Group accounting manual 2022 to 2023: consultation exercise

Question 1

Overview

Accepted Answer

All bodies within the Department of Health and Social Care accounting boundary (DHSC group bodies) must publish annual reports and accounts. Clear and transparent reporting helps the entity, as well as the users of the entity’s annual report and accounts, understand and scrutinise the year’s operations and outcomes.

DHSC (and Monitor as the regulator for NHS foundation trusts, operating under the banner of NHS England and NHS Improvement (NHSE/I)) has powers to direct the form in which the annual report and accounts should be prepared, the information that should be included, and the methods and principles that should be followed in their preparation.

In determining the form and content of the accounts we must, by statute, aim to ensure the accounts present a true and fair view.

In order to achieve this, the department issues a group wide annual report and accounting manual every year, the group accounting manual (GAM), containing the requirements DHSC group bodies need to follow when preparing their annual reports and accounts.

The NHS foundation trust annual reporting manual (FT ARM) establishes the annual reporting requirements for NHS foundation trusts. The FT ARM contains the formal accounts direction but foundation trusts will follow the GAM for accounts requirements.

The GAM requires DHSC group bodies to follow the requirements of International Financial Reporting Standards (IFRS), as adopted by the United Kingdom, interpreted and adapted by the HM Treasury Financial Reporting Manual (FReM).

Therefore, the GAM only includes detailed accounting guidance where DHSC group bodies are:

required to depart from IFRS or the FReM
required to make specific disclosures in addition to IFRS and the FReM, or
faced with particular circumstances that IFRS or the FReM do not address

Updates to the GAM follow the same principle and, on that basis, are required where IFRS or the FReM have changed, or when DHSC group bodies are required to make specific extra disclosures.

Some content for 2022 to 2023 is not yet available, such as HM Treasury discount rates. The draft GAM indicates where this is the case, and the manual will be revised later in the year once this content is known. An additional guidance document published alongside subsequent updates of the 2022 to 2023 GAM will signpost the changes made within the manual.

2022 to 2023 consultation

This consultation relates to the draft GAM for 2022 to 2023. The documents being consulted upon can be found in the DHSC group accounting manual collection.

The consultation period will run from 8 February 2022 until 6 March 2022.

The 2022 to 2023 GAM will be published in April or May 2022, once we have considered consultation responses and further refined the guidance offered in the GAM.

Post consultation changes will be made in collaboration with the relevant sector finance leads. The publication of the GAM is subject to approval by the Financial Reporting Advisory Board (FRAB).

Principal changes proposed in the draft GAM

There is one significant change to the accounting requirements for the 2022 to 2023 financial year in relation to IFRS 16, which has been consulted on heavily over the preceding years and there will be some significant changes to the reporting environment with the enactment of the Health and Care Bill during the 2022 to 2023 financial year.

Changes to the GAM are therefore focussed on providing clarity regarding the implementation of IFRS 16. Additional guidance concerning the implementation of the Health and Care Bill will follow through in year updates to the 2022 to 2023 GAM.

This document summarises the principal changes introduced in the draft GAM.

How to respond

Please submit your responses by 6 March 2022 by completing the public survey.

Question 2

Adoption of IFRS 16 leases

Accepted Answer

IFRS 16, Leases, is set to supersede IAS 17, Leases, SIC 15, Operating Leases – Incentives, SIC 27, Evaluation the Substance of Transactions Involving the Legal Form of a Lease, and IFRIC 4, Determining whether an Arrangement contains a Lease, across the public sector from 1 April 2022.

The objective of IFRS 16 is to report information that faithfully represents lease transactions and provides a better basis for users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

Specific consultation regarding the adoption of the Standard by HM Treasury took place in previous financial years. DHSC group wide consultations have taken place to coincide with the publication of IFRS 16 Exposure Drafts by HM Treasury and as part of the recent GAM consultations.

Given the material nature of leasing arrangements entered in to across the DHSC Group, across the public sector more widely and adoption by entities who follow UK adopted IFRS in accordance with the Companies Act 2006, IFRS 16 application guidance has already been published and regularly updated by HM Treasury, DHSC and NHS England and NHS Improvement.

