represents the total value of stocks and work-in-progress. Part completed
contracts for the provision of healthcare services do not represent work in progress but
may be accrued as receivables. This note provides an analysis of physical stocks held by
the HSC body at the Balance Sheet date.
4.
The figures should include:
 directly consumable items;
 any products in intermediate stages of completion where processing or manufacture of
such items is carried out by the HSC body, and
 finished goods.
Inventories should be listed by classification for e.g.; clinical, general, other.
5.
The figures should exclude:
 the provision of health care services under partially completed contracts, and
 assets in the course of construction
HSC bodies should ensure that any changes in the designation of items of stock comply with
IAS 2. If a HSC body changes the treatment of certain items of stock (then it should make a
prior period adjustment in accordance with IAS 8 if the change is material).
27
Notes to the Financial Statements
Note 12: Trade Receivables
1. The purpose of this note is to identify the HSC bodies receivables and the sector to which
they relate. The note is in two sections for amounts due in less than one year and more
than one year.
2. Receivables should be analysed into the following categories;
Trade and other receivables:





Trade receivables for care e.g. NHS
Deposits and advances e.g. franking machine
Clinical Negligence Central Fund; CN receivable < 1 year PLUS CN receivable > 1
year = CN provision. This is no longer applicable from 2010/11, due to revised
funding arrangements (Circular HSC(F) 57/2010 refers) This has only been kept in
excel spreadsheet to make prior year adjustment easier. This line will be nil for both
current year and prior year. This line should not appear in final accounts.
Central Fund reimbursements receivable –with BSO for payments made by HSCB /
Trusts seeking reimbursements from BSO for clin neg This is no longer applicable
from 2010/11, due to revised funding arrangements( Circular HSC(F) 57/2010
refers) This has only been kept in excel spreadsheet to make prior year adjustment
easier. This line will be nil for both current year and prior year. This line should not
appear in final accounts.
Other receivables e.g. RTA, payments receivable, VAT, salary overpayments,
seconded staff,
Other current assets


Other prepayments and accrued income including pension prepayments
Current part of PFI and other service concession arrangement contracts receivable
Significant receivable balances should be identified separately. The above is the minimum
disclosure.
3. Receivable balances should be net of the provision made for bad debts and should
correspond to the amount shown on the face of the Statement of Financial Position as
"receivables". The provision for bad debts should be disclosed separately.
4. HSC prepayments and income accruals should be included under HSC receivables. HSC
receivable balances should be agreed with the bodies concerned.
5. If applicable receivables relating to capital should be separately identified.
28
Notes to the Financial Statements
6. Any amounts recoverable after more than one year should be separately identified within
note 12 and under the appropriate category of receivable noted above, these will be shown
under Non Current Assets on the face of the Statement of Financial Position.
Note 12.1: Intra-government balances (Receivables)
Intra-government balances are defined as balances between the reporting entity and other bodies
within the boundary set for the whole of government accounts (which is basically all Government
bodies in the UK). (See www.wga.gov.uk)
1. The disclosure should be analysed between; ( new change)





Balances with other central government bodies i.e. DHSSPS, BSO, Board, Other
Central Gov Depts, NDPB’s, Agencies;
Balances with local Authorities for e.g. Councils
Balances with NHS/HSC Trusts
Balances with public corporations and trading funds
Balances with bodies external to government
Where any HSC body is in doubt as to the categorisation of a body, please contact Financial
Accounting Unit.
Please note that the total of Note 12.1 should agree to the total of Note 12
29
Notes to the Financial Statements
Note 13: Cash and Cash Equivalents
1. This includes the total value of the HSC bodies short term investments. (If there is an
overdrawn amount this should be shown as a minus figure).
2. Short term investments have a maturity of less than one year at the date of purchase.
Long-term investments can be considered to be those which are intended to be retained for
more than one year from the balance sheet date and are included in note 8 financial assets.
3. Valuation should be the lower of purchase price or net realisable value.
4. If the investments are listed the market value should be shown if this differs from the
valuation in the accounts.
30
Notes to the Financial Statements
Note 14: Payables
1. The purpose of this note is to provide an analysis of the payables of the HSC body as at
the Balance Sheet (SoFP) date. The note is in two sections for amounts due in less than
one year and more than one year.
2. Payables should be analysed into the following categories:
 Other Taxation and Social Security.
 Bank Overdrafts. This is the total value of all overdrafts held by the HSC body at
the Balance Sheet (SoFP) date.










