Blackpool Council: IFRS Conversion
Progress report April 2010
Position as at 7 May 2010
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Blackpool Council IFRS transition progress report April 2010
Introduction
From the financial year commencing 1 April 2010, all local authorities in the UK are required to produce their financial statements under International
Reporting Standards. The reason for the change is to introduce common financial reporting standards on a worldwide basis. The transition period will cover
two years and will require significant resource, in terms of time, money and effort to ensure that councils have embraced the necessary changes. It will be the
biggest change that most authorities will have undertaken for many years. To enable financial statements to be prepared under IFRS, authorities will need to
review and change existing processes and IT systems, methods of recording and collecting information and methods of reporting information.
The Council has engaged Baker Tilly to provide support for the conversion of its accounts from the current UK GAAP-based reporting to International
Financial Reporting Standards (IFRS). Baker Tilly has been the external auditor at a number of Local Government Organisations over many years and has
undertaken many IFRS conversion assignments at listed companies since the introduction of IFRS in the private sector four years ago.
The key timing drivers are;
The opening balance sheet at 1 April 2009, prepared under UK Generally Accepted Accounting Principles (GAAP), needs restating to be IFRS compliant. The
initial target was by 31/12/2009, however guidance is still being formulated by DCLG / CIPFA.
The full financial statements for the year to 31/3/2010 require conversion to IFRS. The DCLG will require Local Authorities to restate their 2009/10 accounts in
IFRS form by the Autumn of 2010. Guidance on this has also yet to be finalised. The opening balance sheet at 1 April 2009 and the restated financial
statements as at 31 March 2010, will form the comparative accounts for the first IFRS produced accounts for the year ended 31 March 2011.
Actions to date;

An analysis session took place in October 2009, and involved the use of a Baker Tilly diagnostic toolkit, and discussion with management on the
differences between IFRS and UK GAAP to clarify which were most likely to have an effect on the Council.

An IFRS seminar, which was delivered by Peter Thatcher on 7 October 2009, informed finance and non-staff as to the requirements of IFRS, to
provide an understanding for working with the IFRSs and to develop an appreciation of the impact on systems, procedures and working practices
across the Council.

.An action plan was produced from the analysis session, which identified actions required for the 1 April 2009 restatement, for the 31/3/10 conversion
and for the full implementation of IFRS from 1 April 2010.

A Steering Group has been established and has been meeting on a weekly basis to both coordinate and perform the work identified in the action
plan.
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Blackpool Council IFRS transition progress report April 2010

The Steering Group comprises members of the finance function; Phil Redmond and Karen Tomlinson; Estates Finance, Steve Maher and David Fish
and Hannah Shackleton. The Steering Group has received frequent input from the Estates Department (Russell Davies) and has received input from
Blackpool Coastal Housing and the legal and HR functions. The Baker Tilly input has been led by Keith Ward.

The IFRS Statement of Recommended Practice (SORP) was published by CIPFA in December 2009, giving prescriptive treatment for those areas
where IFRS allowed alternative treatments.

The action plan was adopted to reflect the specific requirements of the SORP where that was more prescriptive that the IFRS.

The Steering Group has driven the work process on an ongoing basis between meetings, the results of which are set out in the following pages.
The Steering Group have liaised with the Auditor, KPMG, other councils and forums, such as the Association of Greater Manchester Local Authorities
(AGMA) and the supplier of IT systems to the Council, together with monitoring guidance from CIPFA and the DCLG.
Purposes of this report
This report has been produced solely for the purposes of reporting the progress that has been made to date by the Steering Group on behalf of the Council
towards the conversion of the opening balance sheet as at 1/4/09 and the steps that have been taken in preparing for the translation of the Financial
Statements as at 31/3/2010.
Sources of information
The information presented in this report is derived from the ongoing delivery of the project to 7 May 2010.
Our report is provided solely for the benefit of the parties identified in our engagement letter and should not be copied, quoted or referred to in whole or in part
without our prior written consent.
We will not accept responsibility to any other party to whom our report may be shown or who may acquire a copy of our report. We would be happy to discuss
any matters raised in this report in more detail.
Our findings within this report have been supplied as a result of discussions with Phil Redmond and his team.
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Blackpool Council IFRS transition progress report April 2010
The specific transition arrangements that are applicable to each section of the Code are set out below. Each of these areas is considered in detail in
the following sections:

