Agenda item

To approve the accounting policies to be used during the 2015/16 closedown. 

44.1           The report of the Finance and Asset Management Group Manager, circulated at Pages No. 50-70, set out the main changes in accounting policies under the Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 supported by International Financial Reporting Standards.  Members were asked to approve the accounting policies to be used during the 2015/16 closedown.

44.2           Members were advised that the Council was required to produce an annual statement of accounts prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2015/16.  In order to do this, the Council had to review all of its accounting policies to ensure that it complied with the Code.  One of the main changes was the introduction of the accounting standard IFRS13 Fair Value Measurement; it was noted that fair value had always been mentioned within the accounting standards but this had standardised the definition.  Fair value was now defined as the price that would be received to sell an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date.  There were three levels of input to measure the sale of an asset: Level 1 inputs which were quoted prices in active markets for identical assets e.g. bonds, shares; Level 2 inputs which were inputs other than quoted prices included within Level 1 that were observable for the asset e.g. interest rates; and Level 3 inputs which required more estimation e.g. cash flow forecasts. 

44.3           Although there was no change in measurement for operational Property, Plant and Equipment (PPE), the definition of the measurement base had been changed from ’fair value’ to ‘current value’ in line with the new fair value requirements.  The policy for investment properties had also been amended to reflect the new fair value requirements.  The valuation method was no longer looking at the current use of the asset and instead focused on the possible wider use of the asset which meant that the final value reflected the highest and best use of the asset.  This was more relevant in the private sector, for instance, if prime retail land was used for retirement homes then more money would be made and the higher value would need to be included in the accounts.  As the Council had undertaken borrowing for cash flow purposes, clarification had been provided as to how this would be presented in the balance sheet.  In terms of interests in companies and other entities, the previous year’s accounts had been specific about the relationship with the Swimming Bath Trust, however, the Council now had an interest in Ubico which needed to be accounted for.  This standard had been rewritten to be less specific as full details of any interest would be disclosed within the notes to the account.  It was also noted that the depreciation policies had been amended slightly to allow for the new solar panels which had been installed on the roof of the Council offices as they needed to be treated as a more specialist asset and depreciated over a longer term than current plant and equipment.

44.4           A Member questioned whether the new leisure centre would have any impact on the value of the Council Offices and the Finance Manager confirmed that valuations were currently being undertaken as part of the annual review of assets and Members would be informed of the outcome within the coming weeks.  It was subsequently

RESOLVED          That the accounting policies to be used during the 2015/16 closedown be APPROVED.