Trade Revenue Payables. (For HSCB to include FHS, including GMS,
Voluntaries, Non HSC Trusts)
Trade Capital Payables. (for HSCB to include GP ICT)
Payroll payables- including accrued salaries and wages, for e.g. AFC, employee
benefit accrual
Clinical Negligence. This is the accrual for clinical negligence and will include
clinical negligence settlements agreed but unpaid at the year end. (not applicable
from 2009/10, due to revised funding arrangements Circular HSC(F)
57/2010 refers)
Accruals and deferred income. Excluding sals & wages accruals. This will
include payments received on account,
BSO payables - for support services
Other payables. This represents all payables not included under other headings,
including other payables not relating to care, for e.g. HSC Trusts, DHSSPS, to
include pensions relating to former directors/other staff.
Current part of finance leases. This represents the capital element only.
Current part of long term loans.
Current part of imputed finance lease of on balance sheet (SoFP) PFI and other
service concession arrangements contracts.
Significant payable balances should be identified separately. The above is the minimum
disclosure.
Payables: Amounts falling due after more than one year.
3. Finance Leases -Obligations under finance leases should be identified separately. An
analysis of future obligations under finance leases is presented in the Commitments Note.
4. Imputed finance lease of on balance sheet (SoFP) PFI and other service concession
arrangements contracts.
31
Notes to the Financial Statements
5. Long term loans. This is the total value of loans repayable after 12 months from the
balance sheet (SoFP) date. It excludes amounts repayable within one year. The total
amount repayable after more than one year plus the amount repayable within one year
above must equal the total loans analysed in Loans note.
Note 14.1: Intra-government balances (Payables)
1. Intra-government balances are defined as balances between the reporting entity and other
bodies within the boundary set for the whole of government accounts. (See
www.wga.gov.uk)
2. The disclosure should be analysed between; ( new change)





