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CIPFA/LASAAC consults on accounting for schools in local authorities

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24 Feb 2014

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) are consulting on accounting for schools in local authorities. Comments are invited until 4 April 2014.

A joint HM Treasury and CIPFA/LASAAC working group (“the working group”) was set up in May 2013 to review the accounting for local authority maintained schools in England and Wales.  The working group report (‘The Accounting Treatment of Local Authority Maintained Schools in England and Wales’) concluded that community schools, voluntary controlled, voluntary aided and foundation local authority maintained schools (“local authority maintained schools”) are separate entities controlled by local authorities.  Under IFRS 10 Consolidated Financial statements these local authority maintained schools would need to be included in the local authority group financial statements.  It was also concluded that academies and free schools are not under local authority control.  Under IFRS 10, academies and free schools would not be required to be included in the local authority group financial statements. 

The working group considered whether an adaption to IFRS 10 as adopted by the Code of Practice on Local Authority Accounting in the United Kingdom (“the Code”) was required to allow local authority maintained schools to be included in the local authority single entity financial statements.  The working group highlighted that “this treatment is used by many local authorities at the moment when accounting for schools under existing consolidation standards” and considered “that there might be benefits of a more consistent approach”.   It was considered that requiring inclusion within the group accounts local authorities would incur “a substantial amount of time and expense”.  

In the consultation, CIPFA/LASAAC are therefore consulting on the proposal that the results of local authority maintained schools should be included within the separate financial statements of local authorities.  They also propose a similar accounting treatment for community special, foundation special and local authority maintained nursery schools.  The consultation also seeks the views of respondents on the working group’s assessment that “the inclusion of schools in the local authority’s single entity accounts, instead of their group accounts, is unlikely to alter decision making”.  The proposals adapt the definition of the local authority single entity financial statements in Chapter 9 of the Code. 

CIPFA/LASAAC highlight in their consultation recognise that local authorities will also need to consider IFRS 12 Disclosure of Interests in Other Entities disclosures for local authority maintained schools.  To ensure “that the disclosures required by IFRS 12 do not overburden local authority financial statements with excess information”, they have proposed additional provisions “to encourage local authorities only to report those transactions which materially impact on the presentation of a true and fair view of local authority performance, financial position and cash flows and to report disclosures on schools in aggregate”. 

All of the proposed changes are presented as an Appendix E to the Code. 

The consultation follows an earlier consultation by CIPFA/LASAAC of proposed changes to the Code 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.  

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