CIPFA LASAAC Statement confirming mandatory implementation of IFRS 16 Leases in 2024/25

The CIPFA LASAAC Board confirms that mandatory implementation of IFRS 16 Leases will go ahead as planned, and the standard will be implemented in the Code of Practice on Local Authority Accounting in the United Kingdom 2024/25. The Board continues to strongly recommend voluntary adoption of the standard in 2023/24.

The Board understands that some local authority stakeholders may have anticipated a further delay to the implementation of IFRS 16, having regard to initiatives being pursued by the Department for Levelling Up, Housing and Communities (DLUHC) and the Financial Reporting Council (FRC) who have been engaging with key players in local authority financial reporting and audit in England including CIPFA, CIPFA LASAAC, section 151 officers, audit firms, and the National Audit Office (NAO).

In July the government requested that changes to the Code should be explored for the medium and long term in relation to non-investment assets and pension reporting. More recently, having regard to the difficulties in clearing the audit backlog, CIPFA LASAAC also agreed to consider whether short-term changes might be made to the Code which might relieve pressures on preparers and auditors. Consideration of these matters is ongoing and will be consulted on shortly.

However, at the CIPFA LASAAC meeting on 9 November 2023 the Board decided not to delay further the implementation of IFRS 16 or to substantially reduce disclosure requirements. Continuing with the requirement to implement IFRS 16 is in line with the very clear statement provided in the Invitation to Comment on proposals for the 2024/25 Code. This was not a decision that was taken lightly, and members felt it was important for practitioners to understand the rationale behind this decision.

CIPFA LASAAC are very conscious of the pressure auditors and practitioners are facing due to the current backlog of audited financial statements in England. However local government is the only part of the UK public or private sector reporting under UK adopted IFRS where IFRS 16 has not yet been implemented. Reporting under IAS 17 provides information which is known to be less useful and undermines comparability with the rest of the public sector. Further delay would also be unfair to those local authorities, both in England and elsewhere, who have planned implementation on the basis of CIPFA LASAAC’s clear statement that there would be no further delay.

While making this decision board members considered the resources available to support practitioners in the implementation of IFRS 16. CIPFA has provided various guidance and courses since 2017, and in May 2023 published IFRS 16 Leases: A Guide for Local Authority Practitioners 2023 edition. CIPFA continues to run numerous webinars and training courses on IFRS 16 implementation including Finance Advisory Network (FAN) capital hot topics and the upcoming Accounts Closedown workshops.

The Board took comfort from the results of the recent preparedness survey as part of the recent consultation on the 2024/25 Code of Practice on Local Authority Accounting for the United Kingdom (the Code). 69% of respondents were at least somewhat confident of implementation on 1 April 2024, with only 9% feeling not confident or unready.