DH1/15/221186
SECTION B:
HSC ANNUAL ACCOUNTS
FORM & CONTENT OF THE ACCOUNTS
2015-16
Section B: HSC Body Annual Accounts 2015-16
Contents
The Primary Statements .................................................................................................................. 2
Prior Year Adjustments ................................................................................................................... 6
Notes to the Financial Statements ................................................................................................... 7
Note 1: Statement of Accounting Policies ...................................................................................... 7
Notes to the Financial Statements ................................................................................................... 7
Note 2: Segmental Reporting .......................................................................................................... 8
Note 3: Other Expenditure ........................................................... Error! Bookmark not defined.
Note 4: Income ........................................................................................................................... 133
Note 5.1- 5.2 Property, Plant & Equipment (PPE)...................................................................... 166
Note 6.1 to 6.2: Intangible Assets .............................................................................................. 178
Note 7: Financial Intruments ...................................................................................................... 179
Note 8: Impairments ...................................................................................................................... 19
Note 9: IFRS 5 - Non-current Assets held for sale and Discontinued Operations ........................ 19
Note 10: Inventories .................................................................................................................... 200
Note 11: Cash and Cash Equivalents .......................................... Error! Bookmark not defined.1
Note 11: Inventories ...................................................................................................................... 20
Note 12: Trade Receivables ........................................................................................................ 211
Note 13: Trade Payables and other current liabilities ................................................................. 222
Note 14: Public Sector Payment Policy for HSC organisations - Measure of
Compliance...................................................................................................................... 234
Note 15: Provisions for Liabilities and Charges 2015-16 ........................................................... 256
Note 16: Capital Commitments ..................................................................................................... 27
Note 17: Commitments under Leases ........................................................................................... 27
Note 18: Commitments under PFI and other service concession arrangements ........................... 29
Note 19: Other Financial Commitments ..................................................................................... 290
Note 20: Financial Guarantees, Indemnities and Letters of Comfort ......................................... 290
Note 21: Contingent Liabilities ................................................................................................... 301
Note 22: Related Party Transactions ........................................................................................... 312
Note 23: Third Party Assets ........................................................................................................ 323
Note 24: Financial Performance Targets ..................................................................................... 334
Note 25: Post Balance Sheet Events ............................................................................................. 35
Note 26: Date Authorised for Issue ............................................................................................... 35
The Primary Statements
Presentation of Financial statements - General principles
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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 found in the template.
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 found in the excel template.
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 two sections, the first
detailing Net expenditure against the Revenue Resource Limit (RRL) and the second
detailing revaluation movements re Property, plant and equipment and intangibles and
pension remeasurements.
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.
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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 THE EXCEL TEMPLATE, WITH ADDITIONAL LINE
DISCLOSURE AS NECESSARY (AGREED WITH THE DEPARTMENT) IN
ORDER TO PROPERLY 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 THE EXCEL TEMPLATE.
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.
Capital
Interpretation of the capital disclosures requirements in IAS 1 for the public sector
context:
THE FINANCING OF PUBLIC SECTOR ENTITIES IS ULTIMATELY TAXBASED 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
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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 the excel
template;
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.
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 IFRS’s 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 four 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 eight 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"
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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 pro forma 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 there is no need to refer to accounting policies if they do not apply.
Prior Year Adjustments
IAS 1, Presentation of Financial Statements, details the requirements surrounding the
disclosure of comparative information.
1. The 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 three 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 two preceding periods. The figures for the earliest
comparative period may or may not be relevant dependent 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 (i.e. the notes that have been impacted by the restatement or reclassification)
should be completed.
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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,
Changes in Accounting Estimates and Errors”. HSC accounts must be produced to reflect
the accounting policies given in Note 1 to the accounts.
3. A pro forma for accounting policies will be included in appendix 5 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.
Notes to the Financial Statements
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Note 2: Segmental Reporting
IFRS to be applied in full
The objective of IFRS 8 “Operating Segments” 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 are 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 an approach with the auditors. Prior year
figures are to be provided for comparative purposes. Entities are to follow the format in the
template of accounts.
The analysis of fees and charges information included within the FReM is not required.
Notes to the Financial Statements
For HSC TRUSTS
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Note 3: Other Expenditure
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:
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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.
Notes to the Financial Statements
7 Supplies and Services - General. This is the HSC bodies total revenue expenditure on
such things as:
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cleaning equipment, materials and external contracts;
provisions, catering etc;
contract catering;
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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:
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printing and stationery;
postage, telephones;
advertising, travel;
subsistence;
removal expenses; and
staff cars.
9 Transport. This is the HSC bodies total revenue expenditure on:
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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; and
 furnishings and fittings;
 office equipment;
 computer hardware and software*;
 data processing services;
 rates;
Notes to the Financial Statements
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rent;
property insurance;
engineering and building maintenance; and
other miscellaneous.
*Where not capitalised in accordance with the 2015-16 DHSSPS Capital Accounting Manual.
Bad Debts - This is the total of any bad debts written off in the year (previously unprovided for).
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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 3 smaller headings;
3.1 Commissioning, 3.2 Operating expenses, 3.3 Non cash.
Note 3.1 Commissioning
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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;
and
Misc – any other Commissioning expenditure not included above.
