Whitehall in late race to catch IFRS green light

Government departments are scrambling to issue new balance sheets under
international financial reporting standards, as the public sector gears up for a
full transition to the standards at the end of 2009.

The first deadline on the road to IFRS falls at the end of September, with
all central government departments, excluding the NHS, set to submit a restated
balance sheet.

Some of the largest public divisions controlling billion-pound budgets,
including the Department for Transport and the Ministry of Defence, are being
pushed towards adoption of the global accounting standards and the first
‘trigger point’ comes up on 30 September.

The balance sheets could prove problematic, with the valuation of complex
financial instruments a key and controversial requirement of IFRS. Financial
instruments have caused major headaches to those in the private sector as
companies have had to deal with the volatility that affects derivatives
contracts under fair value.

‘Certain government departments will have debtors, loans, creditors and cash
which may come under the financial instruments rules,’ said Chris Wobschall,
CIPFA’s assistant director for policy and technical.

Though government departments will have to work out the situation with
financial instruments for the purpose of compiling the balance sheets, the full
break-out of what they do and do not have and how it is valued is unlikely to
become public.

‘There will be a financial instruments implication in the balance sheet but
these aren’t going to be published,’ said Wobschall.

Earlier this year David Watkins, the Treasury’s head of financial reporting,
said that central government departments had been given the ‘shock of their
lives’ after being hit with four trigger points in the run-up to the
introduction of IFRS.

Wobschall said: ‘IFRS is a massive project ­ one of the delays has been
accounting for private finance initiative projects ­ but I’m sure [central
government departments] can deliver against it.’

The balance sheets will not be published as they are just a dry run. The NHS
is treated as a series of local authorities and is therefore excluded. The full
effects of financial instruments will have to be submitted to the Treasury by
July 2009.