Help with Your Year End Accounts Laura Fallon

What a year. Whilst the pandemic has definitely driven the ‘what will be changing my accounting assumptions’ judgements over the last three years, the factors to consider this year are perhaps more complex and more nuanced. The war in Ukraine, which had started by last year’s year end, unfortunately continues, with it have come higher fuel and food prices and a cost-of-living crisis. Inflation is at levels not seen in recent history and the post financial crisis low interest rate paradigm has been broken in order to control it. China has reopened, America has unleashed a massive and protectionist leaning stimulus package. Brexit continues to alter the course of the UK economy. The year has seen record high waiting times for ambulances and frequent strikes. Whilst unemployment may be low, wage increases are lousy: households are having to cut back.     

The result of this has been an economy that if not plummeting is struggling. This year has seen equity markets and bond markets fall and even the usually resilient UK property market beginning to teeter. That said, more recent data has also indicated that actually things may not all be that bad after all.  

For local authorities these will all be factors that they need to consider when valuing their financial instruments. Any loans, loan commitments or loan guarantees made will require an Expected Credit Loss (ECL) calculation based on the probability of a borrower defaulting and how much the local authority would be likely to lose if a default occurred. Authorities which own or part own subsidiary companies will need to calculate their value, which will incorporate what income the company now expects to make in future.  

ECL calculations, we believe, may be under further scrutiny in future as suggested changes to MRP rules in England will mean Minimum Revenue Provision (MRP) equal to the ECL is required to be made for loans which are capital expenditure. If implemented this will mean the ECL charge for capital loans will directly impact council tax payers. Getting your capital accounting and Capital Financing Requirement (CFR) right is also of upmost important as future MRP* rules are also expected to tighten the requirement to make MRP on the whole of the (unexempted) CFR. Council’s will wish to avoid making more MRP than they really need to due to mis-postings or discrepancies in the CFR calculation.  

Arlingclose have many years of experience at ECL and company valuations for our clients. We have fully developed audit ready methodologies. We are also experts in the capital accounting surrounding the CFR and subsequent MRP calculations. 

IFRS 16 has been delayed again and again and then again… and then again, although there is an option of early adoption if local authorities want to be ahead of the curve on this. For most authorities IFRS 16 will thus not be a huge concern this year.  

Arlingclose also has an Accounts Assurance service where we can check through prepared financial instruments and capital financing notes and their associated working papers. This can help spot any errors before they reach your auditors or become a bigger problem in future years.  

We can provide bespoke assistance where needed with individual aspects of your accounts. For example, in providing on-site support with preparation, or in depth assistance with soft loan accounting, lease accounting, debt restructuring or other notoriously tricky areas.     

For more information on this or any other Arlingclose services please contact Laura Fallon at or on 07702 788303. 

* Loans Fund Repayments (LFR) in Scotland, where regulatory guidelines are also different. 

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