Balances with other central government bodies i.e. DHSSPS, BSO, Board, Other
Central Gov Depts, NDPB’s, Agencies;
Balances with local Authorities for e.g. Councils
Balances with NHS/HSC Trusts
Balances with public corporations and trading funds
Balances with bodies external to government
Where any HSC body is in doubt as to the categorisation of a body, please contact Financial
Accounting Unit.
Please note that the total of Note 14.1 should agree to the total of Note 14.
Note 14.2: Loans
1. This note analyses the loans and relates to principal only and excludes interest.
2. The note analyses loans by source and by period outstanding. It is necessary to calculate
the principal outstanding over the various time periods.
3. This note is in three sections. The total of this note must equal the total of ‘current
instalments due on loans’ from ‘payables amounts falling due within one year’ and ‘long
term loans’ from ‘payables amounts falling due after more than one year’.
32
Notes to the Financial Statements
Note 15.1: Public Sector Payment Policy for HSC organisations - Measure of Compliance
1.
Departmental guidance soon to be issued (in the form of a circular) will provide
clarification on reporting compliance with Prompt Payment policy. HSC organisations are
obliged to ensure that suppliers of goods and services are paid as promptly as possible. As
such, HSC bodies should comply with the Better Payments Practice Code, as set out in
Annex
4.6
of
Managing
Public
Money
http://www.afmdni.gov.uk/pubs/MPMNI/Managing_Public_Money_NI_November_2010.DOC. and the
Late Payment of Commercial Debts (Interest) Act 1988 (see paragraphs re note 15.2
below).
Payment is regarded as late if made outside the agreed terms, or, where no terms are
agreed, 30 days after receipt of a valid invoice or receipt of goods, whichever is later.
Any expenditure made outside these terms should be exceptional and noted in accounts.
The target is to pay all non HSC trade payables within 30 calendar days of receipt of
goods or a valid invoice (whichever is later) unless other payment terms have been agreed.
Suppliers must therefore receive payment by Bank Automated Credit System (BACS)
within 30 days (or a cheque issued and dated within that period)
2.
A standard format for disclosure is given in the pro forma notes to the accounts.
3.
Total bills paid. This is the total of non-HSC trade payable invoices paid during the year
(by number and value).
4.
Total bills paid within 30 days or under agreed terms. This is the total of non-HSC
trade payable invoices paid during the year within the target period.
5.
Percentage of bills paid within 30 days or under agreed terms. This is the total bills
paid within target expressed as a percentage of the total bills paid during the year.
Decimal places are not required. (Round to nearest whole number).
It is mandatory to complete this note on the basis of total bills paid.
Note 15.2: The Late Payment of Commercial Debts Regulations 2002
1. Circular HSC(F) 1/99 advised HSC bodies of the implications of the Late Payment of
Commercial Debts (Interest) Act 1998, which at the time allowed businesses with fewer
than 50 employees to claim interest on late payment of debt. The late payment of
Commercial debt regulation 2002 extended this so that all businesses (including public
sector) could claim late interest on late payment (no further circular issued).
33
Notes to the Financial Statements
2. 15.2 relates to the above legislation which allows businesses to claim interest from public
sector organisations on debts incurred outside agreed terms or 30 days after receipt of a
valid invoice.
3. The purpose of this note is to disclose the amount included within Interest Payable arising
from claims made by businesses under this legislation.
4. The legislation can be summarised as follows:
5. Businesses may claim interest from public sector organisations on the late payment of
debts at a rate of 8% above the Bank of England base rate at 31 December (for claims
from 1 January to 30 June) and bank of England base rate at 30 June (for claims for period
1 July to 31 December).
6. In addition, a business may claim compensation for debt recovery costs per invoice of.
Up to £999.99 (including VAT) £40
£1,000 to £9,999.99 (including VAT) £70
£10,000 or more (including VAT) £100
7. Payment of a commercial debt is deemed to be late when it is received after the expiry of
the contractually agreed credit period, or the credit period in accordance with trade custom
