We comment on revised guidance on impairment of social housing assets

  • Deloitte Comment Letter Image

06 Jun, 2014

We have published our comment letter on the revised guidance relating to impairment of social housing assets published by the National Housing Federation’s (NHF) and the SORP Working Party. We are generally supportive of the revised guidance but have highlighted a number of areas that need to be addressed before a final Housing Statement of Recommended Practice (SORP) can be published.

An original Exposure Draft (“the original ED”) of a SORP for registered social housing providers was issued by the NHF in December 2013 with a comment period which closed on 14 February 2014.  The impact assessment performed by the NHF, along with the responses to the original ED indicated that that “the sector was deeply concerned about proposals on the impairment of social housing assets”.

Following consideration of responses to the original ED, the NHF, along with the SORP Working Party, published a further ED in April 2014 that significantly revised the proposed guidance relating to impairment of social housing assets.

Our key comments on the revised guidance relating to impairment of social housing assets are:  

  • We do not believe a purely cash flow based estimate (i.e. value in use) in determining the recoverable amount of social properties would provide more relevant and reliable information to users.     
  • We recommend that the SORP includes some more guidance on how depreciated replacement cost should be calculated in respect of social housing properties. In addition, we also believe there are other methods for determining the value of assets held for service potential such as fair value less cost to sell, but the use of different methods may increase diversity in practice. Therefore, we suggested the SORP use one method to encourage consistency.
  • We do not see additional benefits in requiring social landlords to disclose the value in use of a cash generating unit if it chooses to use the VIU-SP estimation technique in performing an impairment assessment.  

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter.

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