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June 29, 2009

PwC partner: UK local government should introduce IFRS milestones

UK local authorities should follow the lead of central government and the public health sector in setting formal target dates and milestones in the lead up to IFRS adoption, according to a PricewaterhouseCoopers UK (PwC) partner.

The entire UK public sector is in the process of moving to IFRS, but with different adoption dates for different sections.

The central government, and health authorities and trusts, must convert to IFRS for the 2009-10 financial year, which began on 1 April. This means producing comparative IFRS data for the 2008-09 financial year.

Local authorities are one year behind.

Julian Rickett, the PricewaterhouseCoopers UK partner responsible for the conversion of the public sector to IFRS, said the regulators of the health trusts and central government accounts put in place rigorous processes for ensuring the organisations are on track.

For example, the first key target for health organisations was to restate their opening balance sheet of 1 April 2008. This was to be completed by the end of last year and was to be audited by 1 May this year.

The next key milestone is the conversion of the full 2008-09 shadow accounts, which is to be done by the end of July or August depending on what type of trust it is. These will be audited in the autumn.

No similar formal time frame has been put in place for local authorities yet.

“While the [UK Chartered Institute of Public Finance and Accountancy] has issued an outline project plan, there are currently no formal trigger dates at the moment and I would like to see a similar rigorous approach applied to the local government sector that applied to the health sector. That would assist them in ensuring they all meet the deadline,” Rickett said.

“We are still a year behind so it could still happen. If we were to apply a similar timetable, it would, for example, require the restatement of the opening balance sheet as of 1 April 2009 and that would be required by the end of this year.”

Rickett said there are added distractions for local government, which could understandably be diverting attention from IFRS adoption. Local government elections have just been held across a number of local authorities, plus Rickett said they are dealing with a “perfect storm” in the form of the credit crunch.

“They are, for example, earning a lot less interest on investments in the money market. They are seeing demand for services, particularly around social services and social housing, increasing,” he said.

“So changing the accounting regime, not that I am belittling it, but against that back drop it is not necessarily priority number one on the chief executive and finance director’s desk. I am not surprised that there aren’t formal milestones in place yet. But my advice would be to get those in place so that the stragglers are also dealt with.”

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