Transcript Do’s & dont’s - Chartered Institute of Public Finance

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What’s new on the technical
accounting scene?
Alan Bermingham
Principal Consultant, CIPFA
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Reporting Service Performance
Conceptual Framework
Revisions to Consolidations
Alignment
CRC Scheme
(IPSAS 6 to 9)
Emissions Trading
Public Sector Locally (HMT/CIPFA LASAAC)
Social Benefits
Mergers
Public Sector International (IPSASB)
SCA's
Government Business Enterprises
Current Exposure Drafts
Consolidations & JV's
Fair Value
Pensions
Public Sector Combinations
What's new in Technical Accounting
Social Landlords
Combinations under common control
Discounting
Further & Higher Education
Impact on SORP's (PBE's)
Internationally (IASB)
Charities
Locally
Liabilities
Major IFRSs
Disclosure Initiative
Emissions Trading
New UK GAAP Framework - FRS 100, 101 & 102
Financial Instruments (IFRS9)
Leases
Rate Regulated Activities
Insurance Contracts
Revenue Recognition
Periods beginning on or after 1 Jan 2015
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Session Objectives
 To raise awareness of key technical issues
 To highlight areas of potential impact
 To look at topics for further research and
understanding
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New UK GAAP
FRS 100 – Application of Financial Reporting
Requirements
FRS 101 – Reduced Disclosure Framework
FRS 102 – The Financial Reporting Standard
applicable in the UK and Republic of Ireland
Effective for accounting period beginning on or after 1
January 2015
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New Framework
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What should we consider?
 Impacts on SORP bodies and other Public
Benefit Entities (PBE’s)
 Are we involved with bodies in the scope of the
new standards
 Does this impact their financial position or
impact financial ratios or covenants?
 Are we grant giving bodies and need to be aware
of changes?
 Do we need to consider wider supplier issues?
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IASB Projects and Developments
Projects (Major IFRSs)
 New standard for Financial Instruments (IFRS 9)
 New Leasing Standard (replacement for IAS 17)
 Rate Regulated Activities
 Insurance Contracts
 Revenue Recognition
Other Research
 Emissions Trading
 Combinations under common control
 Liabilities (IAS 37) and Discounting
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Leases - Consumption Principle
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Recognition - Lessees
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Example - Lessees
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Other Projects and Research
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Rate regulation is a restriction in the setting of
prices that can be charged to customers for services
or products
Generally, it is imposed by regulatory bodies or
governments when an entity has a monopoly or a
dominant market position that gives it excessive
market power
Revenue - the objective of this project is to clarify
the principles for recognising revenue from contracts
with customers
It applies to all contracts with customers except
leases, financial instruments and insurance contracts
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International - IPSAS
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Development of IPSAS Conceptual Framework
Projects include:
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Emissions Trading (also IASB)
Revisions to IPSAS 6 to 9 – Resulting from IFRS 10,11,12
Public Sector Combinations
Government Business Enterprises
Social Benefits!
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Social Benefits Project
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The objective of the project is to identify the
circumstances and manner in which expenses and
liabilities of certain social benefits of governments
should be reflected in the financial statements
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Why do this? – part of the issue of assessing longterm fiscal sustainability and the extent to which
obligations under current frameworks can be met
into the future
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No real movement on this since 2012 and linked to
completion of conceptual framework
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Public Sector Locally
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Current (2013) exposure drafts
 Consolidation and Joint Ventures (IFRS 10,11 and 12)
 Fair Value Measurement (IFRS 13)
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IFRS 13 Fair Value Measurement
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Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date – exit value
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For non-financial assets the standard includes the
principle of highest and best use
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Fair value reflects constraints and restrictions
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FReM adaptation proposed
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Proposed FReM Adaptation
‘In use’ non-specialised property assets used to
deliver services in a restricted geographic area as
described by government policy should be valued
at market value for existing use. This measure is
a proxy for fair value.
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IFRS 13 Route-map for Property, Plant and Equipment
Are there any
constraints or
restrictions on the
disposal of the
asset?
No - Route 1
Measure in accordance
with the requirements of
the standard ie at highest
and best use eg office
accommodation
Yes
Do these
constraints or
restrictions align
with the restrictions
in the standard (ie
either the asset has
unique
characteristics or
there are legal
restrictions)?
Unique Characteristics
Fair Value cost approach
(or the income approach
as appropriate)
Yes - Route 2
Restrictions
Asset measurement at
fair value limited to
current or existing use
No
Does the
organisation have
clear evidence that
it is constrained by
service needs to
provide the asset in
a particular location
or is the asset’s
market restricted by
geographical
limitations?
Yes - Route 3
Measure at fair value
limited to current or
existing use in accordance
with the (proposed)
adaptation
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IFRS 13 – Issues
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Need to assess which assets need to be measured
at ‘highest and best’ use
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Revaluation required where current use is not
highest and best
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Also applies to liabilities
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Disclosures – especially where no market evidence
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Group Accounts Suite of Standards
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IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosures of Interests in Other Entities
IAS 27 Separate Financial Statements (2011)
IAS 28 Investments in Associates and Joint Ventures
(2011)
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Transitional Arrangements if there are changes in
accounting policy (eg changes to consolidation
decisions)
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Group Accounts Standards
IFRS 10 Consolidated Financial Statements
 Identifies control as the single basis for consolidation
 Returns include non-financial benefits and negative returns
 Consolidation process unchanged
IFRS 11 Joint Arrangements
 Classification of joint arrangements joint ventures and joint
operations
 Focus no longer on legal structure but on how rights and
obligations are shared by parties to the arrangement
IFRS 12 Disclosure of Interests in Other Entities
 New (consolidated disclosure standard) concerns about
disclosures for unconsolidated structured entities
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Any Questions?