and practice, or in the course of dealing between the parties, or the default period defined
in the legislation.
8. Where no credit period is defined in a contract, or no contract exists, the Act sets a default
period of 30 days from delivery (i.e. receipt) of invoice for payment or of the
goods/services, whichever is the later. (This is consistent with the prompt payment code.)
9. Circular HSC (F) 53/2010 issued on 16 November 2010 advises that the interest and/ or
compensation payments should be reflected within the losses note as fruitless payments,
as the payment should have been avoided by making the payment in accordance with the
suppliers’ terms or the default period of 30 days. This is now separately identified within
the losses note. The fact that these payments are included on the losses note should be
referred to at note 15.2 below the total amount i.e. the note will include the following
narrative “This is also reflected as a fruitless payment in note 26”.
34
Notes to the Financial Statements
Note 16: Provisions for Liabilities and Charges
1. This note analyses changes in the provisions for liabilities and charges as required by
IAS37. The figures must be analysed over the column headings shown and between
‘provided in year’, ‘utilised during the year’, ‘not required written back’ and ‘unwinding
of discount’.
Provisions must be shown gross. Any amount expected in reimbursement against a
provision (and included in receivables) should be disclosed after the table.
2. Provided in year. This relates to increases to existing provisions or new provisions.
Gross amounts taken to the Statement of Comprehensive Net Expenditure for the present
year for all provisions.
3. Utilised during the year. This relates to reductions in provisions during the current year
due to:
 payments during the year against a provision
 payments becoming sufficiently certain to transfer to payables
 amounts agreed during the year as payable but unpaid at year end. These
outstanding amounts are transferred from provisions to payables.
Utilised are accounted for through the Statement of Financial Position only and not
through the Statement of Comprehensive Net Expenditure.
4. Not required written back. This is used for the write back of a provision or part of a
provision which is no longer required.
5. Unwinding of discount. The increases in provisions due to the unwinding of discount as
the settlement date gets nearer are included here.
The net total of lines 2, 4, and 5 above for all provisions, are the amount charged to the
Statement of Comprehensive Net Expenditure for the year and agree with the operating
expenses note.
6. Provisions not provided for - RRL cover for provisions, particularly clinical negligence
– non cash RRL cover will be provided to cover the cost of the net increase in provisions.
In order to ensure that the correct level of RRL cover is provided, where a settlement is
made in excess of the value included within the provisions, all organisations should
ensure that they process the difference by first creating the relevant additional provision
within the Statement of Financial Position. Otherwise the RRL cover granted will not be
sufficient to cover the total costs arising, because settlements will have been created as
cash costs directly into the Statement of Comprehensive Expenditure for which there will
be no RRL cover.
35
Notes to the Financial Statements
7. Additional disclosure for RPA utilised - The RPA utilised is analysed between early
retirement and redundancy costs. Pension Costs for early retirement reflecting the single
lump sum to buy over the full liability are the capitalised cost.
8. Only RPA provision should go in the RPA column, other staff related provision should be
included within other or have individual column if significant.
9. As per Circular HSC(F) 57/2010 estimates provided by DLS in all areas of law including
clinical negligence, employers liability, public liability and employment law all cover the
following cost elements – damages, plaintiffs solicitors and defence costs (i.e. counsel and
expert fees) but not the cost of the services provided by DLS.
Note 16: (Cont’d): Expected Timing of Cash Flows
Following the provisions table, there must be a disclosure of the expected timing of cash
flows resulting from the provisions. These should be analysed as follows ‘within 5 years’
and ‘6 and 10 years’ and ‘thereafter’. The total should equal the provision at 31 March
xxxx.
Also for each class of provision, the following must be disclosed:

