David Jones, a member of our Financial Audit – Tech Team, was recently asked to speak at the Chartered Institute of Public Finance & Accountancy (CIPFA) Local Government Accounting Conference. He told us what he was there for…
There are many ominous-sounding terms in auditing and accounting; risk management, scrutinise, accountability, measured, qualified opinion. But nothing sounds more menacing than IFRS.
Now for those uninitiated, IFRS is not the name of a new Dan Brown novel, but rather a set of Standards incorporated in the Code. The Code in simple terms is a set of rules local government accountants have to follow when they prepare accounts.
I have a particular interest in this as a member of the Local Authority Code Board. We are responsible for producing what is, essentially, the rule book specifying how local authority accounts are prepared.
So when CIPFA needed someone to speak at the Local Government Accounting Conference, who knew about the application of the Code and worked within an audit organisation, I was happy to volunteer.
So on the 18th November, I travelled across to Manchester. The event was bigger than I had expected – about 75 delegates from a number of authorities, some from Wales but many from England. My aim was to talk about IFRS 13 and also about some of the work our Good Practice Team had promoted recently on Faster Closures.
What is IFRS 13 and should I be afraid of it?
IFRS 13 is a complex Standard which, like all Standards, is written primarily with the commercial sector in mind. My speech focused on the work the Local Authority Code Board had been doing to implement this.
Essentially when adopting IFRS 13 in the 2015-16 Code we mitigated much of its effect on the valuation of most property, plant and equipment by requiring it to be carried at ‘current value’ rather than ‘fair value’ thereby removing it from the scope of IFRS 13.
Thus, IFRS 13 is far less of a challenge than it may have been.
It will, however, impact upon the carrying value of surplus assets and investment properties. It may impact upon assets held for sale.
Helpfully, the 2015-16 Code clarifies and emphasises that local authorities should only include disclosures that are material to the presentation of a true and fair view. This may have benefits in relation to the disclosures required by IFRS 13!
‘Not about peddling faster’
I also spoke about the topic of recent Shared Learning Seminars organised by our Good Practice Team on Faster Closures. You can find out more about it on our website, but the real thing I wanted to drive home is that faster closing has benefits beyond the earlier publication of accounts. It improves the financial information available to decision-makers throughout the year.
Faster closing isn’t about accountants and auditors peddling faster. It requires a fundamental review of financial management arrangements, including regular hard closures of accounts. It will also require a fundamental overhaul of the audit approach.
Takeaways from the conference
The key purpose of my presentation was to alert local authority accountants to the issues that auditors would be considering in planning the 2015-16 audit. Accountants knowing the issues we’ll be looking at in an audit has benefits for us as well as them. In addition to IFRS 13 and materiality, I highlighted potential issues relating to the valuation of housing stock and specialised assets (DRC valuations). I also acknowledged audit implications of recognising the current value of the Highways Network Asset in 2016-17.
About the Author
David is Technical Manager (Local Government) with the Wales Audit Office, his role is to provide advice, guidance and training to auditors regarding audit and accounting issues relating to local government bodies.
Prior to joining District Audit/Audit Commission in 1989, David spent 19 years in local government. He is member of the CIPFA/LASAAC Local Authority Code Board and CIPFA’s Local Authority Accounting Panel.