Note 3.2 – 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 it could be disclosed within
miscellaneous.
Notes to the Financial Statements
Note 3.3
Non cash items
See below – as for Trusts
The following headings are mandatory for ALL organisations;
1 Rentals under operating leases. This is the total amount charged to operating expenses
in respect of operating leases.
2 Interest Charges. This is the total interest paid and payable in respect of the reporting
year on:
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IBD;
Further Government borrowing;
Other borrowing, e.g. PFI and other service concession arrangements;
Finance leases;
Late payment of commercial debt; and
Any other Interest payments.
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3 PFI and other service concession arrangement 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.
4 Miscellaneous. This includes any expenditure that has not been analysed in the other
headings, including 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
5 Depreciation. This is the total charged to the Statement of Comprehensive Net
Expenditure in respect of the depreciation of PPE and should equal the depreciation per
the PPE note.
6 Amortisation. This is the total charged to the Statement of Comprehensive Net
Expenditure in respect of the amortisation of any intangible 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.
Notes to the Financial Statements
7 Impairments. This involves impairment losses in respect of tangible & intangible 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 Impairment of Assets.
Please note, impairments as a result of economic consumption are directly charged
against Net expenditure. It is no longer permitted to offset such impairments against
revaluation reserves.
Impairments in operating expenses + impairments in revaluation reserve =
impairments in property, plant & equipment, intangible assets and assets held for
sale notes.
8 (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 should be recognised as a credit to expense items
(depreciation) – not within income, if the depreciation charge is considered inaccurate.
A profit on sale of land is recognised as income (as land is not depreciated).
9 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.
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10 (Profit) on Intangibles. 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 recognised as a credit to
expense items (depreciation) – not within income, if the depreciation charge is
considered inaccurate. A profit on sale of land is recognised as income.
11 Loss on Intangibles. 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. Amounts in
respect of purchased and donated assets should be included here.
12 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.
13 Costs of borrowing of provisions. This equals the costs of borrowing for all provisions
and can be linked to the provisions note.
Notes to the Financial Statements
14 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.
Note 4: 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 1 April 2008 (1 April 2009 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 1 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.
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Note 4.1 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.
Notes to the Financial Statements
2. HSC bodies. This entry comprises income received and receivable from other HSC
bodies for contracted services (except services that do not include episodes of patient
care) provided by the Trust.
3. Non-HSC.
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Private Patients. This entry records all income received and receivable from private
patients; and
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. HSCB.
The headings below have been agreed for HSCB to replace above:
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Income from Dept of Education – This is income for Surestart;
CAWT – Cooperation and working together; and
Family Health Services Receipts – FHS receipts and recoveries re; medical, dental;
pharmaceutical and ophthalmic services.
Note 4.2: 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
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manufacture and sale of drugs, laundry services managed by the HSC body, pharmacy,
laboratories and radiology and other 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. Donations / Government grant / Lottery funding for non-current assets. This is a
new category added in 2011-12 to reflect the recognition of amounts received in
respect of government grants or donations for non-current assets as income following
the removal of the government grant and donated asset reserves. All
Notes to the Financial Statements
government grants and donated assets should be recognised as income reflecting the
conditions or restrictions placed on their use by the providers. They should be
recognized when receivable unless there are conditions on their use which, if not met,
would mean the grant is repayable.
In such cases, the income should be deferred (Dr Bank Cr Deferred Income) and
released when the obligations are met (these conditional grants should be transferred
to current / non-current liabilities as deferred income until the conditions are met).
Where a grant has only restricted use (and not conditional) it should be recognised as
income immediately.
5. 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.
6. 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.
7. Other Income. This covers any other income not chargeable to the above headings.
Material amounts must be specified as appropriate.
Note 4.3 Deferred Income.
1. Income released from conditional grants. The income released in respect of
conditional grants transferred to current / non-current liabilities until conditions are
met should be included here.
FOR HSCB, the following may also be listed under Other Income;
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Accommodation - This is accommodation income previously shown in note 2.5; and
Canteen - This is income from canteen, previously shown in note 2.5.
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Notes to the Financial Statements
Note 5.1- 5.2 Property, Plant & Equipment (PPE)
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.
2. IAS 16 requires the full disclosure of the comparative PPE note, therefore note 5.1 is for
current year PPE, and note 5.2 is for prior year PPE.
3. Assets should be valued in accordance with the Capital Accounting Manual and updated
for any IFRS changes. Where changes to the value of existing 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;
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Buildings (excluding dwellings) – hospitals, office accommodation and storage
facilities fall into this category;
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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;
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Assets under construction – This category includes assets under construction and
is used mainly for buildings or machinery where cost has been incurred in
commencing the asset and it is not yet available for use;
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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;
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Transport Equipment - This category includes all transport equipment including
motor vehicles;
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Information Technology (IT) – this includes hardware used for processing data and
communications; and
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Notes to the Financial Statements
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Furniture and fittings – this includes furniture and office fittings where these have
been capitalised as having a value over £5,000 to 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. Per para 7.1.7 (g) was written for an earlier version of FReM as part of the PPE note
entities are required, in the year the asset is acquired, to separately disclose the fair value
of those assets funded by government grant, donation or lottery funding. Where the
funder provides cash, rather than physical assets, any difference between the cash
provided and the fair value of the assets acquired should also be disclosed.
8. In preparation for the introduction of Clear Line of Sight (CLoS) two lines have been
inserted into the PPE note these are:
i.
ii.
Impairment charged to the SoCNE; and
Impairment charged to the revaluation reserve.
9. From 2012-13 onwards negative revaluation is to be treated in the same way as negative
indexation, i.e. as an impairment.
10. 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 31March 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.
11. 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 valued. The note should also state
that PPE are valued using indices (if appropriate).
Notes to the Financial Statements
Note 6.1 to 6.2: Intangible Assets
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.
IAS 16 requires the full disclosure of the comparative intangible note, therefore note 7.1
is for current year intangibles and note 7.2 for prior year intangibles.
2. Categories of intangible asset are those with a life of more than 1 year i.e.17








