ESSEX FIRE AUTHORITY
Essex County Fire & Rescue Service
MEETING
AGENDA ITEM
4
Audit & Review Committee
MEETING DATE
REPORT NUMBER
28 January 2010
EFA/015/10
SUBJECT
Implementation of International Financial Reporting Standards
REPORT BY
The Finance Director &Treasurer, Mike Clayton
PRESENTED BY
The Finance Director & Treasurer, Mike Clayton
SUMMARY
The purpose of this report is to inform the Audit and Review Committee on the requirements
for the transition from UK Generally Accepted Accounting Practice (UK GAAP) to
International Financial Reporting Standards (IFRS).
RECOMMENDATIONS
Members of the Audit and Review Committee are asked to note the contents of the report.
BACKGROUND
The adoption of IFRS for Local Government will take place from 2010/11 with full
comparative data required which means the Authority will need to be able to restate our
opening balance sheet as at 1 April 2009 and our 2009/10 accounts. Therefore if authorities
are able to identify their data requirements early this will save having to capture it
retrospectively.
The Authority’s budgets for 2010/11 will need to be prepared on an IFRS basis by January
2010.
Authorities will need to identify potential IFRS effects and also address the resource
challenges of moving towards IFRS.
Agenda Item 4
Report EFA/015/10
Page 2
The impact of the standards
The most significant areas of change for the Authority will be in the following areas:
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leases
property, plant and equipment
employee benefits; and
disclosures.
Leases
Under IFRS the Authority will need to review arrangements they may have involving the use
of an asset, such as a licence, partnership agreement on long term contract to consider
whether they contain a lease.
Information on any licences/agreements/rights to use which run or extend beyond 31 March
2010 will be identified and copies of documentation obtained by April 2010.
Where the Authority leases land and buildings, International Accounting Standard (IAS) 17
Leases requires that the land and buildings elements are considered separately, with the
land element usually treated as operating lease and the building element tested separately
for a finance lease.
Property Services are currently working on compiling a database of property lease details for
this purpose.
Property, plant and equipment
IAS 16 Property, plant and equipment introduces different requirements for the basis of
asset valuations. It states that each part of an item with a cost that is significant in relation to
the total cost shall be depreciated separately, for example if a building has lifts and boiler
system of significant cost and of different economic lives to the rest of the building, then
those components should each be depreciated separately from the rest of the building. This
will require asset registers to record separately those component parts of the asset, however
National guidance on components has not yet been issued.
Finance staff have met with Terry Appleby of Lambert Smith Hampton (property advisors to
the Authority) and agreed that components and valuations will be provided as part of the
2010 valuation process.
Employee benefits
IAS 19 Employee benefits introduces the requirement that organisations accrue for staff
benefits, including paid leave, that are not taken at the balance sheet date. The accrual may
not be material to the accounts however authorities need to be able to demonstrate that they
have undertaken sufficient analysis of this.
A calculation of the accrual as at 31 March 2009 has been carried out, and an equivalent
calculation will be carried out as at 31 March 2010.
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Agenda Item 4
Report EFA/015/10
Page 3
Disclosures
IFRS contains a significant number of additional disclosure requirements over UK standards
which may require the capture of new and different data and authorities will need to consider
how this will be achieved.
Members of the Finance team have attended training on IFRS transition and will be
monitoring the Authority’s progress throughout the transition period.
Impact on 2010 Revenue Budget
The changes to leases, property and plant will not impact on the Authority’s revenue budget
in 2010. This is because non-cash adjustments such as depreciation are replaced for council
tax purposes with the minimum revenue provision.
Changes to the value of outstanding employee benefits will impact on the revenue budget.
The movement in these liabilities is unlikely to be material whilst the leave year and leave
levels remain unchanged.
Project Plan
The Finance Department has a project plan to manage progress in making the above
changes as part of the 2009/10 year end accounts process.
RISK MANAGEMENT IMPLICATIONS
There is a risk that, should IFRS not be followed, the Authority’s accounts would not be
compliant with the Statement of Recommended Practice (SORP). Also there is a risk that
changes have a material impact on the Authority’s cost base and income and expenditure
account. The implementation of the IFRS changes by CIPFA mitigate against this risk as
most of the changes are reversed out when Council Tax is calculated.
FINANCIAL IMPLICATIONS
The work required for the transition to IFRS will come from the existing staffing resources in
the Finance department and existing contractual arrangements with professional advisors.
LEGAL IMPLICATIONS
There are no direct legal implications from this report.
LOCAL GOVERNMENT (ACCESS TO INFORMATION) ACT 1985
List of background documents
Proper Officer:
Contact Officer:
Director of Finance & Treasurer
Mike Clayton, Essex County Fire & Rescue Service, Kelvedon park, London Road,
Kelvedon CM8 3HB
01376 576000
E-mail: mike.clayton@essex-fire.gov.uk
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