Note that this consultation closed on 10 October 2014
CIPFA/LASAAC has released the 2015/2016 Code of Practice on Local Authority Accounting in the United Kingdom (the Code) Exposure Draft (ED) and Invitation to Comment (ITC) for public consultation. The 2015/2016 Code will apply to accounting periods starting on or after 1 April 2015. The proposed amendments in the 2015/2016 Code cover changes in accounting standards and other issues on which CIPFA/LASAAC wishes to seek respondents’ views. The consultation will close on 10 October 2014.
Issues considered in the consultation
The significant changes being proposed in the ITC are as follows:
- IFRS 13 Fair Value Measurement
- Narrow scope amendments to IFRSs
- IFRIC 21 Levies
- Changes to UK GAAP, and
- Other minor and drafting amendments
IFRS 13 Fair Value Measurement and the Measurement of Property, Plant and Equipment
IFRS 13
The new standards introduced in the Code include the proposals for adoption of IFRS 13 Fair Value Measurement. The Standard provides a single definition of fair value. It is designed to apply to assets and liabilities covered by those IFRS standards that currently permit or require measurement at fair value (with some exceptions).
Measurement of property, plant and equipment
The IFRS 13 definition of fair value is based on exit values and market prices for assets and liabilities. For property, plant and equipment it requires a valuation to be at the asset's highest and best use and is a measure of financial capacity. CIPFA/LASAAC considers that the most appropriate measure of operational property, plant and equipment should be based on the service potential that the assets provide in support of the services of the authority. This means that these assets will be measured at either existing use value, existing use value – social housing or depreciated replacement cost, as appropriate to the property, plant and equipment asset in question. Following the conceptual review these measurement bases will now be described in the Code as current value (measurements). These measurements are the same as those of the current (adapted) version of fair value in the 2014/15 Code. The proposals no longer describe these measurements as fair value and therefore mean that operational property, plant and equipment assets are outside of the scope of IFRS 13.
Those property, plant and equipment assets that do not provide service potential for the authority ie those assets classified as Surplus Assets will not be measured for their service potential but for the economic benefits inherent in the assets. Therefore the current value measurement base for these assets will be at fair value in accordance with the definitions and measurement requirements in IFRS 13. This is a change, as currently they are measured by an existing use valuation based on their use before coming surplus.
The ITC and exposure draft of the 2015/2016 code
The Exposure Draft of the 2015/2016 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 (ITC) on the 2015/16 Code (PDF, 255 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 2015/2016 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 (DOC, 81 KB) to respond to the consultation and so speed up the analysis.