International Financial Reporting Standards (IFRS)

In the Budget on 21 March 2007 the Treasury announced that the public sector including local authorities will be moving to International Financial Reporting Standards (IFRS) from 2008-09. There is no IFRS standard for public sector accounting yet and none is expected for several years. However, there is a private sector accounting standard for operators 'IFRIC Interpretation 12 Service Concession Arrangements' (IFRIC 12). This is fully recognised by Treasury and the Financial Reporting Advisory Board (FRAB) and they have agreed to work together to provide IFRS standards for the public sector in the Financial Reporting Manual (FReM) based on relevant existing standards from 2008-09. This is not expected to be incorporated into the SORP until 2010/11.

We expect that many projects that are 'off balance sheet' under the Technical Note will be 'on balance sheet' under the public sector IFRS rules. However, DCLG are proposing to amend the capital finance regulations and the calculation of Minimum Revenue Provision so that the impact on the 'bottom line' of the Income & Expenditure Account is neutral for most projects between off and on balance sheet treatment. Local authorities should take account of the impact of on balance sheet treatment on their prudential indicators though.