Magazine article Public Finance

At a Fork in the Road

Magazine article Public Finance

At a Fork in the Road

Article excerpt

CIPFA AND THE Local Authority Scotland Accounts Advisory Committee have issued their annual consultation on the 2014/15 Code of Practice on Local Authority Accounting in the UK. They they are now looking for input from those preparing the code before finalising it.

The most significant changes proposed concern local roads, and the measurement of assets and liabilities generally as a result of implementing International Financial Reporting Standard 13 Fair Value Measurement. The standard introduces a single comprehensive definition of'fair value' based on market prices. CIPFA/ LASAAC has worked with the Treasury to ensure that the proposals for its application reflect public sector and local government circumstances.

As a result, CIPFA/LASAAC is only proposing changes in the overall valuation approach for assets that local government uses or holds in a similar way to commercial entities - for example, office buildings and surplus assets. However, this is a complex standard, and feedback on the proposed approaches is essential to determine a practical way forward.

CIPFA/LASAAC is also consulting on the introduction of the group accounting standards issued by the International Accounting Standards' Board in 2011. These standards introduce a single control framework for consolidating entities that local authorities have an interest in, include new requirements for the classifications of joint arrangements and introduce a new standard that focuses on the disclosure of interests in other entities.

The proposals may not have a significant impact on local authorities' group accounts as there are no major changes in approach, and the current criteria for control decisions are clear. However, the underlying standards are drafted from a private sector perspective, and CIPFA/LASAAC needs to know that the application approach proposed in the code will work for local authorities.

CIPFA/LASAAC is also consulting on proposals for its 2015/16 edition to better reflect the value of infrastructure assets such as roads and bridges. As these are currently held at depreciated historical cost, one of the proposals is to change the valuation basis by implementing the Depreciated Replacement Cost measurement requirements in the code of practice on Transport Infrastructure Assets.

The fundamental aim of this code is that the same data should be used for asset management, financial management and financial reporting, with the more effective management of assets being the key driver. …

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