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What you need to know about the new Academies Accounts Direction

24th Sep 2019
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The new rules affect accountants and auditors dealing with multi-academy trusts registered in the UK. 

The Education and Skills Funding Agency has published the 2018/19 Academies Accounts Direction (AAD). The changes apply to academy trusts preparing statutory financial statements for the period ending 31 August 2019.

The new AAD rules are important for accountants and auditors dealing with academies registered in the UK. The changes are likely to affect a large number of accountants as the number of registered academies continues to rise year on year.

The government’s statistics show there were 8,490 academies registered in March 2019, the majority of which are multi-academy trusts. This represents a 16% increase from the 7,317 registered academies of the previous year.

What you need to do

If you prepare and audit any academy trusts’ annual financial statements, you need to take into account that the Education and Skills Funding Agency (ESFA) imposes a tight filing deadline on academies of four months from their year-end. Most academies have a 31 August year-end, which means their deadline is the end of the calendar year.

The audited accounts must also feature “prominently” on the academy’s website within five months of the year end (31 January) and they must be filed with Companies House within nine months (31 May).

What are the new rules?

The revisions to FRS 102 detailed in the Update Bulletin 2 are not required for academies this year as they only apply to accounting periods commencing on or after 1 January 2019 – therefore these changes will be incorporated into the 2019/20 Accounts Direction. However, any academies incorporated after this date will need to comply with these changes.

The main changes are highlighted below:

Funds note

The 2017/18 AAD introduced a requirement for an additional table within the Funds note which showed the combined position of the current and prior period fund movements. This table is no longer required by the current AAD.

Tangible fixed assets

The ESFA defines tangible fixed assets as “those assets that have physical substance and are used to provide an economic benefit to the academy trust on a continuing basis (i.e. for more than one reporting period)” including assets acquired since the academy trust was established as well as those inherited from a predecessor school.

The categories of tangible fixed assets have been revised to align with the Sector Annual Report and Accounts (SARA) and are now the following:

  • Land and buildings, analysed between freehold and leasehold
  • Leasehold improvements
  • Assets under construction
  • Furniture and equipment
  • Plant and machinery
  • Computer equipment
  • Motor vehicles

If an asset comprises of two or more parts that have different economic lives (e.g. roofs / boilers / lifts etc. within a building), the AAD also requires consideration of component accounting.

Comparative information

Academies need to provide comparative information on some disclosure notes including agency arrangements and events after the reporting period. If you disclosed a contingent liability in the prior year, you should now include an update where relevant.

Related party transactions

With the new requirements, Academy Trusts need to seek the ESFA’s approval before a transaction with a related party supplier takes place if the contract or agreements with the same party exceed a limit of £20,000 in a financial year and when the transactions are ‘novel, contentious and or repercussive,’ regardless of whether they reach this threshold.