Information Technology – software developed in-house or by third parties (but not
software licences);
Software licences – the right to use software developed by third parties;
Websites;
Development expenditure;
Licences, trademarks and artistic originals – original films, sound recordings, etc
on which performances are recorded or embodied;
Patents – inventions that are afforded patent protection;
Goodwill; and
Payments on account and intangible Assets under Construction.
A number of columns in the table will not be used as they do not apply to HSC bodies.
The columns which do not apply should be left blank. To facilitate CLoS the blank
columns should not be deleted from the table.
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. In preparation for the introduction of Clear Line of Sight (CLoS) two new lines have
been inserted into the PPE note these are:
i. Impairment charged to the SoCNE; and
ii. Impairment charged to the revaluation reserve.
6. From 2012-13 onwards negative revaluation is to be treated in the same way as negative
indexation, i.e. as an impairment.
7. 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.
Notes to the Financial Statements
8. Per para 7.1.7 (g) was written for an earlier version of FReM as part of the PPE note
entities are required, in the year the asset is acquired, to separately disclose the fair value
of those assets funded by government grant, donation or lottery funding. Where the
funder provides cash, rather than physical assets, any difference between the cash
provided and the fair value of the assets acquired should also be disclosed.
Note 7: Financial Instruments
18
HSC bodies should refer to the 2015-16 FReM for detailed guidance. Per the FReM pro
forma financial assets are investments and PDC is not an equity instrument and the NIAS
should present as a form of financing.
Notes to the Financial Statements
Note 8: Impairments
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 (SoCNE)
(within the Net expenditure total) and how much has been taken through to the revaluation
reserve (this amount will be disclosed within the “Other Comprehensive Expenditure”
section of the Statement of Comprehensive net Expenditure). Impairments due to a general
fall in prices is recognised firstly in the revaluation reserve and if there is not enough in the
revaluation reserve to cover, the remaining amount is taken to the SoCNE.
Economic impairments are taken in full directly to the SoCNE (with a corresponding
transfer from the revaluation reserve to the General Reserve for any amount which could
have been used had it been permitted).
The total impairment charge is taken from the PPE and intangibles notes and should include
negative indexation, and is net of reversal of impairments (see below).
This should be analysed between PPE and intangibles.
Reversal of impairments – Where an impairment loss recognised in a previous period
reverses e.g. because of a fall in the value of buildings in the previous year has now reversed
due to an increase in the indexation for buildings. The reversal should be recognised firstly
in the SoCNE, to the extent that the original impairment loss was recognised in the SoCNE.
Any remaining balance of the reversal of impairment should be recognised in the
revaluation reserve. (For further details see the Capital Accounting manual at Chapter 6,
paragraph 13).
Note 9: IFRS 5 - Non-current Assets held for sale and Discontinued Operations
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.
19
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.
Note 10: 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 realisable 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.
Notes to the Financial Statements
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).
Note 11: 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
Instruments.
3. Valuation should be the lower of purchase price or net realisable value.
20
4. If the investments are listed the market value should be shown if this differs from the
valuation in the accounts.
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;
VAT receivable;
Other receivables - not relating to fixed assets;
Other receivables - relating to property plant and equipment;
Other receivables - relating to intangibles; and
Other receivables e.g. RTA, payments receivable, VAT, salary overpayments;
seconded staff.
Other current assets


Other prepayments and accrued income including pension prepayments; and
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.
Notes to the Financial Statements
5. If applicable receivables relating to capital should be separately identified.
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).
21
1. The disclosure should be analysed between:
 Balances with other central government bodies i.e. DHSSPS, BSO, Board, Other
Central Government Departments, NDPB’s, Agencies;
 Balances with local Authorities for e.g. Councils;
 Balances with NHS/HSC Trusts;
 Balances with public corporations and trading funds; and
 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.
Notes to the Financial Statements
Note 13: Trade Payables and other current liabilities
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;
VAT payable;
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 - property, plant and equipment;
Trade Capital Payables - Intangibles (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;
Accruals and deferred income - Excluding salaries & wages accruals. This will
include payments received on account. Also include the element of income deferred
in relation to conditional government grants i.e. if a grant has been received with
conditions attached, which if not met, would mean the grant is repayable, then
income should be deferred and released when the obligations are met. The element
of income deferred should be included here or within the same category within
amounts payable after more than one year;
Accruals and deferred income – relating to property, plant and equipment;
Accruals and deferred income – relating to intangibles;
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; and
22

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.
Notes to the Financial Statements
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.
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 the Loans note.
Note 13.2: Trade payables and other current liabilities - Intra-government balances
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.
2. The disclosure should be analysed between:





Balances with other central government bodies i.e. DHSSPS, BSO, Board, Other
Central Government Departments, NDPB’s, Agencies;
Balances with local Authorities for e.g. Councils;
Balances with NHS/HSC Trusts;
Balances with public corporations and trading funds; and
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.
Notes to the Financial Statements
Note 14: Public Sector Payment Policy for HSC organisations - Measure of Compliance
1. 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 applicable terms
and appropriate government accounting guidance.
In relation to contracts entered into prior to 16 March 2013 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.
23
In relation to contracts entered into post 16 March 2013 payment is regarded as late if
made outside 30 days of receipt of a valid, undisputed invoice.
In the 2015-16 financial year prompt payment reporting should be on the basis of both
bills paid within “30 days or other agreed terms” and within “30 calendar days of receipt
of an undisputed invoice”.
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.
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).
6. Total bills paid within 30 days of receipt of an undisputed invoice. This is the total
of non-HSC trade payable invoices paid during the year within 30 days of receiving an
undisputed invoice.
7. Percentage of bills paid within 30 days of receipt of an undisputed invoice. This is
the total bills paid within 30 days of receiving an undisputed invoice 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.
Notes to the Financial Statements
Note 14.2: The Late Payment of Commercial Debts Regulations 2002
1. The legislation can be summarised as follows (this is not anticipated to be comprehensive
and legal advice should be sought as appropriate):

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);

In addition, a business may claim compensation for debt recovery costs per
invoice:
24
- Up to £999.99 (including VAT) £40;
- £1,000 to £9,999.99 (including VAT) £70; and
- £10,000 or more (including VAT) £100.

