Code Of Practice On Local Authority Accounting In The United Kingdom: Guidance Notes For 2022/23 Accounts (online)

This is the online version of the publication. It is also available in hard copy (presented as a loose-leaf update pack for your existing binder). The online, digital version is a PDF that can be downloaded and shared throughout your organisation. Customers will need to register and log in to CIPFA's website to access the publication.

This year's edition of the Guidance Notes provides detailed guidance on the key accounting changes introduced by the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 (the Code).

A note on this publication

The download for this publication has been updated and is now a zip folder containing two PDF files: the Code Guidance Notes 2022/23 and the IFRS 16 Leases guide, 2023 edition. 

The key accounting changes in this edition of the Guidance Notes include:

• Confirmation in Module 1 Appendix B of the New or Amended Standards introduced in the 2022/23 Code.
• Updates to the methodology in Module 2, Section G for calculating year-end apportionment of NDR and council tax surpluses and deficits where an authority declared an exceptional deficit in accordance with SI 2020/1202, the Local Authorities (Collection Fund: Surplus and Deficit) (Coronavirus) (England) Regulations 2020.
• Updates to the guidance in Module 3, Section I on the disclosures for the Dedicated Schools Grant in accordance with the provisions in the Accounts and Audit Regulations 2015.
• Augmentations to the Appendix to Module 3, ie the example financial statements and notes to the accounts; these include changes to the accounting policies, critical judgements in accounting policies disclosure and other clarifications to the reserves disclosures.
• Explanation of the interaction of the example disclosures and accounting policies in the Appendix to Module 3 with the illustrations in CIPFA Bulletin 12 – Accounting for Infrastructure Assets – Temporary Solution.
• Description in Module 4 of the interaction of capital accounting transactions with CIPFA Bulletin 12 – Accounting for Infrastructure Assets – Temporary Solution.
• Confirmation in Module 4, Section F of the Code’s provisions to allow authorities to voluntarily adopt the provisions of IFRS 16 Leases in advance of mandatory implementation, in line with requirements set out in Appendix F.
• Confirmation in Module 4, Section G (Service Concession Arrangements) that if IFRS 16 is adopted in advance of mandatory implementation, then the service concession arrangement liability is measured in accordance with the measurement requirements of IFRS 16, as set out in Appendix F. Note that CIPFA/LASAAC is currently considering the accounting requirements for this transaction following central government changes. Separate guidance will follow CIPFA/LASAAC’s pronouncements.
• Discussion in Module 4 of the application of the Scottish Local Government Finance Circular 10/2022 – finance leases and service concession arrangements: statutory guidance.
• Discussion in Module 4 Section L of the application of the Code’s impairment provisions to infrastructure assets.
• Amendments to Module 8, Section B to clarify the treatment of social benefits under IAS 37/IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets.

As mentioned, this year the 2022/23 Code Guidance Notes are accompanied by a separate publication providing guidance on IFRS 16 for 2022/23, which is applicable to those authorities deciding to voluntarily implement the requirements of Appendix F (which includes the specifications applicable to those entities implementing IFRS 16 as of 1 April 2022). It will also be of interest to those intending to apply as of 1 April 2023 and those mandatorily implementing as of 1 April 2024.

The publication is important and should be considered at the earliest opportunity because of the prevalence of leasing in local government and the risk that the changes could have a budgetary impact if not managed effectively.

This guidance on IFRS 16 provides comprehensive coverage of the proposed requirements for lessees. Although there have not been significant changes to the requirements for lessors, the guidance also includes extensive commentary on this area.

The guidance covers in particular:

• identifying arrangements that meet the accounting definition of a lease
• determining the term of a lease where there are options to extend or terminate for lessees:
• recognising right-of-use assets and lease liabilities and their initial and subsequent measurement
• reassessment of lease liabilities and treatment of lease modifications
• for lessors, distinguishing between finance and operating leases and accounting accordingly
• dealing with sale and leaseback transactions
• presenting lease transactions and balances in the financial statements
• disclosure of information about leases in the notes to the accounts
• harmonising with statutory accounting requirements
• the mechanics of making the transition in the 2022/23 financial statements (including the application of transitional provisions and the preparation of relevant disclosure notes).

The IFRS 16 guidance publication is available in online format only.

Details of licensing arrangements for other categories of purchaser, which includes those organisations operating shared service arrangements, are available from CIPFA's Publications Department.