Local authorities in the United Kingdom are required to keep their accounts in accordance with ‘proper practices’. They must comply with the terms of the Code of Practice on Local Authority Accounting in the United Kingdom prepared by the CIPFA/LASAAC Local Authority Accounting Code Board (CIPFA/LASAAC).

The exposure draft includes proposals to incorporate the requirements of IFRS 13 Fair Value Measurement and a number of other international standards such as IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entites, IAS 27 Separate Financial Statements (as amended in 2011) and IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) into the Code.  The standards have been incorporated into the Code to the extent that they are applicable in a local government context.  Among other things the amendments to the Code include changes to the definition of control introduced in IFRS 10 with the Code focusing on the concept of “returns”

Significantly, the approach proposed to incorporate IFRS 13 Fair Value Measurement would result in authorities needing to review their current measurements of property, plant and equipment and for some authorities may require remeasurement of particular assets.  CIPFA/LASAAC note that both IFRS 12 and IFRS 13 will also bring “significant new disclosure requirements for local authorities”.  A number of other changes, including minor drafting changes, are also proposed in the Exposure Draft.

The consultation also asks for respondents views on the adoption of depreciated replacement cost for transport infrastructure assets (this measurement basis is included within the CIPFA Code of Practice on Transport Infrastructure Assets) into the 2015/16 Code.  Currently such assets are measured at depreciated historical cost.  Due to a number of “difficulties” being highlighted with the adoption of depreciated replacement cost, CIPFA proposes a “dry run” in the 2014/15 Code. 

In addition, CIPFA/LASAAC are consulting on proposals to simplify and streamline the presentation of local government financial statements/statutory accounts to “better meet the needs of users” and to “remove unnecessary burdens from local authority preparers”.   They highlight that

Local authority financial statements have suffered similar problems in relation to their complexity and length as those encountered in the private sector and elsewhere in the public sector 

CIPFA and LASAAC’s review follows a similar review conducted in June 2013 (link to HM Treasury review) by HM Treasury into simplifying and streamlining the presentation of annual reports and accounts for Central Government. 

The results of the consultations, which were included within the Financial Reporting Advisory Board (FRAB) minutes for December, can be found here. 

Click for (all links to CIPFA website):

• The 2014/15 Code of Practice on Local Authority Accounting in the United Kingdom - Invitation to comment
• Simplifying and streamlining the presentation of Local Authority Financial Statements