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;

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).
2. 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.
Notes to the Financial Statements
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”.
Note 15: Provisions for Liabilities and Charges 2015-16
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; and
 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.
25
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.
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.
6. Estimates provided by DLS in all areas of law including clinical negligence, employers
liability, public liability and employment law cover the following cost elements –
damages, plaintiffs’ solicitors and defence costs (i.e. counsel and expert fees) but not the
cost of services provided by DLS.
Expected Timing of Discounted Cash Flows
7. 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
‘not later than one year’, ‘later than one year and not later than 5 years’ and ‘later
than five years’. This total should equal the provision at 31 March 2016.
Also for each class of provision, the following must be disclosed:
I.
II.
III.
an indication of the uncertainties regarding timings and amounts;
any fundamental assumptions made concerning future events; and
amount of any potential reimbursements in respect of provisions.
Note 16: 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.
26
3.
Organisations should provide a narrative for committed material projects indicating the
likely timescale of the project and the method of finance.
Notes to the Financial Statements
Note 17: Commitments under Leases
This note shows the commitments under leases analysed between operating leases and finance
leases.
Note 17.1 Operating leases
1. In accordance with IAS 17, lesseess must disclose the following;
(a) the total of 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.
(b) the total of future minimum sublease payments expected to be received under noncancellable subleases at the end of the reporting period;
(c) lease and sublease payments recognised as an expense in the period, with separate
amount for minimum lease payments, contingent rents, and sublease payments; and
(d) a general description of the lessee’s significant leasing arrangements including, but not
limited to, the following:
(i)
the basis on which contingent rent payable is determined;
(ii)
the existence and terms of renewal or purchase options and escalation
clauses; and
(iii) restrictions imposed by lease arrangements, such as those concerning
dividends, additional debt and further leasing.
2. Obligations under operating leases must be disclosed separately over the categories land,
buildings and other. Where the amount that would be recognised for the land element is
immaterial, the land and buildings may be treated as a single unit for the purpose of lease
classification.
Note 17.2 (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; and
(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.
27
Notes to the Financial Statements (Note 18.2 continued)
Note 17.2 (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 paragraph 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.
Note 18: 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 18.1: PFI and other service concession arrangement schemes deemed to be offbalance 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; and
 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.
Notes to the Financial Statements
28
Note 18.2: ‘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, the following should
be noted:


Note what the contract is for and note that under IFRIC 12 the asset is treated as an
asset of the Organisation; and
Note that the substance of the contract is that the Organisation has a finance lease
and that payments comprise two 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 18.2)
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.
Note 18.3 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.
Note 19: 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.
Note 20: Financial Guarantees, Indemnities and Letters of Comfort
Financial instruments
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.
Notes to the Financial Statements
29
1. 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.
2. 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.
3. 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.
4. 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).
5. 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

The nature and extent of risks arising from the financial instruments to which the
entity is exposed during the period and at the end of the reporting period and how the
entities manage those risks.
The pro forma accounts should be used where appropriate 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.
Notes to the Financial Statements
Note 21: Contingent Liabilities
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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 also list any unquantifiable contingent liabilities they have
entered into during the year.
3.
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.
4.
The pro forma note describes contingencies in relation to clinical negligence; other
contingencies should be disclosed in a consistent format.
5.
If there are no contingent liabilities or gains, this should be stated.
6.
The identification and accounting treatment of contingent liabilities should be in
accordance with the guidance in IAS 37.
Content
7.
In all cases the disclosure should provide:




8.
a brief description of the nature of the contingent liability, 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.
Notes to the Financial Statements
Note 22: 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 related parties.
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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.
Notes to the Financial Statements
Note 23: 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, where significant 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;
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
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.
Notes to the Financial Statements
Note 24: Financial Performance Targets
Note 24.1: 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 tangible assets (as per note 4);
Amortisation –intangible assets (as per note 4);
Impairments – impairments (as per note 4);
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); and
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.
Notes to the Financial Statements
Note 24.2: 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)
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Receipts from sales of fixed assets up to NBV
Capital Resource Limit
(Over)/Under spend against CRL
(x)
x
(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.
24.3: Financial Performance Targets
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 or £20,000
whichever is the greater.
BSO/NIBTS
Given that the majority of income for BSO/NIBTS is generated through contracts with other
bodies, rather than through RRL, it is recognised that measurement of breakeven as a
percentage 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 activities (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.
Note 25: 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.
Note 26: Date Authorised for Issue
The following interpretations of IAS 10 for the public sector context apply:
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1. The date of the Accounting Officer’s authorisation for issue of the financial statements
of the reporting entities covered by this Manual should be the same date as the
Comptroller and Auditor General signing date. The date of authorisation for issue
must be included as the last note of the Annual Report and Accounts, i.e. after the Post
Balance Sheet Events note.
The statement should read “The Accounting Officer authorised these financial statements for
issue on [insert date of issue].”
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