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CIPFA/LASAAC consult on changes to the Code of Practice on Local Authority Accounting in relation to accounting for secure housing tenancies and COVID-19-related rent concessions

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19 Jan 2021

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) are seeking comments on proposed changes to the Code of Practice on Local Authority Accounting in relation to accounting for secure housing tenancies and COVID-19-related rent concessions.

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 (the Code) prepared by the CIPFA LASAAC Local Authority Accounting Code Board (CIPFA LASAAC).

The first area for consultation relates to the accounting for the secure tenancy for tenants within local authorities in the context of both IAS 17 Leases and IFRS 16 Leases. The consultation considers:

  • Whether the leasing standards apply to housing revenue account tenancy agreements (i.e. whether they meet the definition of a lease (under both IAS 17 and IFRS 16).
  • If the leasing standards do apply, whether they are operating or finance leases.
  • What disclosure requirements will be needed by the users of local authority financial information relating to housing tenancies and the related assets.

CIPFA/LASAAC are of the view that secure housing tenancies do not meet the definition of a lease under IAS 17 and therefore do not propose a change to the 2020/21 or 2021/22 Codes. However they have concluded that secure housing tenancies do meet the definition of a lease under IFRS 16. As CIPFA/LASAAC has taken the decision to delay the implementation of IFRS 16 to 1 April 2022, the proposed amendments to the Code therefore mainly focus on changes to the 2022/23 Code. However, consideration has also been made as to whether secure housing tenancies meet the definition of a lease under IFRS 17 to ensure that the accounting prior to the implementation of IFRS 16 is correct.

As CIPFA LASAAC has decided to defer the implementation of IFRS 16 to 1 April 2022, it is also keen to understand whether it would be useful to local authority stakeholders if provisions were included in the Code to provide guidance on the accounting treatment for COVID-19-related rent concessions. UK GAAP under FRS 102 Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime already provides such guidance and so the proposed amendments to the 2021/22 Code (and possibly as an update to the 2020/21 Code) cross refer to this treatment. This might be useful to local authorities with subsidiaries that apply FRS 102 and that have received such rent concessions.

Comments are requested by 12 March 2021.

A press release, the Invitation to comment and copies of the exposure drafts are available on the CIPFA website.

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