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Government and Non-Government Grants
Property, Plant & Equipment
Leases and Lease-Type Arrangements
Investment Property
Impairment of Assets
Non-Current Assets Held for Sale & Discontinued Operations
Inventories
Benefits Payable during Employment
Termination Benefits
Post-Employment Benefits
Presentation of Financial Statements
.
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Blackpool Council IFRS transition progress report April 2010
IFRS1 – First time adoption of IFRS
Action – Restate opening IFRS Balance Sheet as at 1 April 2009
IFRS 1 requires an explanation how the transition from previous GAAP 
to IFRSs affected its reported financial position, financial performance .
and cash flows by presenting:

a) Reconciliations of its net worth reported under previous GAAP to its
net worth under IFRSs for both of the following dates:
the date of transition to IFRSs, and
b) the end of the latest period presented in the authority’s most recent
annual financial statements under previous GAAP.
However the Code does not require these reconciliations to be
presented. Instead, an authority shall disclose any material differences
between amounts presented under the SORP and the equivalent
amounts under the IFRS-based Code. Disclosure is required where
there are material;
Differences in the following statements:
Balance Sheet as at 1 April 2009
Balance Sheet as at 31 March 2010
Comprehensive Income and Expenditure Statement for 2009/10.
Where no disclosure is required as any differences are not material, an
authority shall include in the notes a statement that there were no
material differences on transition to the IFRS-based Code.
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Template opening balance sheet as at 1 April 2009 produced.
Actual numbers for holiday pay accrual and lease property values are in
draft awaiting finalisation of DCLG guidance and calculations
respectively.
Blackpool Council IFRS transition progress report April 2010
Section 1) Government and Non-Government Grants
The Code (following IFRS 1) requires local authorities to classify and account for grants and contributions and donated assets in their opening IFRS Balance
Sheet (1 April 2009)in accordance with section 2.3 of the Code (also see IAS 20 and IPSAS 23). Accounting for grants and contributions and donated assets
through the Comprehensive Income and Expenditure Statement once any condition(s) have been met is a change of accounting policy that will require
authorities to restate their opening balances in respect of grants and contributions, and donated assets.
Action – Restate opening IFRS Balance Sheet as at 1 April 2009

Any balances on the Government Grants Deferred Account (or 
equivalent) shall be transferred to the Capital Adjustment Account.
Posted to the draft opening balance sheet.

Grants and contributions unapplied at 1 April 2009 shall be reviewed to 
ascertain whether there are any conditions attached to the grant or
contribution. Where there is no such condition, the grant or contribution
shall be transferred to the Capital Grants Unapplied Account. Where a
condition has yet to be satisfied, the grant or contribution shall be
transferred to Capital Grants Receipts in Advance.
All grants unapplied at 1 April 2009 have been reviewed. All are for a
specific purpose. Documentation to support the unapplied grants is
available.

If the authority had previously recognised a creditor in respect of a 
donated asset, that creditor shall be transferred to the Donated Assets
Account (where conditions remained to be satisfied) or to the Capital
Adjustment Account (where all conditions had been satisfied by 1 April
2009).
No relevant assets at the Authority
Section 2) Property, Plant & Equipment
Transactions in relation to assets classified as held for sale and sold (i.e. derecognised) during 2009/10 will need to be restated in line with the Code. The
required entries to restate the 2009/10 transactions are included in steps 4 and 5 of the transition section of noncurrent assets held for sale and discontinued
operations.
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Blackpool Council IFRS transition progress report April 2010
The Code (following IFRS 1) requires local authorities to classify and account for property, plant and equipment in their opening IFRS Balance Sheet (1 April
2009) in accordance with section 4.1 of the Code (also see IAS 16 and IPSAS 17). The Code requires the historical cost to be carried forward from the
existing UK GAAP accounting in the SORP (mainly in relation to infrastructure assets, community assets and assets under construction).
The Code introduces the concept of fair value as a basis of valuation for certain classes of assets. However, there are unlikely to be transition issues with
regard to the use of fair value because fair value has been interpreted under the property, plant and equipment section of the Code as ‘the amount that would
be paid for the asset in its existing use.
This requirement is met by providing the exiting use value (EUV) in accordance with UKPS 1.3 of the RICS Valuation Standards’, which is the same basis of
valuation used under the SORP (i.e. EUV). In addition the valuation methods under the Code of existing use value– social housing (EUV–SH) for council
dwellings and depreciated replacement cost (DRC) for specialist properties where there is no market-based evidence of fair value will be same as under the
SORP.
The requirement for component accounting, as set out in section 4.1 of the Code, shall be applicable from 1 April 2010 and therefore will have no impact on
transition. The Code requires residual values to be based on current prices at the Balance Sheet date. This may require the restatement of the residual
values and depreciation charges of assets carried at historical cost. However, it is anticipated that for authorities, the residual values of assets carried at
historical cost (i.e. community and infrastructure assets) will not be material.
The Code does not permit renewals accounting. The option under the SORP of using renewals accounting as a method of estimating depreciation for
infrastructure assets is not widely used by authorities, and where it is used, previous records detailing the charges may not be readily available. A prospective
approach to transition shall therefore be applied with effect from 1 April 2009.
Action – Restate opening IFRS Balance Sheet as at 1 April 2009

