Consultation outcome

Consultation response: changes to DHSC group accounting manual 2025 to 2026

Updated 30 June 2025

All bodies within the Department of Health and Social Care (DHSC) 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 activities and outcomes.

DHSC and NHS England have powers to direct the:

• form in which the annual report and accounts should be prepared
• information that should be included
• 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, DHSC issues a group-wide 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 HM Treasury’s financial reporting manual (FReM).

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

• required to depart from IFRS or the FReM
• required to make specific disclosures in addition to IFRS and the FReM
• 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 the 2025 to 2026 GAM is not yet available, such as HM Treasury discount rates. The 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 2025 to 2026 GAM will signpost the changes made within the manual.

Background to this consultation

This consultation related to the draft GAM for the 2025 to 2026 financial year. The consultation ran from 7 February 2025 to 7 March 2025. Following the consultation period, the revised GAM has been subject to further assessment by the financial reporting advisory board (FRAB) to clear the final draft for publication.

Feedback has been received from the user and audit community as well as technical experts, which has helped to inform and enhance the development of the 2025 to 2026 GAM. The following sections of this document summarise the technical question posed, responses received and DHSC’s decisions.

Following this consultation and after consideration by FRAB, the 2025 to 2026 GAM will be published in June 2025.

Details of consultation questions and responses

Implementation of IFRS 17 Insurance Contracts

IFRS 17 applies in the FReM and the GAM since 1 April 2025. IFRS 17 sets out the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of IFRS 17 and replaces the previous standard IFRS 4 Insurance Contracts. IFRS 4 was an interim standard which was meant to be in place until the International Accounting Standards Board completed its project on insurance contracts. IFRS 4 permitted entities to use a wide variety of accounting practices for insurance contracts. IFRS 17 significantly changes the accounting treatment for insurance contracts, and will increase the transparency of entities’ financial positions and performance, and make financial statements more comparable.

As is commonplace when the public sector is adopting a new accounting standard, HM Treasury developed IFRS 17 application guidance (available on Government financial reporting manual: application guidance). DHSC has also developed IFRS 17 application guidance for the health sector (available on the NHS England page Financial accounting and reporting updates).

While IFRS 4 had very limited or no applicability within the DHSC group, it is important that entities do not assume that IFRS 17 will not impact group entities without ensuring appropriate assessments have been made as to whether contracts or components of contracts give rise to insurance contracts.

In terms of updated guidance provided in the 2025 to 2026 GAM:

• the accounting and budgeting misalignment in relation to insurance expenditure scoring to capital is detailed in chapter 2 of the GAM
• the interpretations and adaptations of IFRS 17 are detailed in chapter 4 and chapter 4, annex 1
• due to the limited application to group entities historically, a separate annex to chapter 4 of the GAM has not been developed
• summary content regarding transition, initial recognition and subsequent measurement under the general measurement model of IFRS 17 has been provided in chapter 4
• relevant and proportionate updates have also been made to chapter 5 and chapter 5, annex 1 of the GAM detailing key elements of the disclosure requirements

Consultation questions on implementation of IFRS 17

Do you have any comments regarding the guidance in the GAM and supporting annexes relating to implementation of IFRS 17?

Summary of responses

The majority of respondents considered the guidance clear, proportionate and relevant given the limited expected impact of IFRS 17 on NHS bodies. Several respondents welcomed the links to existing guidance issued by HM Treasury and DHSC and felt that the documentation provided an appropriate level of detail for entities likely to be affected.

One respondent suggested that the guidance could be strengthened by including practical, NHS-specific examples and illustrative accounting journal entries to support implementation. Others provided technical observations, including a recommendation to:

• refer explicitly to both capital and resource budgetary impacts
• clarify the definition of key terms
• correct minor editorial issues such as typographical errors and the use of terminology

Technical feedback also queried whether the term ‘current value’ should be amended to ‘fair value’ to align with IFRS 17 and sought clarification on disclosure requirements, including how and when certain disclosures should be provided under the standard.

Additionally, concerns were raised about the potential for prior period errors if insurance contracts within the scope of IFRS 17 are identified that were previously unrecognised under IFRS 4. Respondents suggested that the GAM could provide guidance on how entities should address such circumstances.

