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CIPFA/LASAAC consults on new Code of Practice on Local Authority Accounting

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24 Jul 2015

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) is seeking comments on an exposure draft of the 2016/17 Code of Practice on Local Authority Accounting in the UK (the Code) which would apply to accounting periods beginning on or after 1 April 2016 (“the exposure draft”). CIPFA and LASAAC is also seeking comments on a consultation which seeks to improve the presentation of local authority financial statements and on proposed changes to the service reporting code of practice which will apply to accounting periods commencing on 1 April 2016.

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 a number of key proposals for change including:

Additionally the exposure draft includes proposed changes to the Code’s provisions on Concepts (section 21) following the issuance of the International Public Sector Accounting Standards Board (IPSASB) Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities.  A number of legislative changes and other minor drafting amendments are also proposed. 

Views are also sought as to whether the future adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments will have significant application issues when they are adopted by the Code.  

In addition, CIPFA/LASAAC has issued a parallel consultation on improving the presentation of local authority financial statements ("the consultation").  The consultation, Telling the story: improving the presentation of local authority financial statements, proposes changes to Sections 3.1 and 3.4 of the Code.  CIPFA has also issued a consultation on proposed changes to the service reporting code of practice (SeRCOP) ("the SeRCOP consultation").  

The consultation builds on previous CIPFA/LASAAC projects which aimed to streamline the presentation of local authority financial statements/statutory accounts.  CIPFA/LASAAC considers that the changes proposed in the consultation “will reconnect the financial statements of local authorities with the way those authorities are both organised and funded”.  The consultation has two key strands:

  • To allow local authorities to report on the same basis they are organised by breaking the formal link between the SeRCOP and the Comprehensive Income and Expenditure Statement (CIES).
  • To introduce a new Funding Analysis as part of the narrative report which provides a direct reconciliation between the way local authorities are funded and budget and the CIES .  This Funding Analysis would be supported by a streamlined Movement in Reserves Statement (MiRS) and replace the current segmental reporting note.

The SeRCOP consultation consults on the 2016/17 CIPFA Service Reporting Code of Practice that will apply to accounting periods commencing 1 April 2016.  Changes are proposed to the service expenditure analysis (SEA) for England and Wales to reflect organisational and operational changes to services within authorities.  The main changes to the SEA sections of the SeRCOP are in relation to Public Health (England) and Housing Services (HRA - Wales).

Comments on both the exposure draft and consultation are invited until 9 October 2015.  Comments on the SeRCOP consultation are requested by 16 September 2015.

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