Agenda item

This report advises Members of the progress being made to comply with the requirements of the new International Financial Reporting Standards.

Discussion:

This report advised Members of progress that had been made to comply with the requirements of the new International Financial Reporting Standards (IFRS). It was noted that all councils’ accounts were currently prepared using UK Generally Accepted Accounting Practice but that this was converging with IFRS.

The Accounting Manager informed the Committee of the impact of IFRS on the Council’s financial statements and that, as a consequence, the accounts for 2009/2010 would need to be restated. The Committee was also informed that, from 1 April 2010, the external auditors had agreed to the Council undertaking future component valuations only for those assets deemed to include a material element of plant or specialised equipment, such as Gun Wharf, swimming pools and the crematorium. It was also reported that by 2012/2013 new requirements relating to the classification, valuation and life cycle of transport infrastructure assets must be implemented which would impact on the Council’s financial statements.

Members were advised that IFRS requires that, if material, the value of vehicles and plant utilised by contractors in service delivery be recorded within the Council’s balance sheet, depreciation be calculated and all other accounting entries be made in the accounts as if the vehicles belonged to the Council. Members discussed the implications and complexities associated with incorporating ‘embedded leases’ within the financial statements and questioned the benefits of these requirements.

It was noted that work was being undertaken to introduce a system designed to assist in obtaining the relevant information and officers were working to identify areas where embedded leases may arise. In response to Members concerns with the implementation of these requirements, Robert Grant (PKF) advised that the auditors would be working closely with officers and would be as pragmatic as possible.

The Committee considered the proposal that the “de minimis” level for capital expenditure (the figure above which items would be treated as capital and recorded in the balance sheet together with associated accounting transactions) be increased from £10,000 to £25,000. Members discussed this in detail and expressed concern as to the potential disaggregation of assets so to avoid the requirements of the Council’s capital approval process. Whilst not supportive of this increase in terms of how the Capital Programme is developed and agreed, Members did support this approach in relation to the preparation of the Statement of Accounts. Following this discussion the Chief Finance Officer undertook to provide Members with an update, incorporating the auditor’s views following their consideration of the restated financial statements in February 2011, to the next meeting of the Committee.

Decisions:

(a)                          The Audit Committee noted the progress to date in implementing International Financial Reporting Standards as outlined in Section 3 of the report.

(b)                          The Audit Committee agreed to an increase in the de minimis level in relation to accounting policies for the production of the Statement of Accounts for capital expenditure to £25,000.

(c)                           The Audit Committee requested that the Chief Finance Officer report back to the next meeting of the Committee following the audit of the restated financial statements, including reference to the increase in the de minimis level.