DHSC decision

In response to the consultation the GAM has been updated to include guidance directing entities to assess whether the identification of insurance contracts within the scope of IFRS 17, previously unrecognised under IFRS 4, represents a prior period error under international accounting standard (IAS) 8.

Minor editorial corrections have been made, including amending typographical errors and reviewing terminology to ensure accuracy and consistency.

DHSC does not believe the GAM is an appropriate vehicle for IFRS 17 illustrative NHS-specific examples and basic journal entries. We also do not consider it correct to change ‘current value’ to ‘fair value’ in paragraph 4.293. The guidance in its current form is consistent with the HM Treasury IFRS 17 application guidance. It explains that the liability for incurred claims and the liability for the remaining coverage are measured at current value at every statement of financial position (SoFP) date, which is achieved by calculating the present value of future cash flows and then making a risk adjustment.

Do you have any comments regarding IFRS 17 implementation more broadly?

Summary of responses

Respondents raised no additional concerns and considered the current guidance clear and appropriate. Some noted that NHS bodies may find it challenging to evidence that they are not insurers under IFRS 17, acknowledging the helpfulness of the existing application guidance from DHSC and HM Treasury.

One respondent suggested sharing examples where NHS bodies have identified insurance contracts to support preparers. Another welcomed the removal of certain accounting policy choices through the interpretations in paragraph 4.283, seeing this as promoting consistency and comparability without affecting reporting quality.

DHSC decision

No further changes to the GAM are proposed. DHSC will explore sharing practical examples of IFRS 17 application through existing communication channels and continue to signpost to the application guidance already provided.

Implementing the current outputs from the non-investment asset thematic review

Under the thematic review of non-investment assets, in which DHSC and NHS England participated as representatives on FRAB, the relevant authority working group and as part of the non-investment asset working group, changes have been proposed to the valuation of intangible assets and for property, plant and equipment.

Intangible assets

The review proposed that instead of maintaining the historic position of the FReM, through which the option to employ the cost model on subsequent measurement had been removed, the option to employ the revaluation model should now be withdrawn from 1 April 2025 and the cost model should be employed. Transition will require the carrying values of existing intangible assets, measured under the previous revaluation approach, as at 1 April 2025, to be taken forward as a deemed historic cost. IAS 8 has been adapted so that these changes, and all changes stemming from the thematic review will be completed prospectively than retrospectively.

This approach received positive consultation responses and FRAB endorsement and it has been incorporated into the 2025 to 2026 FReM. The approach is also reflected in chapters 4 and 5 and the associated annexes of the 2025 to 2026 GAM. The comprehensive nature of the proposal and the timely endorsement of the approach and associated guidance by FRAB ensures there are deemed to be limited risks in implementing this proposal across the NHS during 2025 to 2026.

Property, plant and equipment (PPE)

The review has proposed changes to the classification, valuation cycles and valuation methodologies of PPE, accounted for under IAS 16.

In terms of classification, the review proposed to remove the distinction between specialised and non-specialised assets held for their service potential from the FReM and to reclassify these assets in line with terminology employed in the International Public Sector Accounting Standards (IPSAS) 45 and 46, as assets held for their operational capacity. Positive consultation responses and FRAB endorsement have been received and this approach has been incorporated into the 2025 to 2026 GAM.

Regarding valuation cycles, the review proposed to mandate certain approaches to valuation cycles focusing on the employment of a quinquennial (5-year) valuation cycle, or rolling programme of quinquennial valuations, with indexation applied in the interim. For non-property assets, appropriate indices are to be applied as the basis for valuation. Historically the FReM has only listed what valuation cycles may be appropriate, including annual valuations. As part of the proposals, no change has been made to the ability to apply depreciated historic cost to assets with short useful lives or low values or both.

In terms of valuation methodologies, the proposal to remove alternative site valuation from the types of valuation technique employable under a depreciated replacement cost (DRC) methodology on a modern equivalent asset (MEA) basis has been endorsed by FRAB, but a lack of consensus regarding the approach to valuing land has meant that a comprehensive approach to changing valuation methodologies has not been endorsed by FRAB or incorporated into the 2025 to 2026 FReM.

As such there is not a comprehensive approach to changing asset valuation for PPE that has been incorporated into the FReM for 2025 to 2026. Instead, a 2-step approach has been taken in central government to implementing these valuation changes. We view this as creating a number of potential complexities for future years, when a consensus on outstanding issues is reached in FRAB and changes to valuation methodologies are then incorporated in the FReM.

