Important announcement for local authorities - December 2020: In light of COVID-19 pressures, the CIPFA LASAAC Local Authority Accounting Code Board has agreed to defer the implementation of IFRS 16 Leases in the Code of Practice until the 2022/23 financial year.
In a year that will be long remembered for the many crises following the worldwide outbreak of the COVID-19 pandemic as well as the virus’s toll on the economy and functioning of the UK in general and the Public Sector in particular. The CIPFA/LASAAC has in response to the continued disruption issued a statement which will bring some comfort to those engaged in transitioning their entity to IFRS 16 compliance.
A Quick Recap:
At its meeting on Friday 27 March, the CIPFA/LASAAC Local Authority Accounting Board agreed to defer the implementation of the IFRS 16 Leases standard to the 2021/22 financial year, with an effective date of 1 April 2021. This decision aligned with the proposals across the public sector and was subsequently sanctioned by the government’s Financial Reporting Advisory Board.
A year on from the announcement of the outbreak, the country remains gripped by the pandemic despite optimism generated by breakthroughs in vaccination offerings. With the situation very much in mind, the Government’s Financial Reporting Advisory Board has chosen to revise the effective date for the implementation of IFRS 16 to 1st April 2022. Accordingly, the CIPFA LASAAC Local Authority Accounting Code Board has agreed to defer the implementation of IFRS 16 Leases in the Code of Practice on Local Authority Accounting in the United Kingdom (the Code) until the 2022/23 financial year.
While CIPFA/LASAAC has moved the effective date, it makes clear that the decision in no way diminishes its belief that the IFRS 16 Leases standard is a positive in usefulness and accountability. Nonetheless, the decision has been taken to help relieve the pressures on council finance teams resulting from the effects of the pandemic. The goal remains to implement IFRS16 throughout the sector and CIPFA LASAAC emphasises that this further deferral is limited to one year only and there will be no further extensions based on lack of preparedness. Public Sector finance teams need to continue their preparations for implementation and to look to the adoption of this standard in the 2022/23 financial year.
It might be oh so tempting to sit back, breathe a sigh of relief and await the next deferral but as the announcement emphasises this is a one-off “holiday”. Take advantage of the extra time by looking at how others have been tackling the road to compliance. Look closely at whether your processes are up to the job, forget a spreadsheet solution and investigate alternative purpose-developed software, use the time to ensure compliance on time with minimum disruption and maximum payoff as your improved lease management, accurate lease accounting and effective asset utilisation come to fruition.
For more information, use your membership to contact CIPFA/LASAAC.
To discover how Innervision can help contact one of our lease accounting experts today, become a leader in the public sector and join the many organisations worldwide who have successfully transition to and achieved on-going compliance with IFRS 16.