Agenda item

To approve the accounting policies to be used to prepare the 2019/20 financial statements.

6.1             The report of the Head of Finance and Asset Management, circulated at Pages No. 16-36, set out the main changes in accounting policies under the Code of Practice on Local Authority Accounting in the United Kingdom 2019/20 supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under Section 12 of the 2003 Act.  Members were asked to approve the accounting policies to be used in the preparation of the 2019/20 financial statements.

6.2             The Finance Manager explained that the Council was required to review all of its accounting policies on an annual basis to ensure it complied with the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Local Authority Accounting.  This report was usually brought to the Committee in March but the deadline for approval of the Statement of Accounts had been changed to 30 November 2020 as a result of the coronavirus pandemic.  It was noted there had been no substantial changes to the 2019/20 Code which applied to the operation of the Council, therefore no new or amended accounting requirements needed to be reflected in the Council’s accounting policies.  Officers had taken the opportunity to clarify some of the existing policies, for instance, where the Council had the intention of holding an investment for a long time, it had been reclassified as a long-term investment e.g. pooled funds which the Council intended to hold over the long-term even though the shares could be put up for sale at any time.  The Council had held pooled funds since May 2017 and in previous years had shown them as short-term assets but, having reviewed how the Council intended to use them, it was considered that it would be appropriate to reclassify them as long-term investments which required a restatement in the accounts.  The Finance Manager explained that clarification had also been provided that the Council used a statutory override applicable to financial assets which were held at fair value through profit and loss; this meant that any changes would not affect Council taxpayers.  Members were informed that, whilst COVID-19 would have a financial impact on the accounts, it did not necessarily change the accounting priorities; however, it would impact on investments and asset value which was starting to come to light.  It was noted that a new standard for accounting leases had been due to be introduced in 2020 but this had been delayed for a year to 1 April 2021 in light of COVID-19 – this would have a significant impact on next year’s accounts.

6.3             In terms of the change regarding the reclassification of treasury investments as long-term, a Member was surprised that this policy had been adopted based on an intention to hold such investments over a longer period rather than based on the reality not least because short-term investments gathered liquidity in terms of the balance sheet.  If funds could be collected within 30 days then, objectively, the asset was a short-term one and he asked for confirmation as to the reasoning behind the decision.  In response, the Finance Manager advised that the IFRS was all about intentions and she appreciated this was very subjective which was why it was necessary to have policies in place in order to make comparisons between authorities.  The Council had taken professional advice from its treasury advisers before making the reclassification and it was noted that pooled assets could fluctuate in value but they were not being held for that purpose.  It had always been the intention to hold the pooled funds for a return and that was what the Council had done for the last three years.  In terms of liquidity, assurance was provided that the authority had options to borrow quickly and cheaply through the Public Works Loan Board so this was not really an issue.  The Member asked whether the reclassification to long term assets impacted on how income value was recognised and the Finance Manager confirmed there was no impact, it was a balance sheet classification only.  Another Member drew attention to Page No. 35 of the report and questioned why Paragraph 1.22 in relation to heritage assets was shaded grey.  The Finance Manager explained that this section was being removed as, although the Council had heritage assets - such as the sculptures at the Stonehills roundabout and Mayoral regalia - they were not material.

6.4             Having considered the information provided, it was

RESOLVED          That the accounting policies to be used in the preparation of the 2019/20 financial statements be APPROVED.