The proposed approach for PPE in the 2025 to 2026 FReM, of entering a transition period from 1 April 2025, without the revised valuation approach being finalised, may mean entities are well into the transitional period or will have completed their transition before it is confirmed how entities will need to revise their complex DRC MEA models. Under the FReM approach, entities may have as little as a few months to re-work complex models with their valuers, dependent on when the change in approach is communicated and guidance finalised.

Given the material impact for a number of NHS bodies that will be seen in removing alternative site valuation from the FReM and GAM, this change at short notice could create significant levels of variation from local financial plans, together with audit scrutiny, increased valuer costs and operational impacts to the entity, as well as cause complications for national planning activities.

We are aware of the immediate benefits in updating valuation cycles to reflect the approach taken in the FReM, particularly in employing indexation rather than resorting to annual valuations. However, concerns over the complications of implementing half of a wider change to valuation approach now and the other half potentially in 2 years gives rise to future risks that would not arise if both the change in valuation cycle and valuation methodology were implemented together within a transition period, as was originally proposed by the thematic review.

While the GAM reflects changes to terminology of PPE in regards to assets no longer being held for their service potential, but held for their operational capacity and revising references to distinctions of specialised and non-specialised assets, the GAM diverges from the FReM by excluding any changes to valuation cycles for the 2025 to 2026 financial year. Instead, the GAM reflects the previous guidance on this matter until revisions to valuation cycles and valuation methodologies both receive FRAB endorsement. The intention is to then enter a transition period in which both the changes for valuation cycle and valuation methodology are enacted, which was the expectation stemming from the thematic review proposals for most of 2023 and 2024 calendar years.

Given the above, the updates have been made throughout the GAM in relation to subsequent measurement of intangible assets and some updates of terminology in relation to assets held for operational capacity and accounted for under IAS 16. It should be noted that all divergences from the FReM in the GAM were endorsed by FRAB in March 2025.

Consultation questions on the GAM approach to implementing the current outputs from the non-investment thematic review

Do you have any comments regarding the guidance on intangible assets contained in the GAM?

Summary of responses

Overall, consultation responses supported adopting the cost model for intangible assets from 1 April 2025, aligning with the revised FReM. Respondents noted this would have limited impact on most NHS bodies, as intangible assets are generally not material. The change was seen as straightforward to apply, though several technical clarifications were requested.

Some feedback focused on removing or updating outdated references to revaluation in the GAM, including specific paragraphs in chapters 4 of the manual and example accounting policies. Respondents also highlighted the need for clearer guidance on transition disclosures, particularly regarding the treatment of accumulated amortisation and whether gross or net carrying values should be brought forward as deemed cost.

One respondent raised a concern about the potential impact on electronic patient record (EPR) business cases, noting that removing the revaluation option could impact reported asset values, affecting affordability assessments. Others flagged audit risks in the financial year 2024 to 2025, cautioning that organisations might seek to reduce intangible asset balances before transition.

Further suggestions included:

• clarifying whether intangible assets remain an example of estimation uncertainty
• reminding entities of the need to clear any revaluation reserve balances linked to intangible assets upon disposal or derecognition

DHSC decision

The change to the cost model for intangible assets has been well supported, and the GAM has been updated to fully reflect this transition, with specific attention to removing legacy references to revaluation.

The treatment of accumulated amortisation at transition has been clarified, specifying that the net carrying values should be carried forward as deemed cost.

While we acknowledge concerns about the potential impact of moving to a cost model on EPR business cases, the change reflects a policy decision already endorsed by FRAB and incorporated into the FReM,

The accounting treatment does not affect the underlying operational value or funding of EPR systems. Any affordability or business case implications should be addressed through financial planning and capital investment decisions, rather than through accounting guidance. Therefore, no change to the GAM guidance is considered necessary.

Do you have any comments on the considered risks of implementation of half a valuation approach in one financial year, to be followed up with additional adjustments to valuation approaches in a future year?

Summary of responses

Respondents overwhelmingly preferred a single, co-ordinated implementation of all valuation changes rather than a split-year approach. They cited:

• potential confusion
• inconsistency
• additional workload
• audit burden

Some respondents, however, raised concerns about reduced comparability across public sector bodies.

