New accounting practices soon to come into force will impact upon local authorities’ financial reporting arrangements, according to assurance experts at PwC in the Midlands.
It will be a requirement for local authorities to prepare financial statements based on the International Financial Reporting Standards (IFRS) when the financial year ends in 2011. It is essential that local authorities begin to adopt the new reporting standards now to ensure that their 2010/11 accounts are up to date.
The Audit Commission’s ‘Countdown to IFRS’ briefing paper highlights a lack of readiness among local authorities, and how some are falling behind the timetable set out by The Chartered Institute of Public Finance and Accountancy (CIPFA). However, the paper also highlights that if local authorities act now they can still be ready in time.
Andy Hammond, partner and assurance expert at PwC in the Midlands, said: “The temptation for many organisations is to treat IFRS just as a technical accounting matter. This simply isn’t the case. Moving to IFRS can be a major project and will affect all areas of an organisation, not just the finance department.
“Many local authorities are still coming to terms with the wider implications of adopting the new standards and what it will mean for financial reporting as well as other areas such as human resources and IT systems. Our experience from other parts of the public sector which have already converted to IFRS, is that the task is not to be underestimated.”
A failure to achieve successful transition to IFRS could 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 the necessary requirement and will be published late.