A year really is a long time in politics not to mention financial reporting. One year ago the former Chancellor was announcing in a relative blaze of publicity the move to International Financial Reporting Standards (IFRS) in 2008/09 for public sector accounts and Whole of Government Accounts.

After 12 months of hard graft for public sector accountants and civil servants, Alistair Darling in his Budget 2008 announced that following consultation on the technical work needed to implement this change, the Government now intends to move to IFRS from 2009/10 to “minimise burdens and to ensure a smooth transition.”

Private sector companies had up to 5 years to implement the changes.

The delay is hardly surprising given the listed, private sector had up to 5 years to implement the changes required under IFRS. What is disappointing is that the lead time for implementing the new standards could not be foreseen earlier ie at the time of the original announcement by Gordon Brown. That two of the largest government departments would face significant challenges in achieving restatement of figures should surely have been taken into account in developing a project plan for this move.

The consequence of the postponement is that the accounts of all central government departments, agencies and NDPB’s will not be prepared under International Financial Reporting Standards until the year ended 31 March 2010.

Instead in 2008/09 accounts will be prepared under UK Generally Accepted Accounting Principles with a requirement for most organisations to prepare shadow IFRS based accounts.  The opportunity for a period of shadow accounting must be welcomed as an opportunity to address, on the ground, practical issues before “live” accounts are prepared.

Arguably this should have been part of the original plan for transition. What is clear however is that this will add an additional burden to finance teams in central government. Instead of one IFRS based set of accounts being prepared there will now be a requirement to produce a UK GAAP set and one based on international standards.

The collective sigh of relief from central government bodies to HM Treasury’s announcement to postpone implementation was almost audible. Considerable progress has however already been made by many central government bodies in planning and provisionally reviewing the impact of IFRS on their accounts.

It is important however that the relief in the easing of the timetable does not mean that this work stops. With the release of the accounting guidance on accounting for PPP schemes under international standards, the building-blocks are now nearly all in place for central government bodies to start working through the amendments that will be needed to accounts and systems.

The analysis is needed not only for the production of 2008/09 shadow based accounts but to inform the budgets and estimates for the following year when the move to internationally based standards will really become critical.

Contact:

Nick Bennett, Partner & Head of Public Sector practice