IFRS opportunity or threat

1
IFRS opportunity or threat

• David Watkins
• Head, Financial Reporting Policy

2
The 2007 Budget announcement

• ..from the first year of the CSR period the
  annual financial statements of government
  departments and other entities in the public
  sector will be prepared using International
  Financial Reporting Standards adapted as
  necessary for the public sector.

3
The 2007 Budget announcement

• .. intention that Whole of Government Accounts
  will now be published for the first time for the
  2008-09 financial year. prepared on the new IFRS
  basis.

4
Progress in implementing IFRS

• Work starts on IFRS-FReM May 2006
• FRAB consideration from June 2006
• Draft FReM due end June 2007
• Consultation over summer 2007
• Conference on 27 September 2007
• Final version due December 2007

5
Application across sectors

• IFRS-based FReM applies to departments, executive
  agencies, non-departmental public bodies and
  trading funds
• NHS Manuals and FT FReM are based on the FReM
• Working with CIPFA/LASAAC on how to get IFRS data
  for local government

6
Key issues in applying IFRS

• GRAA 2000 EU adopted IFRS
• IFRS 8 Operating segments will Europe adopt?
• IFRIC 12 Service concession agreements will
  Europe adopt?

7
Key issues in applying IFRS

• Accounting for PFI and links to IAS 16, IAS 17
  and IFRIC 12
• Accounting for infrastructure assets renewals
  accounting outlawed
• Financial instruments lack of engagement by
  central government entities

8
Other issues in applying IFRS

• IAS 17 Leases to what extent are existing
  operating leases finance leases?
• IAS 19 Employee benefits can we realistically
  accrue for holiday pay?
• IAS 40 Investment properties to what extent does
  government hold investment properties?

9
Other accounting issues

• Modified historical cost accounting a new
  approach
• Accounting for pension scheme liabilities
• Heritage assets the arguments rumble on

10
Whole of government accounts

• New intention 2008-09 opening and closing
  balance sheets and IE account
• IFRS-based so the key issues for individual
  accounts are also key here
• Wider data quality issues as we consolidate
  health, public corporations and LG (working with
  CIPFA)

11
Whole of government accounts

• Dry-run 2005-06 completed and audited with
  positive positive feedback from the National
  Audit Office on progress made in addressing
  methodological issues
• Some data quality issues remain