First time adoption preparing the opening balance sheet

Transcription

1 First time adoption preparing the opening balance sheet Philip Trotter 21 November 2014

2 Agenda Accrual accounting in the UK public sector Features necessary for a successful transition and the UK experience Preparing the opening balance sheet

3 Accrual accounting in UK public sector Gradual adoption across the public sector with central government last to make transition All public sector entities have since made a second transition from UK GAAP to IFRS Why move to Resource Accounting and Budgeting (RAB) in central government? Modernising government Cash isn t enough Accountability Experience of others 3

4 Features necessary for successful accrual accounting transition and the UK experience Requirements necessary for a successful transition to accrual accounting A clear mandate and political commitment; Commitment of centre and key officials to change; Adequate resources (human and financial); An effective project management structure; Adequate technological capacity and information systems; Locking-in the reforms with legislation. 4

5 HM Treasury s role Small HM Treasury project team Composition evolved with project Policy and legislation responsibilities Developed programme framework timetables and milestones Programme management monitoring and addressing emerging issues Stakeholder management - promotion and progress reporting Systems - Project team set timetable and high level output requirements but no central system guidance and no Standard Chart of Accounts 5

6 Preparing the opening balance sheet use of trigger points process Treasury formally monitored and assessed departments progress towards implementation. Involved a series of trigger points against which progress in implementing RAB could be monitored and assessed, and which would allow sufficient time to resolve any problems which emerged. The trigger points TP1: Stage 1 approval - Treasury received individual departmental confirmation that they had accounting policies and systems in place which would enable them to produce meaningful resource accounts. TP2: Assessment of departments opening balance sheets for TP3: Stage 2 approval including an audit by the NAO of departments dry run resource accounts for TP4: Departments making available to their select committees shadow resource-based Estimates for

7 Preparing the opening balance sheet trigger point 1 TP1: Stage 1 approval - Treasury received individual departmental confirmation that they had accounting policies and systems in place which would enable them to produce meaningful resource accounts. Accounting standards, consolidation scope, and role of the FRAB Accounting policies and the role of the Accounting Officer Staff and training Systems Culture 7

8 Preparing the opening balance sheet key requirements for assets and liabilities Documenting all types of assets and liabilities held by the entity; Assessing the accuracy and completeness of existing information; Determining the categories of assets and liabilities that will be used in the chart of accounts and the financial statements; Establishing accounting policies for each category in accordance with relevant standards; Determining accurate opening balances for each category (identification, application of definition of asset and liability, and measurement); and Establishing systems to support the ongoing requirements of accrual accounting. 8

9 Preparing the opening balance sheet trigger point 2 TP2: Assessment of departments opening balance sheets for Staggered approach to the production of resource accounts and parallel running Departmental system issues and support for ALBs Communication and training issues Quality of guidance 9

10 Preparing the opening balance sheet practical considerations on assets and liabilities from UK Benefit of using established accounting standards and the FRAB Some specific issues related to assets Quality of existing information Determining valuation basis Some specific issues related to liabilities Pensions Other long-term liabilities 10