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

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18 Jul 2016

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) are seeking comments on an exposure draft of the 2017/18 Code of Practice on Local Authority Accounting in the UK (the Code) which would apply to accounting periods beginning on or after 1 April 2017 (“the exposure draft”).

Local authorities in the United Kingdom are required to keep their accounts in accordance with ‘proper practices’. This includes compliance 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:

  • Narrative reporting.  CIPFA/LASAAC propose to incorporate specific narrative reporting requirements into the Code from 2017/18.  It is CIPFA/LASAAC’s view that “narrative reporting requirements should encourage local authorities to tell their story and not be overly prescriptive in nature”.  The proposed amendments to narrative reporting are based on “high level principles”.  Proposed requirements have been derived by reference to the elements required in an Integrated Report and also by reference to the Financial Reporting Council’s (FRC’s) Guidance on the Strategic Report.
  • Going concern reporting.  Changes are proposed to reinforce the requirements in relation to going concern.
  • Review of accounting policies.  CIPFA/LASAAC propose to remove the list of accounting policies at paragraph 3.4.2.87 and to include more guidance for local authorities on the inclusion of significant accounting policies in the financial statements.  It is hoped that this will “encourage local authorities to avoid a ‘boilerplate’ approach to their significant accounting policies”.  CIPFA/LASAAC also encourage local authorities to “consider innovative ways of including their accounting policies in their financial statements to engage the users of the financial statements and ensure that the accounting policies tell the individual authority’s story”.   
  • New disclosure of transaction costs for pension fund investments.  It is proposed that the current recommended disclosure at paragraph 6.5.5.2 in relation to disclosure for pension fund transaction costs be mandatory.  
  • Consideration of the effects of a number of narrow scope amendments to International Financial Reporting Standards (IFRSs) including amendments to IAS 7 Statement of Cash Flows (Disclosure initiative) and IAS 12 Income Taxes (recognition of deferred taxes for unrealised losses)
  • Legislative changes. 

The exposure draft also includes two proposed appendices for inclusion in the 2017/18 Code.  These appendices are in relation to provisions required to adopt IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.  Both of these appendices will apply only to the 2018/19 Code but are proposed to be included to allow local authorities adequate time to prepare and understand the requirements of the new standards.

Comments on the exposure draft are invited until 7 October 2016.  

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