Technical / Fair value and simplification are the key issues for year-end
There are two major changes to the Treasury’s Financial reporting manual this year – the application of IFRS 13 Fair value measurement for the first time and the implementation of the Treasury’s simplification and streamlining project.
IFRS 13 is adopted without adaptation or amendment, which means all fair value measurements need to be made in accordance with the requirements of this standard. However, IAS 16 Property, plant and equipment and IAS 38 Intangible assets have been adapted and interpreted as a result of the adoption of IFRS 13.
Applying a fair value measurement technique to non-current assets in the NHS has always been difficult as such assets are held for their service potential rather than to generate income. This becomes even more difficult when applying IFRS 13. This is because the new standard takes into account the asset’s condition, location and any restrictions on its use, but also requires that the valuation is for the highest and best use of the asset and assumes that any buyer is acting with self-interest. The highest and best use of an NHS building may not be the provision of healthcare services.
In order to avoid more valuation difficulties, IAS 16 and IAS 38 have been adapted for public sector purpose. They say that IFRS 13 valuations will only apply to non-current assets that are surplus to requirements – this means they are not in use and there are no plans for them to be used again – and have no restrictions on their use. The standard may also affect investment properties or assets held for sale, which may be valued on a fair value basis.
All other non-current assets will continue to be valued as they always have been. It should be remembered that all other assets and liabilities measured or disclosed on a fair value basis should be reviewed to ensure that the valuation basis meets IFRS 13. The Treasury started the simplification and streamlining project several years ago with the aim of making public sector bodies’ annual reports and accounts more accessible and understandable. The project has now been concluded and the manual amended accordingly. It will have an impact on the annual report half of NHS bodies’ annual report and accounts.
The implementation of this project results in some structural changes to the annual report, but very little new disclosure. One new requirement is the inclusion of a statement from the chief executive of the NHS body giving their perspective of the performance of the body over the period. This will have to be balanced, fair and understandable and will have to be consistent with the rest of the annual report and accounts.
The other new requirement is the inclusion of a table that sets out how many employees (categorised between directors or members of the governing body, other senior managers and employees) are male and how many are female. The Department’s Finance manual includes a whole annex on accounting for the better care fund, which everyone who has any contact with the better care fund should read.
Monitor’s foundation trust Annual reporting manual is expected to include a new requirement to explain the steps the remuneration committee or board has taken to satisfy itself that it is reasonable to pay a senior manager more than £142,500 per annum.
There will, of course, be other minor amendments and issues will arise towards the end of the year, but these are the issues that could be considered now. Debbie Paterson is an HFMA technical editor
|
NICE update New technology appraisal guidance (TA359) recommends tolvaptan for treating autosomal dominant polycystic kidney disease (ADPKD) in adults to slow cyst development and kidney function decline. ADPKD is a genetic disorder characterised by a progressive increase in the number and size of bilateral renal cysts, resulting in enlargement of the kidneys to three to four times their normal size. This may lead to renal impairment – some people with ADPKD will lose all their kidney function. Tolvaptan is the first treatment to delay progression in ADPKD in terms of total kidney volume growth and rate of kidney function decline. This delays the time to kidney failure and also to when dialysis and transplant may be needed. While higher drug costs are anticipated, this should reduce the need for hospital admission, dialysis and transplant. Some 2,300 people in England may be eligible for treatment with tolvaptan for ADPKD – four in 100,000. Uptake is anticipated to reach 50% of the eligible population five years after publication of the guidance. The Department of Health and Otsuka have agreed that tolvaptan will be available to the NHS with a patient access scheme making it available with a discount. The size of the discount is commercial in confidence. The NICE costing template provides a framework for organisations to calculate the cost of implementing the guidance once the confidential discounted price of tolvaptan has been input. Tolvaptan is a high-cost drug, so the cost is paid by clinical commissioning groups in addition to the tariff. The treatment of people with stage 2 and 3 chronic kidney disease is commissioned by CCGs. NHS England is the commissioner of dialysis and kidney transplants. Providers are secondary and tertiary care providers. Nicola Bodey is senior business analyst at NICE |
|
In brief The Department of Health is looking for a costing accountant to work with the reference costs team on a parttime secondment to help improve costing guidance and the collection process. The 12-month post is likely to involve one to two days per week, although the Department will be flexible for the right applicant. Outgoing post holder Deborah McEvoy of Lancashire Care NHS FT said her 18-month spell had been ‘hugely valuable’, benefiting her substantive role and her organisation, which had agreed the secondment. For details, contact [email protected] The HFMA Charitable Funds Special Interest Group has invited comments on an example trustee annual report and accounts, applying the new FRS102-based statement of recommended practice. Send comments to [email protected] by 20 November. HFMA guidance will help clinical commissioning groups and NHS trusts set up auditor panels to advise on external auditor appointments. This requirement comes into effect from 2017/18, but, as appointments must be made by the end of the year before, panels must be in place early in 2016 |
Related content
The value masterclass shares examples of organisations and systems that have pursued a value-driven approach and the results they have achieved.
This webinar series offers colleagues of ICS organisations the opportunity to discuss common priorities, challenges, and successes within their field.