an indication of the uncertainties about the timings and amounts;

any major assumptions made concerning future events; and

the amount of any expected reimbursements in respect of provisions.
36
Notes to the Financial Statements
Note 17: Capital Commitments
1.
The purpose of this note is to identify amounts committed in relation to future capital
developments. Planned developments should be categorised as "contracted" where there
is a contractual obligation to proceed. There is no need to show commitments in respect
of uncompleted schemes which would previously have been shown under the heading
"Authorised by the Board, but not contracted" where the Organisation Board has approved
the scheme but no contractual obligation was entered into by the end of the financial year.
2.
The estimated cost of the commitment should be shown. With the exception of the first
year of operation comparative figures relating to the previous year should also be shown.
3.
Organisations should provide a narrative for committed material projects indicating the
likely timescale of the project and the method of finance.
37
Notes to the Financial Statements
Note 18: Leases Commitments
This note shows the commitments under leases analysed between operating leases and
finance leases.
Note 18.1 Operating leases
1. In accordance with IAS 17, lessors must disclose the following;
(a) the future minimum lease payments under non-cancellable operating leases in the
aggregate and for each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years;
(iii) later than five years.
Note 18.2 (first table) Finance Leases
1. In accordance with IAS 17, Lessees shall make the following disclosures;
(a) for each class of asset the carrying amount at the end of the reporting period.
(b) Organisations must analyse future lease obligations between amounts due within one
year, between one and five years and after 5 years. The gross payments should be stated
with a deduction for future interest.
2. Within one/between one and five/after five years. Minimum lease payments should be
analysed over the time periods shown in the pro forma note. In most cases, the
payments will be those given in a standard leasing agreement. Where an agreement
provides for possible variations in the periodic payments, then the values are the
minima payable under the lease.
Note 18.2 (second table) Present Value of obligations under finance leases
1. Organisations must analyse the present value of the net obligation between amounts due
within one year, between one and five years and after 5 years, for each class of asset. This
table shows just the capital element being repaid, with the interest/discount element
excluded, representing the present liability relating to the asset. The total should agree to
the total of the present value of obligations in the table described above.
Lessor obligations
2. Under IAS 17 para 56 HSC bodies must disclose the same level of information about
lessor activities (e.g. Health Centres if a lease agreement exists, leased cars, farm land,
mobile phone masts etc.) as disclosed in Note 18.1 for commitments under leases taken
out by the Trust. Include similar disclosure as for operating leases.
38
Notes to the Financial Statements
Note 19: Commitments under PFI and other service concession arrangements
This note is in two parts. The first analyses PFI and other service concession arrangement
schemes which have been deemed to be off-balance sheet (SoFP) and the second analyses the
‘service’ element of those schemes deemed to be on balance sheet (SoFP). Organisations may
have schemes under both headings.
Note 19.1: PFI and other service concession arrangement schemes deemed to be off-balance
sheet (SoFP)
For each relevant PFI contract and other service concession arrangement, this note should
 State what the contract is for and note that the property is not an asset of the (name
of org)
 the estimated capital value of the project
 give details of any prepayments, revisionary interests etc and how they are
accounted for
 disclose the total payments for off balance sheet (SoFP) service concessions
broken down by payment period
Where a PFI and other service concession arrangement transaction does not result in any items
being recognised in the balance sheet (SoFP), the transaction may give rise to guarantees,
commitments or other rights and obligations which, although not sufficient to require recognition
of an asset or liability, requires disclosure in order that the financial statements give a true and fair
view.
Note 19.2: ‘Service’ element of PFI and other service concession arrangement schemes
deemed to be on-balance sheet (SoFP)
For each relevant PFI contract and other service concession arrangement, this note should
 note what the contract is for and note that under IFRIC 12 the asset is treated as an asset of
the Organisation.
 Note that the substance of the contract is that the Organisation has a finance lease and that
payments comprise 2 elements- imputed finance lease charges, and service charges and
provide details of the imputed finance lease charges in the first table at note 19.2. This
discloses the cost of repaying both the capital element of the lease and the interest i.e.
what will hit revenue. The interest element is then removed to reconcile with the second
table (described below).
Present Value of Obligations under on balance sheet (SoFP) service concession
arrangements (second table at note 19.2).
The net present values should be disclosed between amounts due within one year, between one
and five years and after 5 years This table shows the capital element being repaid, with the
interest/ discount element excluded, representing the present liability relating to the asset. The
total should agree to the total of the present value of obligations in the table described above.
39
Notes to the Financial Statements
Note 19.3 Charge to the Statement of Comprehensive Net Expenditure and future
commitments
This is the amount charged to operating expenses in respect of off balance sheet (SoFP) PFI and
other service concession arrangement transactions and the service element of on balance sheet
(SoFP) PFI and other service concession arrangement transactions and the payments to which the
organisation is committed analysed by the period during which the commitment expires. This
effectively shows the cost to the organisation of the services being provided by the operator of the
assets and provider of the services.
40
Notes to the Financial Statements
Note 20: Other Financial Commitments
The Organisation should note its commitments into non cancellable contracts other than leases
and PFI and other service concession arrangements stating what service is being provided. The
payments to which the Organisation is committed should be analysed in note 20 by the period
during which the commitment expires.
41
Notes to the Financial Statements
Note 21: Financial Guarantees, Indemnities and Letters of Comfort
Financial instruments
1. IAS 32, 39 & IFRS 7 Financial Instruments: Disclosure, recognition and
Presentation establishes principles for presenting financial instruments as liabilities or
equity and for offsetting financial assets and financial liabilities. In the public sector
context public dividend capital is not an equity instrument and should be presented as
financing in the Statement of Financial Position.
2. The standard defines a financial instrument as a contract that gives rise to a financial asset
of one entity and a financial liability or equity instrument of another entity. A financial
asset is, mainly, an asset that is either cash, or an equity instrument of another entity, or a
contractual right to receive cash or another financial asset from another entity. Examples
include investments, loans, receivables and cash.
3. A financial liability is a liability that is, mainly a contractual obligation to deliver cash to
another entity or to exchange financial assets or liabilities on unfavourable terms.
Examples include payables and provisions that are subject to contracts
4. Because of the relationships with HSC Commissioners, and the manner in which they are
funded, financial instruments play a more limited role within Organisations in creating
risk than would apply to a non public sector body of a similar size, therefore Organisations
are not exposed to the degree of financial risk faced by business entities. Organisations
have limited powers to borrow or invest surplus funds and financial assets and liabilities
are generated by day to day operational activities rather than being held to change the risks
facing the Organisations in undertaking activities. Therefore the HSC is exposed to little
credit, liquidity or market risk.
5. Where the Organisation is exposed to risk the appropriate IFRS 7 disclosures should be
made. Disclosures should be given only where they are necessary because the
Organisation holds financial instruments that are complex or play a significant medium to
long term role in the financial risk profile of the Organisation. The headings in IFRS 7
should be used to the extent that they are relevant. Where an Organisation does not
face significant medium to long term financial risks, then it is sufficient to make a
statement to that effect, (silence is not an option).
6. IFRS 7 Financial Instruments: Disclosures requires entities to provide disclosures in
their financial statements that enable users to evaluate:

The significance of financial instruments for the entity’s financial position and
performance; and
42
Notes to the Financial Statements

The nature and extent of risks arising from the financial instruments to which the
entity is exposed during the period and at the year end and how the entities manage
those risks.
The pro forma accounts should be added to where to do so would aid the understanding of the
impact and potential impact of financial instruments.
Financial Guarantees, Indemnities and Letters of Comfort
The Organisation should note if it has entered into any quantifiable guarantees, indemnities or
provided letters of comfort. None of these is a contingent liability within the meaning of IAS 37
since the likelihood of a transfer of economic benefit in settlement is too remote. They therefore
fall to be measured following the requirements of IAS 39. The full potential costs of such
contracts must be reported. These costs are reproduced in the table at note 21.
If the HSC body has no such financial guarantees, a note should be made to this effect.
43
Notes to the Financial Statements
Note 22: Contingent Liabilities
1.
The purpose of this note is to disclose material contingent liabilities and gains where
they are not accrued or provided for in the accounts and where there is uncertainty
as to the eventual outcome. The identification and accounting treatment accorded to
such liabilities should be in accordance with IAS 37 “Accounting for Provisions,
Contingent Liabilities and Contingent Assets”.
2.
Organisations should indicate the nature of each contingency and should estimate or
state the value of the liability and should outline the grounds for uncertainty
affecting the eventual outcome.
3.
The pro forma note describes contingencies in relation to clinical negligence; other
contingencies should be disclosed in a consistent format.
4.
If there are no contingent liabilities or gains, this should be stated.
5.
The identification and accounting treatment of contingent liabilities should be in
accordance with the guidance in IAS 37.
6.
The note will disclose separately the contingent liabilities for clinical negligence.
The note separately identifies other contingencies not relating to clinical
negligence. Material amounts must be specified.
Content
7.
In all cases the disclosure should give:




8.
a brief description of the nature of the contingent liability or asset, and, where
practicable:
an estimate of the financial effect;
an indication of the uncertainties relating to the amount or timing of cash
flows; and
(contingent liabilities only) the possibility of a reimbursement.
Where any of this information is not disclosed because it is impracticable to do so,
that fact must be stated. In extremely rare cases where disclosure of the
information could be expected to seriously prejudice the position of the
Organisation, the general nature of the dispute should be disclosed, together with
the fact that, and the reason why, the usual information has not been disclosed.
44
Notes to the Financial Statements
Note 23: Related Party Transactions
Related Party Disclosures.
The purpose of this section is to comply with the requirements of IAS 24 - The objective of IAS
24 is to ensure that an entity’s financial statements contain the disclosures necessary to draw
attention to the possibility that its financial position and income and expenditure position may
have been affected by the existence of related parties and by transactions and outstanding
balances with such parties.
Interpretation of IAS 24 for the public sector context.
In applying IAS 24, entities should be aware of the following interpretations for the public
sector context:
a) for the purposes of IAS 24.9(a), the related party will be
 the names of the chairman and chief executive; and