As part of recent GAM consultations DHSC consulted on an ‘IFRS 16 Supplement’. This supplement served to give group bodies an early indication of the level of guidance intended to be offered on application of IFRS 16 by the DHSC Group, as well as indication of specific accounting policies to be employed by the DHSC Group. The latest version of the supplement was published as part of an IFRS 16 implementation guidance publication in November 2021.

The supplement as published in November 2021, with further minor amendments, has now been incorporated into the 2022 to 2023 GAM. Various chapters of the GAM have been supplemented with the relevant IFRS 16 implementation guidance as follows;

summary IFRS 16 budgeting guidance within Chapter 2 of the 2022 to 2023 GAM
HM Treasury interpretations and adaptations of IFRS 16 are detailed in Chapter 4 and Chapter 4 Annex 1
guidance regarding the approach to accounting for PFI liabilities on the implementation of IFRS 16 has been provided in Chapter 4 and Chapter 4 Annex 5 – further guidance will be provided when further HM Treasury guidance has been published
a new annex, Chapter 4 Annex 11 of the 2022 to 2023 GAM provides detailed guidance regarding the application of IFRS 16
relevant IFRS 16 disclosure guidance is provided in Chapter 5 and Chapter 5 Annex 1

This guidance is on top of the extensive implementation materials that can be found on NHSE/I IFRS 16 financial reporting page. The implementation tools and guidance therein are consistent with the adoption of IFRS 16 per the FReM and the GAM.

This consultation represents a further opportunity to comment on the DHSC Group approach to IFRS 16, prior to formal publication of the 2022 to 2023 GAM in April or May 2022. Various consultation questions enable entities to consider the differing aspects of IFRS 16 guidance in turn.

Consultation questions on the IFRS 16 GAM guidance

Do you have any further comments regarding the HM Treasury interpretations and adaptations for IFRS 16?

Do you have any additional comments on the DHSC implementation tools provided on the NHSE/I IFRS 16 financial reporting page?

Do you have any further comments regarding the transition to an IFRS 16 measurement basis for the valuation and disclosure of PFI liabilities in alignment with IFRS 16 adoption across the public sector in 2022 to 2023?

Do you agree or disagree with the accounting policy approach mandated in the group accounting manual of not applying IFRS 16 to other intangible assets not covered by paragraph 3 (e) of the Standard?

Agree
Disagree

Do you with to see any further guidance relating to sale and leaseback arrangements under IFRS 16 in the GAM?

Do you have any comments regarding the guidance offered in the group accounting manual concerning disclosure requirements under IFRS 16?

Do you have any further comments regarding IFRS 16 application described in the group accounting manual?

Question 3

Changes to the GAM stemming from the implementation of the Health and Care Bill during 2022 to 2023

Accepted Answer

The Health and Care Bill is currently progressing through Parliament. It is expected to be implemented during the 2022 to 2023 financial year.

The 2022 to 2023 GAM makes reference in Chapter 1 and Chapter 2 that the changes to be made to the GAM, with the enactment of the Health and Care Bill, will be provided as part of the in-year update cycle.

Users may wish to note that existing guidance regarding the approach to changes in entity status is covered at the end of Chapter 4 and in Chapter 4 Annex 9 of the GAM.

Consultation questions on changes to the GAM stemming from the implementation of the Health and Care Bill during 2022 to 2023

Do you have any comments regarding the approach in which changes will be communicated through in year updates to the 2022 to 2023 GAM?

Is there a specific matter in the provisions of the Bill that you consider detailed guidance for bodies is required?

Question 4

Other changes to the 2022 to 2023 GAM

Accepted Answer

Users should note that there are minimal changes to the FReM beyond the changes made as a result of IFRS 16 adoption.

Changes are either relating to departmental accounts specifically or already included in the GAM, as the GAM contains the appropriate ARA requirements communicated by the FReM and annual Public Expenditure System papers on ARA requirements.

This draft of the 2022 to 2023 GAM does not contain guidance that relates to any year end updates that will be made to the 2021 to 2022 GAM. Post consultation where it is appropriate to roll these updates to the 2021 to 2022 GAM forward, these will feature in the 2022 to 2023 GAM published in 2022.

Consultation questions on other changes made to the GAM

Do you have any other general comments on the draft group accounting manual?

Question 5

Summary of consultation questions

Accepted Answer