IFRS Opportunity or Threat

1
IFRS Opportunity or Threat?

• Ian Carruthers
• CIPFA, Policy and Technical Director
• 13 June 2007

2
Local Authority SORP

• Developed by CIPFA/LASAAC Joint Committee
• Proper accounting practice under legislation in
  England, Wales and Scotland
• Authority via accounts direction in Northern
  Ireland
• Updated annually
• Exposure Draft 3 month comment period
• ASB negative assurance process

3
Recent LA SORP developmentsUK GAAP convergence

• 2002 SORP review vs UK GAAP and (then) RAM
• 2005/06 Group accounts
• 2006/07 Income Expenditure Accounts and
  Statement of Movement on General Fund Balance
• 2007/08 Revaluation reserve
• 10 other GAAP divergences addressed

4
Current LA SORP developments Financial
instruments

• International standards on financial instruments
  implemented in full for 2007/08
• FRSs 25, 26 and 29 (IAS 32, 39 and IFRS 7)
• 2 year process to work up guidance
• Linked to new secondary legislation in England,
  Wales and Scotland

5
Future developments LA Transport Infrastructure
Assets

• Current SORP historic cost and depreciation
  treatment UK and International GAAP compliant
• BUT, different to central government
• CIPFA review of use of AMP based information to
• Support good financial management locally
• Provide good information to suppport policy
  development and resource allocations
• Provide financial accounts complying with
  relevant IFRS requirements
• Deliver consistent high quality information of
  WGA and National Accounts purposes

6
Future developments LA Transport Infrastructure
project timetable

• Draft report to be published early July
• Three months consultation supported by events,
  stakeholder meetings etc.
• Final report published in November
• Agreement of recommendations likely to be
  challenging!

7
Future developments IFRS convergence issues for
local government

• Well placed following completion of convergence
  and introduction of international financial
  instruments standards
• Potential problem areas identified
• PFI (IFRIC 12?)
• Leases (IAS 17)
• Segment reporting (IAS 14 or IFRIC 8?)
• Disclosure requirements generally

8
LA accounts framework Known unknowns

• Will UK GAAP continue to exist?
• If so, what will the big bang date be?
• Do SORPs have a future?
• Content and relevance of IASB SME guidance?
• Following Budget 2007 announcement
• Final IFRS based FReM requirements?
• WGA consolidation return requirements?

9
LA accounts framework Range of options

• Come under FReM no intermediate code
• Come under FReM intermediate code
• SORP directly adopts IFRS
• Continue with SORP and ASB convergence strategy,
  ensure WGA consolidation information available
• Decision for 2008/09 at 25 June CIPFA/LASAAC
  meeting

10
About the IPSASB

• Develops International Public Sector Accounting
  Standards (IPSASs) cash and accrual
• 24 Accrual Basis IPSASs and Comprehensive Cash
  Basis IPSAS
• Facilitates convergence of national and
  international public sector standards
• Financial support from World Bank, ADB, UN, EC,
  Canadian, NZ and Swiss governments, CICA
• Relocation to Toronto in 2006
• Voluntary Board appointed through IFAC nomination
  process

11
IPSASB Members 2007

• Accounting Profession 15 members
• UK (Chair), Argentina, Australia, Canada, China,
  France, India, Israel, Japan, Mexico,
  Netherlands, New Zealand, Norway, South Africa,
  USA
• Public Members 3
• Italy, Switzerland, USA
• Observers
• ADB, EU, IASB, IMF, INTOSAI, OECD, UN, UNDP,
  World Bank

12
Relevance of IPSASs in the UK

• No formal legal status but
• Provide guidance on areas not covered by IASB or
  ASB standards (e.g. taxes)
• FRAB increasingly using as a benchmark e.g. tax
  credits
• Growing use internationally

13
Key IPSASB Projects

• Service concessions (PPP/PFI) grantor
  perspective
• Conceptual Framework stewardship an objective
  of public sector financial reporting only?
• Heritage assets
• Social benefits

14
Other items on IPSASB work programme

• Convergence with IFRSs
• Financial instruments
• Management commentaries
• Use of fiscal sustainability information

15

• No shortage of opportunities
• to influence!