Where a revaluation gain has been recognised in the Revaluation 
Reserve prior to 1 April 2009 on an asset with a previous
revaluation loss recognised in the Income and Expenditure Account
(under the SORP), an adjustment shall be made between the
Revaluation Reserve and the Capital Adjustment Account.
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To prove that this is the case a paper has been prepared that demonstrates
the trail of postings to the Revaluation Reserve and to the I & E account
Blackpool Council IFRS transition progress report April 2010
Section 3) Leases and Lease-Type Arrangements
Reclassification of leases
Action – Restate opening IFRS Balance Sheet as at 1 April 2009
Property leases (Council; owned assets)
The Code (following IFRS 1) requires local authorities to classify and account for
leases in their opening IFRS Balance Sheet (1 April 2009) in accordance with
section 4.2 of the Code (also see IAS 17 and IPSAS 13). Authorities will
therefore need to separate leases of land and buildings into land and buildings
elements, and classify and account for those elements separately. Authorities
may also need to recognise a lease that was previously recognised as an
operating lease as a finance lease, or recognise a lease that was previously
recognised as a finance lease as an operating lease. These requirements are
applied retrospectively, and apply when accounting both as a lessee and as a
lessor.
Separation of land and buildings leases:

To separate leases of land and buildings into the separate land and
buildings elements, authorities will need to review the lease contracts,
and separate each lease on the basis of the position at the inception of
the lease. Lease payments are allocated to the land and buildings
elements in proportion to their relative fair values. The fair values of the
land and buildings elements will therefore need to be established as at
the inception of the lease.
Accounting as a lessee: operating lease reclassified as a finance lease:


Where an operating lease is reclassified as a finance lease, an asset
and a liability shall be recognised. Authorities will need to establish the
fair value of the asset. Where this is not known, the fair value of the
asset can be estimated by taking the present value of the minimum
lease payments (discounted at the rate implicit in the lease). If the rate
implicit in the lease cannot be established, the authority’s incremental
borrowing rate at the date of reclassification shall be used.
Payments made between the inception of the lease and 31 March 2009
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All property leases categorised and reviewed using criteria that meets the
requirements as follows;
•
•
•
Ownership is transferred by the end of the asset’s life
Lease term is for the major part of the asset’s life
PV of minimum lease payments is at least substantially all
of the fair value of the leased asset. 75% was used as an
initial but not absolute, indicator.
Accounting records identified that there are approximately 900 properties
owned by the Council, of which 400 are leased out, 500 are occupied by
the Council. 320 of the 400 expected to not be material, leaving around 80
expected to be material, under the following criteria:Property with a lease at inception of less than 10 years – property deemed
to be let under an operating lease as not likely to be a significant
proportion of the life of the property.
Property with an annual lease premium of less than £10,000 and 10 year
deemed an operating lease.
Property with a premium on commencement of less that £100,000 as
asset would not be itemised separately and listed for capitalisation, i.e.
would not be treated as a fixed asset.
A printout showing the analysis of leases against the above criteria is in
the working paper file.
Property leases results
1) A total of 25 leases were finally selected for review.
2) These were selected on the basis of the parameters above.
Blackpool Council IFRS transition progress report April 2010


shall be apportioned between the finance charge and the repayment of
the liability. These amounts would previously have been charged to the
General Fund.
Depreciation on the assets acquired under the lease will need to be
charged from the commencement of the lease until 31 March 2009. This
should be in accordance with an authority’s depreciation policies. Assets
will also need to be revalued in accordance with the authority’s
revaluation policies.
The General Fund shall be charged with the Minimum Revenue
Provision (England and Wales) or repayment of the liability (Scotland
and Northern Ireland) as required by regulation or statutory guidance.
Where a finance lease is reclassified as an operating lease, the asset
and liability will need to be derecognised. Any Minimum Revenue
Provision (England and Wales) or repayment of the liability (Scotland
and Northern Ireland) shall be adjusted in accordance with regulations or
statutory guidance if required.
Accounting as a lessor: operating lease reclassified as a finance lease:


