One in five public bodies not ready for IFRS
If UK small businesses are alarmed at the prospect of international financial reporting standards (IFRS), then spare a thought for the public sector accountants who will have to adapt their financial reports to IFRS for the 2010-11 financial year.
CIPFA has published an indicative timetable for public sector bodies making the transition to IFRS, but with several of the milestones already passed, many authorities are falling behind the schedule, the Audit Commission found.
The commission’s latest Countdown to International Financial Reporting Standards reported some shocking findings from a November 2009 survey of local government and emergency authorities:
- Overall, only 15% of authorities were rated as on track, 63% were rated as having minor issues, and 21% rated as not on track and having major issues.
- 65% of authorities had not set a budget for transition. In some cases, this is because the authorities have carried out an impact assessment and determined that they could meet the requirements with existing resources. However, the report added, “Usually auditors report that this is because authorities do not yet know what the impact will be and therefore do not know what resources will be required.”
- Just under half of authorities (46%) had not informed the audit committee of their
- transition plans; in 59% of authorities, the audit committee did not have a role in overseeing IFRS transition.
- 42% of authorities had not yet completed an initial impact assessment
- 35% had not established a budget for the transition in November 2009.
- Nearly a third of authorities had not discussed the IFRS transition with their auditor at
- the time of the survey.
“A failure to achieve successful transition to IFRS would cause significant reputational damage to individual local authorities and the local government sector as a whole. Poor preparation will heighten the risk that accounts will not meet requirements and so attract a qualified auditor's opinion or be published late. At a practical level, there is a risk that extra and unnecessary costs will be incurred,” the commission concluded.
IFRS and the need for asset management
IFRS offers the opportunity to utilise the asset register to maximise business benefits for public sector organisations. It’s true that the new IFRS reporting complexity combined with an extraordinary increase in asset numbers does present a series of challenges to financial departments. But the new standards will, in time, offer tangible business benefits and increased cost efficiencies which will make any disruption caused during this transitionary period, as organisations completely readdress their asset register requirements, seem like a very necessary catalyst leading ultimately to a far more productive time. A centralised, automated asset register is key if organisations are to reap the maximum benefits. This vital tool will not only streamline year end audits and reduce the reliance on specific, skilled personnel but will also provide the detailed insight into corporate assets required to enhance capital expenditure decision making. Once established, this new set of standards will offer an astonishing level of visibility throughout the fixed asset register, maximising business value, streamlining processes and allowing organisations to achieve their full business potential through the prudent management of resources. Karen Conneely Group Commercial ManagerReal Asset Managementwww.realassetmgt.co.uk