DHSC decision

We welcome the comments on current guidance to defer implementation of both quinquennial valuation cycles and the removal of the alternative site valuation assumption until HM Treasury’s final valuation methodology is confirmed. No further changes to the guidance are required.

Do you consider the benefits brought by mandating quinquennial valuations with interim indexation outweigh the risks of implementing a revised approach to valuations under IAS 16 in two steps and if so, why?

Summary of responses

Most respondents preferred deferral until full valuation methods are finalised. They believed this would be simpler and more manageable for NHS bodies, valuers and auditors. However some supported immediate introduction of 5-year valuations with indexation, viewing it as beneficial in reducing the burden of annual valuations. Concerns were raised about index availability for land assets.

DHSC decision

DHSC welcomes the comments from the stakeholders and overall support to deferring implementation of the valuation changes until all elements are finalised to enable single, coordinated transition. We will consider indices for land and buildings valuations to be specified in the guidance or shared separately to reduce judgement and ensure consistency.

Do you have any other comments regarding the outputs from the non-investment thematic review?

Summary of responses

Respondents were generally supportive of the outputs from the non-investment thematic review but highlighted the need for early and clear communication of changes.

There was a call for additional guidance on applying IAS 36, particularly around impairment reviews, as many NHS bodies have limited experience in this area due to previous reliance on asset valuations.

Concerns were raised about the phased removal of alternative site valuations, which could lead to inconsistency across organisations. Respondents recommended that DHSC provide appropriate indices for interim valuation years to support comparability.

DHSC decision

We acknowledge the request for further guidance on the application of IAS 36, particularly in relation to the identification of impairment indicators and the requirement for impairment reviews under the revised valuation approach.

However, we consider that no additional guidance is necessary at this stage, as the GAM already provides sufficient coverage of this topic.

We will continue to monitor the implementation of the guidance and gather feedback from NHS bodies and auditors to assess whether further clarification is required in future.

Do you have any other comments regarding the guidance in the GAM relating to the changes stemming from the non-investment asset review?

Summary of responses

Most respondents indicated they had no further comments regarding the guidance in the GAM stemming from the non-investment asset review. Some respondents reiterated their ongoing engagement with the broader consultation process.

One technical comment was raised regarding paragraph 4.167 of the GAM, which currently states that depreciated replacement cost (DRC) is to be used to arrive at an existing use value (EUV) for specialised assets. It was suggested that the reference to EUV may be incorrect, and that this should instead refer to ‘current value in existing use’ as per paragraph 4.164.

DHSC decision

We do not consider a change to the paragraph 4.167 as being necessary. Current value in existing use must be interpreted as market value in existing use which is defined in the Royal Institution of Chartered Surveyors (RICS) Red Book as existing use value, which we explain in the guidance in paragraph 4.167.

Implementing phase 3 of TCFD recommended disclosures

The 2025 to 2026 financial year incorporates the Task Force on Climate-related Financial Disclosures (TCFD) strategy pillar recommended disclosures into the GAM and completes the phased introduction of TCFD recommended disclosures.

The approach of the GAM in the main has reflected the HM Treasury approach to public sector adoption of the TCFD recommended disclosures. The GAM currently departs from the approach in the FReM in the following ways, as the GAM does not require:

• NHS bodies to disclose or develop processes to disclose scope 1, 2 and 3 emissions reporting under the metrics and target pillar. As emissions estimates for the NHS in England will be provided by NHS England, it is considered that undue costs and effort would be involved in each local body establishing a duplicative process for the purpose of this disclosure
• a compliance statement, but provides suggested introductory text in making the disclosures while maintaining the Companies Act approach of requiring the entity to explain why the specific disclosures are not provided

In adopting the recommended disclosures under the strategy pillar, the GAM departs from the approach taken in the FReM in regards to:

• not requiring entities to complete a climate principal risk assessment required as part of HM Treasury’s application guidance as part of the strategy pillar, as it is considered that the risk management pillar requirements sufficiently cover this matter
• adaptation of the recommended disclosure relating to the scenario analysis, as described below

Rather than requiring entities to disclose the resilience of an organisation’s strategy over various reference points, including mid and end of century reference points, given a global warming pathway of 2°C or lower, the GAM adapts the second recommended disclosure under the strategy pillar, to incorporate the requirements of a more targeted scenario analysis.

