There’s Still a Pandemic and it’s Financial Year End Again… Laura Fallon lfallon@arlingclose.com

This financial year end may be shaping up as an improvement on the last two. If you are a parent, the main one being that the kids have a reasonable chance of actually being at school this year so you won’t be trying to close the accounts between a Cosmic Kids online yoga session and trying to bribe your toddler to sit through Frozen quietly. Even better you might be able to unwind from the stresses of IFRS 9 at the pub on Friday night or if you are really lucky (and depending on which region of the UK you live in) you might be going into the office for one or two days a week!

While we may count our blessings, no-one knows more than local authorities that this pandemic isn’t over. It continues to have reverberating effects on our local communities, businesses and the local economy. As accounts aim to reflect reality it will thus also affect these with continued challenges faced in valuing local authority owned companies and the likelihood of loans made to external parties defaulting. Whilst there may be some winners (hello house prices in suburban areas where you can get an extra bedroom) there are also unfortunately many losers as the travel and hospitality industry continue to get back on their feet, not to mention the huge challenges currently facing the energy market at the present time. If you are a local authority that owns an airport, theatre, or energy company to name just some examples there may well be extra scrutiny on these items this year.

After being delayed again and then again and then again IFRS 16 is also now almost upon us. It officially comes into play from 1st April 2022 but the impact of it will need to be discussed briefly in this year’s accounts under accounting standards issued but not yet adopted. The main effect of the new standard is an increase in debt levels as operating leases are classified in a similar way to finance leases. There may also be a revenue impact in a small number of cases.

Arlingclose has many years of experience at assessing how to value items appropriately for published accounts. This includes the valuation of equity in companies owned or part owned by local authorities and the value of any loan made to these companies, or loans made to local businesses or charities. For loans this includes an Expected Credit Loss calculation which requires a realistic assessment of the borrower’s chance of default and what the loss would be if a default occurred.  We are also able to assist with accounting for soft loans, guarantees, loan commitments and restructured loans as well as areas of local authority capital accounting including calculation of the Capital Financing Requirement and Minimum Revenue Provision (or in Scotland Loans Fund Repayments). Our methods are tired, tested and audit ready even in a pandemic.

We can also provide an assurance service to check through the various financial instruments and capital accounting aspects of your accounts to spot errors and prevent arguments with your auditors. Many of our support services are very much bespoke and we can provide as much or as little help as you need.

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

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