• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Stephen Sheen: Brexit and the accounting implications

0
  • by Stephen Sheen
  • in Blogs · Stephen Sheen · Technical
  • — 25 Jul, 2016

“If only I’d known …!” many local government accountant Brexiteers might now be wailing, as the prospect of an end to IFRS recedes.

Amidst all the clamour of the recent referendum, one thing was strangely missing from the debate, particularly for those of us who keep banging on about it outside of such feverish times. Local government accounting.

One might have thought that the internationalisation of accounting practices across UK central and local government would have been of interest to those who wanted to take back control of their country.

However, it is actually the fact that the UK’s public sector accounting framework is far more advanced in its embrace of International Financial Reporting Standards (IFRS) than any other European Union country’s.

Our adoption of accruals accounting would be enough to give us a hefty lead over most member states.

But its extension to include IFRS-based current value techniques for such things as property, plant and equipment, pensions liabilities and financial instruments leaves Latvia (apparently) trailing a distant second.

Continued membership of the EU would actually have been a threat to our advanced position.

The project to develop European Public Sector Accounting Standards for member states risked the establishment of a framework that would be less far-sighted than what we currently have.  A matter of reining in the UK fully so as not to frighten the EU carthorses.

“If only I’d known …!” many local government accountant Brexiteers might now be wailing, as the prospect of an end to IFRS recedes.

But if Brexit is unlikely to have an impact on the accounting standards that we use, there is a more immediate problem of how to account for the effects of Brexit within this framework. The market volatility initiated by the Leave vote is likely to have a substantial effect on values of property, investments and the assets held on the authority’s behalf by the pension fund.

If your authority has yet to publish its Statement of Accounts for 2015/16, the consequences of the Leave vote are required to be explained where they have impacted on the figures in the financial statements.

The financial statements are not to be adjusted, because accounting standards require them to reflect conditions as they applied at the year-end.

For instance, the balance sheet will continue to show investments at the value they had before the market dip.  However, if material changes have taken place there needs to be a note setting out estimates of the financial effects of events following the referendum.

Such a note would cover such things as:

  • reassurance about the continued applicability of the going concern concept
  • revaluation losses on property and other assets
  • losses in the value of investments and on foreign currency transactions
  • increases in the net pensions liability as a result of reductions in the value of investments held by the pension fund

The note can be limited to descriptions of the effects of the referendum, but only if it is impossible to make reliable estimates for adjusted figures.

A more discursive commentary can be added to the Narrative Report, projecting the effect of Brexit on the authority’s financial plans.

Any additional material will need careful drafting.  In circumstances such as these, loose wording can result in a note that effectively says “… none of the important figures in the financial statements can be trusted anymore”.

Disclosures should supplement the financial statements, not kick the chair from underneath them.

Still, a small task when compared with the work ahead in confronting the effects of Brexit on the authority’s financial plans.

Stephen Sheen is the managing director Ichabod’s Industries, a consultancy providing technical accounting support to local government.

Get the Room151 Newsletter

Image courtesy of www.SeniorLiving.Org

Share

You may also like...

  • What chance of an Olympic bounce? What chance of an Olympic bounce? 6 Aug, 2012
  • Graeme Muir: exciting times for actuaries predicted Graeme Muir: exciting times for actuaries predicted 17 Apr, 2019
  • Peter Worth: The year-end looms and lessons are being learned Peter Worth: The year-end looms and lessons are being learned 30 May, 2018
  • Investment outlook 2017: Decoupling and Donald Trump Investment outlook 2017: Decoupling and Donald Trump 24 Jan, 2017

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 19 hours ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 22 hours ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 22 hours ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 2 days ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 2 days ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 2 days ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 3 days ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 3 days ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 3 days ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 4 weeks ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 4 weeks ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 4 weeks ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 4 weeks ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

    Room151 1 month ago

    PWLB consultation: Big change on the way but there are ‘grey areas’ and opportunities: The consultation on PWLB borrowing has concluded creating a new landscape for funding property acquisition. Our experts look at the implications. Tracie Langley The… dlvr.it/RndRvJ pic.twitter.com/KEqXEBmEfq

    Room151 1 month ago

    2021: Better income outcomes?: Sponsored article: Investors should be mindful of structural challenges posed to income generation as a result of rapid thematic change. Jon Bell looks at the prospects for the coming year.[...] dlvr.it/RndRsw pic.twitter.com/TxVk8aXkMq

    Room151 1 month ago

    Capturing the ‘spirit’ of borrowing rules and a sequel for interest rate swaps: The year in treasury has been marked by a return for interest rate swaps and new rules from PWLB on borrowing for yield. Jackie Shute asks whether they will sprinkle[...] dlvr.it/RnQwv7 pic.twitter.com/it5FApdCcl

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story TradeRisks breaks into treasury adviser market with Derby
  • Next story James Bevan: Signs of global growth point to better equity markets

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK