Audit Committee
28 June 2011
Financial Accounts 2010-11
Claire Cook -Assistant Finance Director
and
Joanne Watts – Head of Finance Accountancy Services
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Overview
•
•
•
•
•
•
•
Format of Accounts
Key changes for 2010-11
Background to IFRS and key adjustments
Walk through the key financial statements
Segmental Reporting
Next steps
Questions
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Format of Accounts
• Explanatory Foreword (page 4)
• Four primary statements:
–
–
–
–
Comprehensive Income & Expenditure account (page 20)
Balance sheet (page 21)
Movement in Reserves Statement (page 22)
Cash flow Statement (page 23)
• Statement of Accounting Policies (page 24)
• Notes to the accounts (page 39)
• Pensions Accounts (page 127)
– Local Government Pension Fund Accounts
– Fire-fighter's Pension Fund Accounts
• Glossary of Terms (page 160)
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Key changes for 2010-11
• Financial year 2010/11 is first year actual
IFRS based accounts produced
• Note 1 to the accounts provides details of
the adjustments involved in the
restatement exercise
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Key changes for 2010-11
• Required:
– Restatement of 2009/10 financials for comparative
purposes
– Review & revision of accounting policies to ensure full
compliance with IFRS
– New formats for key financial statements
– Presentation of 3rd balance sheet (this year only)
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What is IFRS and why change?
•
Consistent set of standards for financial
reporting
•
Governs approach to accounting across
the public & private sector
•
Allows comparability of accounts at global
level
•
One set of accounting rules
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Overview of Main Changes from UK GAAP to IFRS
Significant IFRS changes
Substantially the same
Financial
Statements
Greater flexibility – new statements &
amended layouts
New formats consist with those
used in the SORP
Salaries &
Pensions
Compensated Absences: Untaken
holiday pay and similar items accrued
for at year end
Everything else
Govt. Grants &
Contributions
Capital grants recognised immediately
(unless unmet conditions) rather than
deferred and matched to expenditure
Same for capital grants if there
are unmet conditions
Property, Plant &
Equipment (Fixed
Assets)
Component accounting, new class of
‘assets held for sale’ and impairments
taken initially to Revaluation Reserve
rather than CI&E
Everything else
Leases
Removal of 90% test, separate leases of
land & buildings and need to assess
whether other arrangements contain
lease arrangements
Everything else – concept of
finance and operating leases
unchanged
Cash & Cash
Equivalents
Inclusion of investments held to meet
short term liabilities and bank overdrafts
Everything else
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Walkthrough: Things to consider in reviewing
financial statements
• Comparison with previous year – significant
movements up or down?
• Are you happy with the reasons for those
movements? – should be set out in the notes
• Are the results and changes from previous
year in line with your understanding with
events in year?
• Do figures seem reasonable including
those that are zeros?
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Walkthrough: Comprehensive Income and
Expenditure statement (CI&E)
• CI&E Statement format covers the equivalent of
• the SORP’s Income & Expenditure Account; and
• the SORP’s STRGL
• Details:• Cost of Services: Gross Income and Expenditure costs
incurred
• Surplus or deficit on Provision of Services
• Other Comprehensive Income and Expenditure
• Sets out how the costs are financed (see Note 11 – page
72)
• Government grants
• Income from taxpayers
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Walkthrough: CI&E 2010/11
2010/11
Note
Cost of Services
Gross
Expenditure
Gross
Income
Net
Expenditure
£000s
£000s
£000s
1,948,426
(1,377,660)
570,766
Other Operating expenditure
9
5,092
(13,812)
(8,720)
Financing and Investment Income
& Expenditure
10
192,459
(141,263)
51,196
Taxation and Non-Specific Grant
Income
11
-
(815,787)
(815,787)
2,145,977
(2,348,522)
(202,545)
(Surplus) or Deficit on
Provision of Services (A)
Surplus or Deficit on revaluation of
Property, Plant and Equipment
23
(8,630)
Actuarial gains / loses on pension
assets / liabilities
23
(292,487)
Other Comprehensive
Income & Expenditure (B)
Total Comprehensive
Income & Expenditure (A+B)
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(301,117)
(503,662)
Page 20
Note 28 Segmental
Reporting provides a
bridge to budget
Financing of
services from
tax and grants
Surplus for
2010/11
Walkthrough: Balance sheet
• Shows the value as at 31st March 2011 of
the assets and liabilities recognised by the
Council
• Provides details of: –
–
–
–
Long term Assets
Current Assets
Long term Liabilities
Current Liabilities
• Net Assets matched by the reserves held
(£1,824.560 m) : – Usable reserves,
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– Unusable reserves
Walkthrough: Balance sheet extract Page 21
31 March 2011
Note
£000s
Long Term
Assets
•
–
–
–
–
£000s
2,980,662
Current Assets
176,188
Current
Liabilities
(223,472)
Long Term
Liabilities
(1,108,818)
Net Assets
1,824,560
Provides details of: -
•
Long term Assets
Current Assets
Long term Liabilities
Current Liabilities
Net Assets (£1,824.560 m) are
matched by the reserves held
by the Council : – Usable reserves (see Note 23 –
page 86)
Usable Reserves
23
201,534
Unusable
Reserves
24
1,623,026
Total Reserves
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– Unusable reserves (see Note 24
– page 87)
1,824,560
Walkthrough: Movement in Reserves Statement Page 22
•
Important consideration is
whether Council has a
surplus of deficit compared
to its budget for the year
– Council achieved a surplus
– Other CI&E is
predominately driven from
actuarial position on
pensions
•
Adjusts for differences
between Accounting Basis
and Funding Basis under
Regulation
•
(see Note 7 page 63).
