Implementing international financial reporting standards

Report: 9
Date: 23 March 2009
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 December 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 in ensuring the successful implementation of IFRS and good progress continues to be made within the MPA/MPS. However whilst work continues on assessing the various changes that IFRS might have on the Statement of Accounts, until CIPFA issue their guidance on the impact of the various standards on Local Authority accounts no final assessment can be made. Although early drafts of sections of the code are being released for comment on an ad-hoc basis, consultation on the guidance, initially due in the autumn, was deferred until the spring and latest indications are that this will be issued in the next month. This has meant that a number of target dates within the project initiative document have needed to be revised. This is a key risk to the successful implementation of IFRS and will need to be closely monitored by the project board. Other areas of progress are detailed below:

4. Project Plan – Attached at Appendix 1 is the current. This has now been updated to reflect both the revised timetable and various changes in MPS personnel. A more comprehensive timetable is currently being prepared that will support the timetable included in the project initiation document.

5. Project Board – Chaired by the Treasurer (the project sponsor) the board continues to meet on a regular basis to monitor progress and ensure successful implementation of IFRS.

6. Interpretation of standards – As indicated above, the team of “subject matter experts” continue to review the current list of IFRS changes, to determine the likely impact on the Authority’s accounts. The project board will formally sign off the assessed impact of each standard once CIPFA guidance has been issued.

7. Employee benefits – The new requirement to accrue for all employee benefits in the year in which they were earned could potentially be a major task. Therefore as part of this year’s closing of accounts, employee benefits that would need to be accrued under the new standard will be calculated for a sample of staff so the potential impact on the accounts can be assessed.

8. External Audit – An initial meeting has been held with the Audit Commission to discuss our approach and progress to date in implementing IFRS.

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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