the composition of the management board (including advisory and nonexecutive members) having authority or responsibility for directing or
controlling the major activities of the entity during the year. This means those
who influence the decisions of the entity as a whole rather than the decisions of
individual directorates or sections with the reporting entity
b) charitable NDPBs may apply the general principle of exemption from related party
disclosure in respect of trustees acting as agents of the charity, in accordance with the
parameters contained within the Charities SORP;
c) entities should give details of material transactions between the entity and individuals who
are regarded as related parties.
d) the requirement to disclose the compensation paid to management, expense allowances and
similar items paid in the ordinary course of an entity’s operations will be satisfied by the
disclosures made in the notes to the accounts and in the Remuneration Report; and
e) in considering materiality, regard should be had to the definition in IAS 1, which requires
materiality to be judged “in the surrounding circumstances”. Materiality should thus be
judged from the viewpoint of both the entity and the related party.
45
Notes to the Financial Statements
Note 24: Third Party Assets
1. Third party assets are assets for which an entity acts as custodian or trustee but in which
neither the entity nor government more generally has a direct beneficial interest. Third
party assets are not public assets, and should not be recorded in the primary financial
statements. Nor should third-party monies be held in public bank accounts. An example
would include money held on behalf of patients. These should be excluded from the
accounts.
2. In the interests of general disclosure and transparency, any third party assets should be
reported by way of note. The note should differentiate between:

third party monies and listed securities: the minimum level of numerical
disclosure required is a statement of closing balances at financial year-end. For
listed securities, this will be the total market value. Optionally, when considered
significant by the entity and at its discretion, further disclosures may be made,
including gross inflows and outflows in the year and the number and types of
securities held;

third party physical assets and unlisted securities: disclosure may be by way of
narrative note. For physical assets, the note should provide information on the
asset categories involved. Such disclosure should be sufficient to give users of the
financial statements an understanding of the extent to which third-party physical
assets and unlisted securities are held by the entity; and

in the event that third party monies are found to have been in a public bank
account at the end of an accounting year, commentary should be included in the
note on cash at bank and in hand and in the disclosures above on the amount of
third party monies held in the bank account.
46
Notes to the Financial Statements
Note 25: Financial Performance Targets
Note 25.1: Revenue Resource Limit
1. The Revenue Resource Limit (RRL) is a resource budget set by the Department
annually to cover ongoing operations and HSC organisations will be required to
contain their net expenditure within this limit and report on any variation from the
limit as set. It is a financial target to be achieved and not part of any double entry
accounting system. It is a combination of agreed funding by commissioners,
DHSSPS and other Departments.
2. Non cash RRL:







Depreciation for non donated tangible assets (as per note 4 less depreciation
on donated assets). Does not include donated asset depreciation, since this is
cost neutral in Statement of Comprehensive Net Expenditure account.
Amortisation – for non donated tangible assets (as per note 4 less
amortisation on donated assets). (Does not included amortization on donated
assets since this is cost neutral in Statement of Comprehensive Net
Expenditure account)
Impairments –This is non donated impairments only (as per note 4 less
impairments on donated assets)
Loss on disposal of property, plant and equipment (as per note 4)
Notional audit fees- this is per operating costs in note 4
All provisions – movement in all provisions (arising, not required written
back and unwinding)
Profit on disposal of property, plant and equipment (as per notes 4 and 5)
– this will reduce the RRL
3. Contracts accounted for under IFRIC 12/ Service concession agreements
If an entity has a PFI contract or other service concession arrangement which is accounted
for under IFRIC 12 such that for accounting purposes it is capital and on balance sheet
(SoFP), but for budgeting purposes it is revenue. The revenue RRL that is reflected on the
Statement of Comprehensive Net Expenditure account will need to be reduced to exclude
the budget cover.
47
Notes to the Financial Statements
Note 25.2: Capital Resource Limit
The Organisation is given a Capital Resource Limit which it is not permitted to overspend.
£’000
Gross Capital Expenditure
x
(charge against the CRL)
Receipts from sales of fixed assets
(x)
Capital Resource Limit
x
(Over)/Underspend against CRL
(x)/x
The overspend was caused by (please specify)
Contracts accounted for under IFRIC 12
If an entity has a PFI contract or other service concession arrangement which is accounted for
under IFRIC 12 such that for accounting purposes it is capital and on balance sheet (SoFP), but
for budgeting purposes it is revenue. The capital expenditure will need to be reduced by this
IFRIC 12 expenditure.
25.3: Break Even Performance
Organisations are required to break even on an annual basis – this had been defined as
containing net expenditure to within 0.25% of Revenue Resource Limits, however,
Departmental guidance soon to be issued (in the form of a Circular) will revise this and will
require all HSC bodies to contain any deficit within 0.25% of RRL and will remove the
requirement to contain any surplus within the 0.25% of RRL (although all bodies should take
all reasonable steps to ensure that any surplus on net resource outturn is kept to the minimum
practical level).
BSO/NIBTS
Given that the majority of income for BSO/NIBTS is generated through contracts with other
bodies, rather than through RRL, it is recognized that measurement of breakeven as a %age of
RRL would not be practical. Therefore it has been agreed that the calculation around the
tolerance level will be based on RRL PLUS INCOME FROM ACTIVITES (note 5.1)
At note 25.3, a full narrative explanation must be given for a material surplus or deficit for the
reporting year and for a material cumulative net surplus or deficit.
The explanation should explain why the surplus/deficit has arisen and the plans (actions and
timescales) to restore the Organisation's break even position.
48
Notes to the Financial Statements
Note 26: Analysis of Losses and Special Payments
1.
The purpose of this note is to summarise Losses and Special Payments which, under
Government Accounting procedures, are subject to specific approval and write-off
procedures.
2.
HSC(F)05/2011, issued on 24 January 2011 relates to Losses and Special Payments and
contains guidance on matters such as:
a.
b.
c.
d.
delegated limits for write-off;
classification;
application for write-off approval;
maintenance of losses register.
3.
The losses statement is a memorandum statement and does not form part of the double
entry process. The loss will be borne in the appropriate expense or income heading.
4.
The note should reflect Losses and Special Payments recognised in the year. Where an
item is recognised but approval for write off has not been obtained, a note should be
inserted at the foot of the statement.
5.
Under or overestimates should be adjusted in succeeding years.
6.
Supplementary notes may be added beneath the statement to explain the nature of any
large loss.
7.
Organisations should add to the list provided in Note 26, any other material categories of
loss (materiality being viewed in relation to total value of losses).
8.
The amounts included in category 11 for compensation claims should reflect the
settlement in the year.
9.
It should be noted that interest and compensation payments under the late Payment of
Commercial debts Regulations 2002 are classed as fruitless payments (made because
there is an obligation to make but for which no benefit is received) and as such should
be recorded as a loss. These payments should be included within the section “Nugatory
and fruitless payments” (please refer to circular HSC(F) 53/2010 which was issued on
16 November 2010).
49
Notes to the Financial Statements
Note 26.1: Special Payments
1. This note provides details of special payments during the financial year. It is expected that
in most cases this will be nil. The total amounts of all special payments (e.g. ex-gratia
payments including severance payments and payments for misadministration) must be
noted, as should gifts (resources donated to third party for no payment or a payment less
than its market value).
50
Notes to the Financial Statements
Note 27: Post Balance Sheet Events
1. The objectives of IAS 10 are to prescribe when an entity should adjust its financial
statements for events after the reporting period and what disclosures should be given
about events after the reporting period, and to require disclosure of the date when the
financial statements are authorised.
2. Organisations are required to disclose in this note to the accounts events of the type
described in IAS 10. Organisations should provide a narrative on each such event stating
its nature and giving an estimate of the financial effect or a statement that is not
practicable to make such an estimate where this is the case. IAS 10 should be consulted
for further guidance on definition and disclosure.
3. If there are no material Post Balance Sheet Events this should be stated in the note.
The following interpretations of IAS 10 for the public sector context apply:
4. The date of the Accounting Officer’s authorisation for issue of the financial statements
of the reporting entities covered by this Manual is normally the same as the date of the
Certificate and Report of the Comptroller and Auditor General. The date of
authorisation for issue must be printed on the first page of the Annual Report and
Accounts (inside the front cover), below the title of the accounts and above the date on
which the accounts were ordered to be printed (where appropriate).
The statement should read “The Accounting Officer authorised these financial statements for
issue on [insert date of issue].”
51