Where an operating lease is reclassified as a finance lease, the asset
shall be derecognised and a long-term debtor recognised.
For each lease, authorities will need to separate the lease income into a
finance income element and a repayment of principal element. The
repayment of principal element of each payment shall be applied to
reduce the balance on the long-term debtor, and is classed as a capital
receipt; a transfer from the General Fund to the Capital Receipts
Reserve (Capital Fund in Scotland) is required unless regulations or
statutory guidance permit otherwise.
Accounting as a lessor: finance lease reclassified as an operating lease:

Property leases (Council has taken a lease out on the property)
All property leases that the Council has taken out were reviewed, using the
above criteria. The resultant split into land and buildings has been
captured. There were no changes in classification resulting from the
above review.
Plant and machinery (Council has taken a lease)
Accounting as a lessee: finance lease reclassified as an operating lease:

3) These criteria have been discussed with our external auditors on an
ongoing basis and no objections were raised.
4) The process of Property lease review has not yet concluded but the
majority of lease remain operating leases
Where a finance lease is reclassified as an operating lease, the longterm debtor shall be derecognised and the asset that would have been
derecognised at the commencement of the finance lease shall be
reinstated. The balance on the Fixed Asset Account shall be adjusted for
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Leases all done. The following have been checked and agreed by Baker
Tilly:
0025 – Nav. Man tracking unit
0014 – Citroen Berlingo
0047 – Transit vans
0064 – Photocopiers
0057 – Ford Fiesta
0052 – Mayoral vehicle
8780 – Golf clubhouse
To ensure that all leases were identified the Finance Department
scrutinised for 2008/09 all payment streams, looking for recurring payment
runs that might have indicated a lease. Any such payments were
reviewed, no additional payments were identified. This has the additional
advantage of giving confidence in the coding system.
Vehicle, plant and equipment (VPE) results
1) A total of 57 leases were reviewed, this is all the VPE leases currently
centrally held by Blackpool Council.
2) 5 of the leases remained as operating leases under IFRS
3) All others were categorised as finance leases, other than the 8 leases
which were taken out on the 31-3-09 so do not require reclassification.
4) The VPE lease reclassified had a total cost in excess of £3M.
Blackpool Council IFRS transition progress report April 2010

the depreciation chargeable between the time the asset was originally
derecognised and the time it is reinstated. The asset may also need to
be revalued.
Authorities would previously have apportioned the income received
under the lease into a finance income element and a repayment of
principal element. As an operating lease, all income would be
recognised in the General Fund; a transfer to the General Fund from the
Capital Receipts Reserve (Capital Fund in Scotland) is required unless
regulations or statutory guidance require otherwise.
Embedded contracts
Non identified
Blackpool Zoo – long lease
Currently 10 year lease with the option of triggering a 99 year lease, no
accounting changes proposed .
System issues
The accuracy of information on P2 system with regard to leases, in
particular, the availability of information regarding value on inception, split
of land and building, accuracy of premium on inception, expiry date of
lease and lease payments, did not always appear consistent or accurate.
Rent review information was originally thought to be from an alternative
data source, but also extracted from P2. Per P2 expiry dates, around 200
current property leases have expired.
To establish the reliability of data, an exercise was carried out on a sample
basis to extract the original lease agreement and compare data to the
information held on P2 – the review confirmed that information on P2 was
accurate. There is uncertainty as to whether the P2 net system has the
capability and capacity to record IFRS compliant data for property, plant
and equipment and leases. The ability of P2 net to meet the Councils
requirement, in particular in capturing component information should be
established before any resource is committed. Equally, the urgency of
having a system to post component information should be recognised,
given the start date for component accounting was 1 April 2010.
Spreadsheets have been set up to capture component information on
transactions arising post 1/4/2010 on a temporary basis. Spreadsheets will
not be adequate to cope with the complexities of component accounting
on a long term basis. The Steering Group have scheduled a review to
consider the capability of existing systems and a consideration of
alternative available products or products in development.
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Blackpool Council IFRS transition progress report April 2010
Section 4) Investment Property
Authorities will need to review their assets as 1 April 2009 to identify those assets that meet the definition of an investment property. Assets classified as
investment property under the SORP may not meet the definition of an investment property under section 4.4 of the Code and IAS 40. Such assets shall be
reclassified as property, plant and equipment and accounted for under section 4.1 of the Code. Property classified as surplus under the SORP that does not
meet the definition of held for sale may meet the definition of investment property; this could occur where the property was being held for capital appreciation
prior to any sale taking place. The Code (following IFRS 5) does not permit investment property to be reclassified as held for sale. Therefore any assets
classified as surplus under the SORP that had been classified as investment property prior to being classified as surplus assets will need to be reclassified as
investment property under the Code. It is unlikely that property classified as operational under the SORP would meet the definition of investment property
under section 4.4 of the Code.
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Blackpool Council IFRS transition progress report April 2010
Action – Restate opening IFRS Balance Sheet as at 1 April 2009

