CIPFA LASAAC issues urgent consultation on Code of Practice – Infrastructure Assets


The CIPFA LASAAC Local Authority Code Board has released temporary proposals to update the Code of Practice on Local Authority Accounting in the United Kingdom for infrastructure assets. An urgent consultation on these proposals is now under way and comments are invited until the consultation closes on 14 June 2022 at 23.00.

The temporary proposals address an issue raised by auditors about the derecognition (removal of the carrying amount) of parts of local authority infrastructure assets as they are replaced. CIPFA LASAAC and CIPFA established a Task and Finish Group to find a solution to this issue and consider the outcome of any proposed changes to the code.

Following advice from the Task and Finish Group, CIPFA LASAAC has now issued temporary proposals for changes to the code relating to how these issues are reported. They include:

  • confirming the accounting consequences of derecognition, e.g. that the effect on the carrying amount is nil (on a presumption that the replaced parts are fully depreciated);
  • temporarily adapting the code to remove the reporting requirements for gross historical cost and accumulated depreciation
  • providing extra guidance on how depreciation may be applied for infrastructure assets

CIPFA LASAAC will consult on a longer-term solution later in the year.

Conrad Hall, Chair of CIPFA LASAAC and Corporate Director of Resources at the London Borough of Newham, said: "CIPFA LASAAC has taken the necessary pragmatic steps to temporarily resolve the issue so that accounts that have not yet received their audit opinions can close and local authorities can receive the assurances on the vital financial information they hold. The proposals should not mean any significant losses in high quality financial information."

Derek Yule, CIPFA Council Member and Chair of the Task and Finish Group, said: "The Task and Finish Group has produced draft guidance which will be issued imminently to supplement the outcomes of this consultation.

"The group welcomes the consultation on the temporary proposals as this will give us more time to consider fully the consequences of the options we have put forward. We are clear that local authorities should ensure they have effective depreciation policies, which will be essential to ensuring they have properly reflected the transactions."

Notes to editor

  • CIPFA LASAAC is the body that produces the Code of Practice on Local Authority Accounting in the United Kingdom, issued under the government's Financial Reporting Advisory Board (FRAB).
  • The issue raised by auditors is mainly caused by the difficulty of generating information which is useful and that meets the needs of accounting standards for infrastructure assets. There are also related issues for the reporting of gross historical cost and accumulated depreciation. This has caused delays in issuing audit opinions on local authority financial statements and also risks of qualifications on those opinions.
  • The code is updated on an annual basis, although in exceptional circumstances can be updated more frequently.
  • CIPFA will be holding a webinar to explain the consultation proposals and to allow key stakeholders to understand the technical or practical issues that arise.
  • The code is described by Regulation 31 of the Local Authorities (Capital Finance and Accounting) (England) Regulations, as amended as proper practices under section 21(2) of the Local Government Act 2003.

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