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2016/17 code of practice on local authority accounting in the United Kingdom: invitation to comment

24-07-2015

Please note that this consultation has now closed

CIPFA/LASAAC has released the 2016/17 Code of Practice on Local Authority Accounting in the United Kingdom (the Code) Exposure Drafts (EDs) and Invitation to Comment (ITC) for public consultation. The 2016/17 Code will apply to accounting periods starting on or after 1 April 2016. The proposed amendments in the 2016/17 Code cover changes in accounting standards and other issues on which CIPFA/LASAAC wishes to seek interested parties views. The consultation will close on 9 October 2015.

Issues considered in the consultation

The significant changes being proposed in the ITC are as follows:

  • The measurement of the Highways Network Asset (transport infrastructure assets) at Depreciated Replacement Cost  
  • A review of the Accounting and Reporting by Pension Funds section of the Code
  • Narrow Scope Amendments to International Financial Reporting Standards
  • Augmentation of the Code’s provisions on Concepts following the issue of the IPSASB Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities  
  • Legislative amendments
  • Other minor and drafting amendments.

Measurement of the highways network asset

The annual consultation on the 2016/17 Code includes the move to measuring the highways network asset in accordance with the methodologies specified in the Code of Practice on Transport Infrastructure Assets (the Transport Code) ie at depreciated replacement cost (DRC) instead of historical cost.  

This will mean specific new accounting policies and measurement processes for the highways network asset.  Highlights of the new accounting policies include:

  • Recognition – the Highways Network Asset will be a single asset and separately reported on the face of the balance sheet
  • Measurement at DRC – with specific accounting treatments for annual depreciation for categories specified within the Transport Code and where accumulated depreciation and impairment are not eliminated on revaluation
  • Derecognition – replacement expenditure is used as a proxy for Gross Replacement Cost and Accumulated Depreciation for the replaced component.

Review of the accounting and reporting by pension funds section of the Code

One of the most substantial changes included in the Code following this review is the adaptation of the Code’s adoption of IFRS 13 to bring the pension fund investments within the scope of the fair value measurement disclosures.  Other changes are proposed to the format of the statements.

Legislative amendments

The legislative changes include:

  • Amendments due to the Local Audit and Accountability Act 2014 and the Accounts and Audit Regulations for English Authorities, the new Act and Regulations will mean changes to the relevant references throughout the Code but also to the narrative reporting requirements in the Code.  
  • Amendments due to the Local Government (Accounts and Audit) Regulations (Northern Ireland) – these update the factual references in the Code. 
  • Amendments resulting from new statutory guidance (Finance Circular 4/2015) issued by the Scottish Government on Accounting for Equal Pay and Severance. 

The ITC and exposure drafts of the 2016/2017 code

The Exposure Draft of the 2016/17 Code is provided as a number of files. They are listed in numerical order and follow the order of the section in the ITC in which an issue is discussed, not to the section of the Code itself, as a number of issues affect more than one section of the Code.

Invitation to comment

Invitation to Comment (ITC) on the 2016/17 Code (PDF 143 KB)
ITC Appendix A – Annual Improvements to IFRSs 2010 – 2012 Cycle (PDF, 76 KB)
ITC Appendix B– Annual Improvements to IFRSs 2012 – 2014 Cycle (PDF, 67 KB)

Exposure drafts

ED 1 – Amendments to IAS 1 Presentation of Financial Statements and Telling the Story consultation (PDF, 403 KB)
ED 2 - Measurement of the Highways Network Asset (PDF, 93 KB)
ED 3 - The Review of the Accounting and Reporting by Pension Fund Section of the Code (PDF, 449 KB)
ED 4 - Improvements to IFRSs 2010 -2012 Cycle – Amendments to IAS 24 Related Parties Disclosures (PDF, 128 KB)
ED 5 – Amendments to IFRS 11 Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations (PDF, 95 KB)
ED 6 – Amendments – IPSASB Conceptual Framework Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (PDF, 367 KB)
ED 7 – Accounts and Audit, Regulatory Changes England and Northern Ireland (PDF, 321 KB)
ED 8 – Minor Amendments (PDF, 242 KB)

The Invitation to Comment summarises the proposed changes to the Code. Where CIPFA/LASAAC is interested in specific issues, consultation questions have been included in the ITC. However, CIPFA/LASAAC welcomes comments on any aspect of the draft 2016/17 Code. In order to assess comments properly CIPFA/LASAAC respondents are asked to support comments with clear accounting reasons and, where applicable, preferred alternatives. Respondents are asked to use this RESPONSE SHEET (Word, 131 KB)  to respond to the consultation and so speed up the analysis. 

Telling the story: improving the presentation of local authority financial statements

CIPFA and CIPFA/LASAAC are also issuing a parallel consultation, Telling the story: improving the presentation of local authority financial statements (Telling the story consultation). This consultation proposes amendments to the Code. A number of the changes to the Code proposed in ED1 emanate from the Telling the story consultation.