The Code (following IFRS 1) requires local authorities to classify 
and account for investment properties in their opening IFRS
Balance Sheet (1 April 2009) in accordance with section 4.4 of the 
Code (also see IAS 40 and IPSAS 16). Accounting for investment
property at fair value through Surplus or Deficit on the Provision of
Services is a change of accounting policy that will require 
authorities to restate their opening balances in respect of
investment property.

For existing investment properties, and surplus assets reclassified
as investment properties, authorities shall transfer any balances
on the Revaluation Reserve in respect of investment property as
at 1 April 2009 to the Capital Adjustment Account. Any
depreciation charged prior to 1 April 2009 would have been
transferred to the Capital Adjustment Account, and therefore no
further adjustment is required.

As surplus properties were subject to depreciation, authorities
shall adjust the carrying amount of surplus properties reclassified
as investment properties to fair value where this is materially
different to the carrying amount.

Authorities shall adjust the carrying amount of investment property
held under a lease to fair value as at 1 April 2009.

Where an asset classified as an investment property under the
SORP is reclassified as property, plant and equipment under the
Code, the asset shall be revalued (as at 1 April 2009) in
accordance with section 4.1 of the Code. Any loss on revaluation
in excess of the balance for the asset in the Revaluation Reserve
shall be transferred to the Capital Adjustment Account.
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No change required
Schedule of investment properties at 1 April 2009, reviewed, no additional
assets are surplus.
No changes required. – Annotating the schedule and put on file.
Blackpool Council IFRS transition progress report April 2010
Section 5) Impairment of Assets
Action – Restate opening IFRS Balance Sheet as at 1 April 2009

The Code (following IFRS 1) requires local authorities to
classify and account for impairments in their opening IFRS
Balance Sheet (1 April 2009) in accordance with section
4.7 of the Code (also see IAS 36 and IPSAS 21 and 26).
Accounting for impairment of assets following IAS 36 is a
change of accounting policy that will require authorities to
restate their opening balances in respect of Impairment.
IAS 36 requires all impairments, including the term referred
to in the SORP as ‘clear consumption of economic
benefits’, on re-valued assets to be recognised in the
Revaluation Reserve up to the amount in the Revaluation

Reserve for each respective asset and thereafter
recognised in Surplus or Deficit on the Provision of
Services (previously called the Income and Expenditure
Account). No adjustments are required to authorities’
opening Balance Sheet in relation to impairments as the
2009 SORP required an adjustment between the
Revaluation Reserve and the Capital Adjustment Account
that matches the adjustment that would otherwise be
required on transition to the IFRS-based Code.

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Impairment review done at the time – no change required.
Blackpool Council IFRS transition progress report April 2010
Section 6) Non-Current Assets Held for Sale & Discontinued Operations
There are not expected to be any transition issues arising from discontinued operations.
The impact on transition of re-measuring costs to sell at their present value where sale is expected beyond one year is not expected to be common and will
only be required where material. Where authorities deem that the re-measurement of costs to sell is required, and the present value of costs to sell increase
from a passage of time (representing the unwinding of the discount), it will be necessary to reduce the carrying amount of the asset and show the
corresponding entry as a financing cost in Surplus or Deficit on the Provision of Services.
Where assets meet the criteria to be classified as held for sale they shall be treated as either non-current assets or current assets dependent on meeting the
respective definitions.
Action – Restate opening IFRS Balance Sheet as at 1 April 2009 (assets
classified as held for sale prior to 1 April 2009)
 The Code (following IFRS 1) requires authorities to classify and account for 
Non-current Assets Held for Sale in their opening IFRS Balance Sheet (1
April 2009) in accordance with section 4.9 of the Code (also see IFRS 5). In
accordance with IFRS 1 First Time Adoption of IFRS the exemption of
applying IFRS 5 prospectively (as opposed to retrospectively) is not
permitted because the date of transition for authorities is after 1 January
2005.
 Accounting for non-current assets held for sale following section 4.9 of the
Code is a change of accounting policy that will require authorities to restate
their opening balances in respect of non-current assets held for sale.
 The opening Balance Sheet (1 April 2009) will need to be restated for assets
classified as held for sale prior to 1 April 2009.
 In the event that the criteria under chapter four, section 9 of the Code have
not been met as at 31 March 2009, authorities shall reclassify the assets
held for sale to non-current assets (ie property, plant and equipment or
investment property) and adjust the carrying amount of the asset to the
level it would have been as at 1 April 2009 before the asset was classified
as held for sale.
14
Supported by list of assets not in use spreadsheet which shows which
assets are being improved and which are for disposal – no material
values for disposal.
Blackpool Council IFRS transition progress report April 2010