Entities are asked to describe the impact of risks and opportunities on the organisation’s operations, strategy and financial planning and how these materialise over time horizons established as part of the first recommended disclosure, when considered against a global warming pathway of 2°C or lower.

The adapted recommended disclosure above ensures entities will describe elements of plausible but uncertain future states that are consistent with the delivery of a scenario analysis, but in a more targeted and informative manner for the user of an NHS body annual report and accounts (ARA), that is less resource intensive or costly for the entity to compile. Tailored guidance has been provided in chapter 3 annex 5 of the GAM to assist with compiling the recommended disclosures detailed as part of the strategy pillar.

Consultation questions on applying the phase 3 TCFD recommendations in the GAM

Do you have any comments on the guidance provided in the GAM relating to the recommended disclosures under the strategy pillar?

Summary of responses

The respondents generally welcomed the inclusion of TCFD strategy pillar disclosures, but some felt the guidance was overly technical and not accessible to lay readers.

Some feedback highlighted concerns around clarity, technical language and the practical applicability of the instructions. Some respondents felt the guidance was too complex, particularly for non-expert audiences, and recommended simplifying the language, explaining technical terms like scope 1, 2, and 3 emissions.

One respondent also commented on the mandatory headings in the annual reports, with suggestion to allow more flexibility for NHS bodies.

Additionally, some noted that the guidance assumed readers had already consulted other TCFD materials, which may not be the case. There was also a request for clarification on the materiality assessment, with some suggesting that financial statement materiality should be the benchmark for assessing climate-related risks.

Some raised concerns about the time horizons used in the guidance, suggesting the need for consideration of longer-term risks, particularly those extending beyond 2030.

DHSC decision

Following careful consideration of the feedback, some paragraphs of the guidance have been revised to improve the language and remove technical terms where possible (3.225, 3.226 and 3.237). We conclude that otherwise the current guidance remains appropriate and sufficiently clear for its intended audience.

In future publications, we will consider further revisions to explain or remove technical terms where it is practicable. Some terms, however, such as scope 1, 2, and 3 emissions, are internationally recognised under the Greenhouse Gas Protocol and the TCFD framework, and their inclusion ensures alignment with standard climate reporting terminology. NHS bodies operating within a public sector reporting context are expected to have access to the necessary expertise to interpret these terms. Simplifying or removing this terminology risks reducing the technical accuracy and comparability of disclosures.

We also do not consider it necessary to allow further flexibility in structuring headings. The prescribed structure supports consistency and comparability across NHS bodies, a primary objective of the annual reporting framework.

We do not propose amending the materiality guidance. The GAM reflects the TCFD-aligned public sector guidance from HM Treasury, which intentionally leaves flexibility for entities to determine materiality based on their circumstances.

Do you have any other comments regarding the TCFD guidance in the GAM?

Summary of responses

Respondents broadly welcomed the clarity and structure of the current TCFD guidance in the GAM, particularly the detailed breakdown of the 4 disclosure pillars. However, one respondent raised concerns about the relative length of the TCFD guidance compared to the rest of chapter 3, suggesting this could unintentionally signal that climate-related disclosures should dominate the annual report.

Another respondent highlighted that references to green plans in current NHS reports were often too general and did not always align with TCFD’s broader governance and risk focus, due to differences in purpose and scope between green plans and TCFD disclosures.

Concerns were also raised about NHS organisations’ readiness to meet the strategy pillar requirements, particularly regarding scenario analysis and the need for sufficient preparatory work and governance arrangements.

DHSC decision

We considered the consultation responses and in light of the guidance already provided in the 2025 to 2026 GAM, we do not recommend further amendments. The responses from most stakeholders confirm the guidance is already clear and helpful.

The current GAM guidance already makes clear that references to green plans should only be used where they provide relevant and sufficient information to meet TCFD disclosure requirements. Additionally, the GAM reflects the phased approach adopted by HM Treasury, recognising that earlier iterations of green plans may not have been developed with TCFD alignment in mind. The responsibility remains with the organisation to assess the adequacy of their green plan content for TCFD purposes, as already explained in the guidance.

The GAM already recognises the potential challenges of preparing disclosures under the strategy pillar and has intentionally adapted the HM Treasury requirements to reduce reporting burdens.