Transfers to / from
Earmarked Reserves (see
Note 8 page 67).
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General
Fund
Total
Reserves
£000s
£000s
32,140
1,320,894
Surplus or (deficit) on the provision
of services
202,545
202,545
Other Comprehensive Income and
Expenditure
301,117
301,117
Total Comprehensive Income and
Expenditure
503,662
503,662
Balance at 31 March 2010 carried
forward
Movement in reserves during
2010/11
Adjustments between accounting
basis & funding basis under
regulations
Note 7
(498,488)
-
5,170
503,662
Transfer to / from Earmarked
Reserves
(19,344)
-
Increase / Decrease in 2010/11
(14,170)
503,663
17,973
1,824,556
Net Increase / Decrease before
Transfers to Earmarked Reserves
Balance at 31 March 2011 carried
forward
Links
to
CI&E
Note 8
Walkthrough: Cash flow statement Page 24
2010/11
Note
£000s
£000s
Net surplus or (deficit) on the provision
of services
202,545
Adjustments to net surplus or deficit on
the provision of services for non
cash movements
(39,587)
Adjustments for items included in the net
surplus or deficit on the provision
of services that are investing and
financing activities
(98,889)
(see Note 19 page 82)
Net cash flows from Operating Activities
25
64,069
Investing Activities
26
(46,894)
Financing Activities
27
(7,323)
Net increase or decrease in cash and
cash equivalents
9,852
Cash and cash equivalents at the
beginning of the reporting period
16,126
Cash and cash equivalents at the end
of the reporting period
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• Details changes in
cash & cash
equivalents during
the reporting period.
19
25,978
• Shows how the
Council generates
and uses cash by
classifying cash
flows as:
– Operating;
– Investing; and
– Financing activities.
Walkthrough: Cash flow statement
– The amount of net cash flows arising from operating activities is
a key indicator of the extent to which the operations of the
Council are funded by way of taxation and grant income or from
the recipients of services provided by the Council. (£64,069K)
(see Note 25 page 91)
– Investing activities represent the extent to which cash outflows
have been made for resources which are intended to contribute
to the Council’s future service delivery. (£46,894K) (see Note 26 page
91)
– Cash flows arising from financing activities are useful in
predicting claims on future cash flows by providers of capital (i.e.
borrowing) to the Council. (£7,323K) (see Note 27 page 92)
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Segmental Reporting (Note 28) Page 92
• Based on internal management structures
• Prepared on a different basis from the
financial statements.
– No charges are made in relation to capital
expenditure
– Retirement benefits are only reflected at the end of
the year
– Some centrally budgets not charged to services
– Various adjustments are not reflected (e.g.
contributions to/ from reserves)
• Reconciles the management accounts
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(monitor) to the financial accounts (CI&ES)
Segmental Reporting Extract (Note 28) Page 92
• This extract shows the
reconciliation to the CI&ES,
where the analysis of income
and expenditure by service is
that specified by the Best
Value Accounting Code of
Practice (BVACOP)
2010/11
£000s
• Other reconciling items are
– Depreciation, amortisation and
impairment (capital charges)
– Other service expenses
– Net Pension Costs
Net Expenditure in the Segmental Analysis
841,247
Amounts included in the Segmental analysis and
included below the Net Cost of Services on
the Comprehensive Income & Expenditure
Statement
(31,012)
Amounts included in the Segmental analysis and
not included in the Comprehensive Income
& Expenditure Statement
(24,594)
Amounts in the Comprehensive Income &
Expenditure Statement not included in the
segmental analysis
(214,875)
Cost of Services in Comprehensive Income &
Expenditure Account
Per CI&ES page 20
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570,766
Next steps
30th June
Audit Committee Meeting: Review of
Statement of Accounts
July - Sept
Audit of Accounts
Mid Sept
Consider Audit Commission Annual
Governance Report and details of any
material mis-statements
End Sept
Audit Opinion published
Audited Statement of Accounts published
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Questions?
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