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Stephen Sheen: Audit and accounting crystal ball

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  • by Guest
  • in Technical
  • — 17 Dec, 2014

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

From an accounts and audit point of view, 2014 was notable for sending everyone scurrying back to their textbooks as technical accounting issues stirred to nip at the ankles of budgetary controllers. Predictions of shares of business rates under the new retention regime were found to be impacted significantly by the need to provide for the potential outcome of outstanding appeals. Within a few short weeks, the number of people in local government who were fluent in IAS 37 and its strange talk of “obligating events” quintupled.

This is likely to be a continuing issue in 2015 as authorities refine their provisioning calculations and share experience (particularly of the rumours of what the authority in the neighbouring county managed to get away with).
Apart from that, there were no great accounting controversies in 2014. Across the country the odd yelp was heard as auditors determined to knock the dust off some of their favourite hobby horses by riding them over particular unfortunate authorities. The most colourful bruises were left by debates over the frequency of valuations of property, plant and equipment, with many authorities being led to believe that they had let themselves down if they had not funded annual revaluations. A common thought in these circumstances – authorities could justifiably be more sceptical of the certainty of the auditors’ views.

What is coming over the horizon for 2015? Authorities in England are likely soon to have a better idea of the shape of local audit, in terms of when preparations need to begin and what exactly will be required in the appointment of an auditor (or to opt out and have someone else appoint one). My guess is that the current contracts have been priced too competitively for them not to be extended through to 2020.
In the meantime, chief finance officers will have a new set of Accounts and Audit Regulations to measure their financial arrangements against from 1 April. This is also the date from which you will have to take the first steps in filling the Audit Commission-shaped hole in your life.

With regard to specific accounting issues, focus in 2014/15 is likely to be on group accounts. The Accounting Code has redefined subsidiaries and joint ventures, requiring decisions on group boundaries to be revisited. Expanded CIPFA guidance on accounting for collaborations outside the group boundary will also raise the auditor’s interest in how authorities have dealt with such things as joint working and shared services in their I+E Statement and Balance Sheet.
For education authorities in England and Wales, the group accounts changes have been determined to bring all maintained schools within the authority’s group. The Accounting Code requires the accounts of these schools to be consolidated into the authority’s single entity financial statements. Practitioners are currently working hard on understanding what this means in terms of accounting entries and information requirements from schools.
Authorities with interests in transport infrastructure will also be doing some serious work in 2015 to get ready for the introduction of depreciated replacement cost valuations in the 2016/17 Statement of Accounts. Prior period adjustments for 2016/17 will require values as at 1 April 2015.

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