Implementing international financial reporting standards

Report: 9
Date: 8 December 2008
By: Treasurer and Director of Resources on behalf of the Commissioner

Summary

In March 2007 the Government announced in the Budget Report the intention that all government and other public bodies should in future publish their annual financial statements in line with International Financial Reporting Standards. The new reporting standards are to be implemented by central government bodies for 2009/10 and other public bodies, including Police Authorities for 2010/11.

Early planning is seen as key in successfully making the transition to the new arrangements, and this report provides members on progress made since the last update in September 2008.

A. Recommendation

That members note the report and the appended project plan.

B. Supporting information

Background

1. The annual financial statements of government bodies and other public bodies, including police authorities are currently produced in line with UK Generally Accepted Accounting Practices (UKGAAP). However in March 2007 the Chancellor’s Budget Report announced the Government’s intention that the annual financial statements of government departments and other public bodies were in future to be published in line with international financial reporting standards (IFRS). The intention was to bring consistency and comparability with global economies and follow best practice in the private sector.

2. Central Government bodies will need to report on an IFRS basis from 2009/10, with other public bodies, including Police Authorities, reporting on an IFRS basis from 2010/11. Financial statements for the previous year will also need to be restated to produce prior year comparatives.

Progress to date

3. Early planning is seen as being key to the successful implementation of the new International Financial Accounting Standards (IFRS), and since reporting to the last Committee the Authority and Service have made good progress with regard this as detailed below.

4. Project Plan – Attached at Appendix 1 is the project initiation document that has now been agreed by the Authority and Service. This provides details of the project including its objectives and timeframe and will be used to monitor progress in implementing IFRS. In accordance with good practice, quarterly reports are to be made to Corporate Governance and these will include updates, monitoring whether progress is in line with the project plan and its timeframe.

5. Project Board – Chaired by the Treasurer (the project sponsor) a project board of key officers within the Authority and Service has been established and met for the first time in November. Regular meetings will continue to be held to monitor progress and ensure successful implementation of IFRS.

6. Project Group – Implementation of the standards is not just a financial issue, but will have implications for various parts of the organisation such as property, HR and DoI. Therefore a multi disciplinary project group has been set up to discuss and develop the necessary changes in policies and procedures.

7. Interpretation of standards – A team of “subject matter experts” have been identified and have started to review the current list of IFRS changes, to determine the likely impact on the Authority’s accounts. However until CIPFA issue their guidance on the impact of the various standards on Local Authority accounts no final assessment can be made. This guidance was due in the autumn but has now been deferred until spring 2009. The team are currently meeting on a fortnightly basis to discuss standards under review.

8. Leases – under IFRS accounting treatment of leases will change. Therefore in conjunction with property services, finance services are currently reviewing all material leases, to assess the impact of the new standard.

Next steps

9. The Project Board and subject matter experts will continue to meet on a regular basis to ensure the good progress made to date continues. In addition the project group will meet regularly to ensure the organisational wide issues are fully considered.

10. The Authority and Service need to start engaging with the external auditors on implementing IFRS. Whilst the auditors will not be able recommend how these are adopted they will be able to discuss their implications and review our proposals.

11. Specialist external advice is to be sought on the implications of IFRS on how we currently account for our two PFI schemes. The strong likelihood is that schemes need to be added back on the balance sheet.

C. Race and equality impact

The Authority and MPS will ensure that equality and diversity issues are properly considered throughout the transition period.

D. Financial implications

Whilst the introduction of IFRS will impose greater burden on those preparing the accounts than on those auditing them, there will nevertheless be extra work for external audit. The additional cost in 2010/11 is as yet unqualified.

E. Background papers

None

F. Contact details

Report author: Annabel Adams, MPA.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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