In the event that the criteria under section 4.9 of the Code have been met as
at 31 March 2009, authorities shall reclassify surplus assets held for disposal
to the classification of held for sale. From the date the criteria are met (note:
this may be a different date to when the asset was reclassified under the
SORP), reverse any depreciation charged and reinstate the carrying amount
where this amount is lower than fair value less costs to sell. Further entries
will be required to reverse any initial or subsequent revaluation gains
recognised following reclassification that are in excess of cumulative
impairment or revaluation losses (adjusted for depreciation that would have
been charged had the impairment or revaluation losses not occurred)
previously recognised in the Income and Expenditure Account. Increases in
fair value less costs to sell that are not in excess of previous impairment or
revaluation losses (adjusted for depreciation) recognised in the Income and
Expenditure Account will need to be recognised in the Capital Adjustment
Account as opposed to the Revaluation Reserve. Any impairment or
revaluation losses recognised in the Revaluation Reserve, following
reclassification, will need to be recognised in the Capital Adjustment
Account.
Section 7) Inventories
It is considered that the impact of transition with regard to the change in measurement and acquisition on deferred settlement terms will not apply to many
inventories held by authorities.
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Blackpool Council IFRS transition progress report April 2010
Action – Restate opening IFRS Balance Sheet as at 1 April 2009

 The Code (following IFRS 1) requires local authorities to classify and
account for inventories in their opening IFRS Balance Sheet (1 April 
2009) in accordance with section 5.1 of the Code (also see IAS 2 and
IPSAS 12). Accounting for inventories following IAS 2 is a change of
accounting policy that will require authorities to restate their opening
balances in respect of inventories. IPSAS 12 requires that where
inventories are acquired through a non-exchange transaction, their cost
is measured at their fair value as at the date of acquisition, and where
inventories are provided at no charge or for a nominal charge, they are
to be valued at the lower of cost and current replacement cost.
 Where inventories are acquired through a non-exchange transaction (and
held as at 31March 2009) their carrying amount shall be adjusted to their
fair value at the date of acquisition. Any previous adjustment to their
carrying amount shall be reversed.
 Where inventories are to be provided at no charge or for a nominal
charge (and are held as at 31 March 2009), their carrying amount shall
be adjusted to the lower of cost and current replacement cost. Any
previous adjustment to their carrying amount shall be reversed.
 Where inventories have been purchased on deferred settlement terms
beyond normal credit terms (and held as at 31 March 2009), the carrying
amount of the inventories shall be adjusted with the difference between
the purchase price for normal credit terms and the amount paid. The
resultant deferred debit (in effect the financing element of the
arrangement) shall be written down from the initial period of the
arrangement to 31 March 2009.
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No material impact
Supporting stock certificates
Blackpool Council IFRS transition progress report April 2010
Section 8) Benefits Payable during Employment
Under IAS 19 and the Code, ‘benefits payable during employment’ comprise ‘short-term benefits’ and ‘other long-term employment benefits’. Except for ‘longterm disability benefits‘, the SORP and UK accounting standards do not cover these matters. It is therefore likely that authorities’ accounting policies will vary
and some authorities may not have followed accounting policies that accord with the requirements of the Code.
The types of short-term employment benefits covered by IAS 19 and the Code are:
a) wages, salaries and social security contributions
b) short-term compensated absences
c) bonuses and similar payments
d) non-monetary benefits.
The Code’s requirement in respect of a), c) and d) above follow standard principles for accruing expenditure and it seems unlikely that amounts recognised
under most authorities’ pre-IFRS accounting policies would be significantly different from those that would have been recognised under the Code’s
requirements.
In the case of ‘short-term compensated absences’, however, few, if any, authorities have provided for ‘accumulating’ short-term absences such as annual
leave and flexi-time in accordance with the requirements of the Code, which requires provision to be made for benefits which have accumulated but are
untaken at the Balance Sheet date.
The types of ‘other long-term employment benefits’ covered by IAS 19 and the code are:
a) long-term compensated absences such as long service or sabbatical leave
b) jubilee or other long service benefits
c) long-term disability benefits
d) bonuses payable 12 months or more after the end of the period in which the employees render the related service
e) deferred compensation paid 12 months or more after the period in which it is earned.
All of the above except ‘long-term disability benefit’ rarely occur at local authorities or would very rarely involve significant expenditure, where they do occur.
Where an authority incurs significant expenditure on an employee benefit covered by the ‘benefits during employment’ section of the Code it shall consider
whether its accounting policy has resulted in its accounts recognising significantly different amounts from those that would have been recognised if the Code
had been in force. Where the amounts are significant, the authority shall:
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Blackpool Council IFRS transition progress report April 2010
Action – Restate opening IFRS
Balance Sheet as at 1 April 2009
 In the case of short-term
employee benefits, this will
involve recognising provisions
for the amount by which the
expenditure which would have
been recognised had the Code
always been in force exceeds
the expenditure that was
actually recognised in the
accounts with the double entry
being to debit the General
Fund and HRA Reserve as
appropriate.
Or,
if
the
expenditure
actually
recognised in the accounts
exceeds the expenditure which
would have been recognised
had the Code always been in
force, recognising a debit
accrual with the double entry
being to debit the General
Fund and HRA Reserve as
appropriate. (Note: the need
for
legislation/statutory
guidance to ameliorate the
effect
of
recognising
accumulating
short-term
compensated absences is
being
discussed
with
stakeholders).

The details of the return for each directorate, the amount and the completion of returns for holiday pay and flexitime
accrual are as follows;
EMPLOYEE BENEFITS SUMMARY
1/4/09 RESTATED BALANCE SHEET SUMMARY
ANNUAL LEAVE
DEPARTMENT
SAMPLE %
£
FLEXI
SAMPLE %
£
ONCOSTS
TOTAL
£
ACCRUAL
Adult Social Care
76%
137,745.95
76.30%
13,851.81
37,899.44
189,497.20
Regen and Tourism
55%
90,945.53
64%
56,126.14
36,767.92
183,839.59
Business Services
77%
147,076.97
87.02%
124,163.31
67,810.07
339,050.35
Culture & Communities
46%
28,021.72
71.10%
32,014.00
15,008.93
75,044.65
Children & Young People
67%
123,053.16
67%
29,823.59
38,219.19
191,095.94
100%
4,201,348.81
1,050,337.20
5,251,686.01
Teachers*
n/a
6,230,213.74
* Teachers calculated based on CIPFA's report dated 15/12/08
An average has been taken (based on each dept) for employees where data has not been received.
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Blackpool Council IFRS transition progress report April 2010

Banked time
-

report from system showing, not material
Fylde TUPE staff – 12 in 08/09, 30 in 09/10 – print on system. No holiday pay accrual brought forward.
Section 9) Termination Benefits
The SORP did not cover all termination benefits (e.g. lump sum payments on termination of employment); it only covered termination awarded as an
enhancement of pension benefits usually in the form of added years of service. The SORP treated these as a retirement benefit and classified them as one
type of ‘past service’ cost. The Code, in accordance with IAS 19, covers all forms of termination benefits and does not treat them as a ‘post employment
benefit’ but as a separate category of employment benefit. Termination benefits are required to be recognised immediately in Surplus or Deficit on the
Provision of Services.
Past service cost may be subject to a vesting period (although this is unusual in local authorities) which would require the obligation to be recognised on a
straight-line basis over the vesting period. It is very unlikely that a grant of ‘added years’ would have been subject to a vesting period since it would be
expected to be awarded on retirement.
Unless, very unusually, termination benefits awarded as a pension enhancement are subject to a vesting period, no transitional adjustment to the opening
IFRS Balance Sheet at 1 April 2009 will be required. If there are unrecognised past service costs:
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Blackpool Council IFRS transition progress report April 2010
Action – Restate opening IFRS Balance Sheet as at 1 April 2009
Blackpool Council accounting policy is that any past service cost is recognised in
the year the liability arises. Therefore no implication on transition..
 Any unrecognised past service cost shall be immediately recognised by
crediting the defined benefit obligation and debiting the General
Fund. In turn the entry to the General Fund shall be reversed by
increasing the statutory transfer to the Pension Reserve (i.e. credit
General Fund and debit Pension Reserve).
Section 10) Post-Employment Benefits
For authorities, except those in Northern Ireland, there will not normally be transitional issues in respect of post-employment benefits and the Balance Sheet
items will usually be transferred to the 1 April 2009 opening IFRS Balance Sheet at the amounts carried on the 31 March 2009 Balance Sheet.
Where exceptionally the defined benefit obligation or plan assets to be included to the opening IFRS (1 April 2009) Balance Sheet in accordance with the
requirements of the Code is different from the carrying amounts included in the 31 March 2009 Balance Sheet, an authority shall:
Action – Restate opening IFRS Balance Sheet as at 1 April 2009
 The amounts included for the opening IFRS Balance Sheet shall be
the amount determined in accordance with the Code and the net
difference shall be taken to the Pension Reserve.
No differences identified. Schedule on file to support that the position as at 1/4/09 is
compliant with FRS 17 and hence IFRS.
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Blackpool Council IFRS transition progress report April 2010
Section 11) Presentation of Financial Statements
Amounts disclosed in the financial statements will need to be restated in accordance with other sections of the Code. Authorities will need to prepare
comparative segment information (including a subjective analysis) to be presented in the financial statements.
Action – Restate opening IFRS Balance Sheet as at 1 April 2009

 The Code (following IFRS 1) requires local authorities to classify
cash and cash equivalents in their opening IFRS Balance Sheet (1 
April 2009) in accordance with section 3.4 of the Code (also see
IAS 7). Reclassifying items to cash equivalents following IAS 7 is a
change of accounting policy that will require authorities to restate
their opening balances in respect of cash and cash equivalents.
 An authority shall reclassify short-term investments as cash
equivalents following their accounting policy of determining the
composition of cash equivalents.
21
Identified and change put through
Overdrawn with review of movements – up - downs – overall remains in surplus
– cashflow forecast on file.
Blackpool Council IFRS transition progress report April 2010
SORP extract
With reference to chapter 10 of CIPFAs publication “code of practice on local authority accounting”, transition arrangements are as follows:

Authorities shall account for the transition to the IFRS-based Code of Practice on Local Authority Accounting in the United Kingdom in accordance
with IFRS 1 First-time Adoption of International Financial Reporting Standards, except where interpretations or adaptations to fit the public sector are
detailed in the Code.

Accounting policy changes arising out of the adoption of the IFRS-based Code shall be accounted for retrospectively unless the Code requires an
alternative treatment.

In accordance with paragraph 3.4.2.17 f) of the Code, an authority shall present an opening Balance Sheet as at 1 April 2009.

This section of the Code applies to both Group Accounts and an authority’s own single entity accounts.

IFRS 1 permits exemptions from the retrospective application of some requirements of other IFRSs. The Code requires the following exemptions to
be applied; exemptions not listed in the Code shall not be applied.

Authorities shall apply the requirements of paragraph 9.1.2.51 of the Code and IFRS 3 Business Combinations prospectively from 1 April 2009.

Authorities shall apply the requirements of IFRS 2 Share-based Payment prospectively from 1 April 2009.

The depreciated historical cost of an asset as at 1 April 2009 shall be deemed to be the depreciated historical cost of that asset as at 31 March 2009
under the 2009 SORP.

In adopting IFRIC 4 Determining Whether an Arrangement Contains a Lease, an authority shall determine whether an arrangement existing as at 1
April 2009 contains a lease on the basis of facts and circumstances existing at that date. Where an authority determines that the arrangement
contains a lease, it shall account for that lease retrospectively from the commencement of the lease.

An authority shall not adopt any of the transitional arrangements contained within IFRS 1 in respect of financial instruments, as these arrangements
will have been adopted by the authority when the SORP adopted the equivalent UK standards.

Where an authority is required to apply the requirements of IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities, it shall
apply the requirements prospectively from 1 April 2009.
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Blackpool Council IFRS transition progress report April 2010

Where the requirements of the Code in relation to borrowing costs (see section 4.8 of the Code) amount to a change in accounting policy for an
authority, the authority shall apply those requirements prospectively from 1 April 2009.

An authority shall not implement the requirements of the Code in relation to accounting for the depreciation of significant components of an asset and
the derecognition of old components and recognition of new components retrospectively. These requirements shall be applicable to enhancement
and acquisition expenditure incurred, and revaluations carried out, from 1 April 2010.

IFRS 1 requires an authority to explain how the transition from previous GAAP to IFRSs affected its reported financial position, financial performance
and cash flows by presenting:
23