Incorporation of HM Treasury guidance regarding accounting for social benefits

The 2025 to 2026 FReM incorporates specific guidance regarding the accounting for social benefits with accompanying application guidance. While the accounting for social benefits is anticipated to have limited relevance or material impact for DHSC group entities, a short section in chapter 4 has been added to provide the definition of social benefits and the expected accounting treatment following the principles outlined in the IFRS conceptual framework and application guidance. A link to the HM Treasury application guidance is also provided.

Consultation question on the accounting for social benefits

Do you have any comments regarding the guidance provided in the GAM relating to the accounting for social benefits?

Summary of responses

A small number of comments have been received. The respondents welcomed or had no concerns regarding the inclusion of guidance on accounting for social benefits in the GAM. Some acknowledged that the guidance is unlikely to have practical relevance for NHS bodies, as they do not typically make direct payments to individuals qualifying as social benefits under the definition provided.

One respondent recommended that the GAM explicitly state that the guidance is unlikely to apply to NHS bodies, to reassure preparers and reduce uncertainty.

DHSC decision

DHSC welcomes the comments. We do not consider it necessary to amend the guidance to explicitly state that the accounting for social benefits is unlikely to apply to NHS bodies. The current guidance already provides a clear definition of social benefits, along with references to HM Treasury’s application guidance, enabling entities to determine applicability. Including an explicit statement of non-applicability risks inadvertently narrowing interpretation or overlooking exceptional cases where NHS bodies may engage in activities falling within the scope of social benefits.

Reporting updates in the GAM

Mental health expenditure

NHS England requires each integrated care board (ICB) to meet the mental health investment standard (MHIS). The MHIS requires all ICBs to spend at least a minimum proportion of their allocation on mental health services. This minimum level of spend is calculated by NHS England for each year. Separately the GAM has up to now incorporated a requirement stemming from the National Health Service Act 2006 for ICBs to disclose in their annual report the proportion of overall spend that relates to mental health. This was included at paragraph 3.27 of the 2024 to 2025 GAM.

The 2025 to 2026 GAM incorporates both of these sets of requirements into a single disclosure that must be included as a note to the ICB’s financial statements.

The guidance that was previously included at paragraph 3.27 has been removed and revised guidance for ICBs has been incorporated into chapter 5 of the GAM. The note for the ICB accounts template and reference to eligible mental health services as defined by the NHS England MHIS guidance are incorporated into chapter 5 of the GAM. Paragraph 3.27 will now require ICBs to cross-refer users to the note to the financial statements which present the relevant statement, calculation and explanation regarding mental health expenditure.

Do you have any comments on the principle of disclosing mental health expenditure in a note to the accounts?

Summary of responses

Respondents to the consultation broadly supported the proposal to disclose mental health expenditure and compliance with the MHIS in a single note. They highlighted potential benefits such as:

• reduced administrative burden
• cost savings from eliminating standalone assurance work
• improved timeliness and transparency

Preparer respondents were wholly in favour. While some audit firms expressed support or measured support, some concerns were raised by audit firms who expressed doubts about the implications for audit scope and consistency, noting that the proposed disclosure could be treated variably across audits due to differing assessments of materiality and risk. Some also flagged the risk that stakeholders might misinterpret the nature and level of audit assurance provided, since the information would be part of the financial statements but not subject to a dedicated assurance engagement.

Additional concerns included the potential for delays during the financial statement audit process and the operational challenges of implementing new disclosure requirements during a period already subject to high workload and tight deadlines.

DHSC decision

The changes suggested by respondents, while aiming to strengthen the credibility of the disclosure, risk introducing further complexity and burden into the reporting process.

Proposals to enhance audit consistency through prescriptive guidance on materiality or mandated audit procedures undermine the principle of professional auditor judgment and may increase costs and reduce audit flexibility. Maintaining a separate assurance engagement alongside the new financial statement note would reintroduce the dual-reporting burden the proposed change was intended to eliminate, undercutting the efficiency gains. Overall, these suggestions risk placing additional pressure on financial and audit teams without proportionate value to stakeholders. Therefore, no change to the guidance stemming from the responses received to this consultation is implemented.

Do you have any comments on the detailed design of the proposed note or the accompanying guidance?

Summary of responses

Few responses were received for this question. The majority of respondents either had no additional comments or raised specific concerns regarding the usefulness, clarity, and consistency of the proposed note and its accompanying guidance. One respondent raised several technical issues: lack of clarity around the scope (for example, whether it remains ‘revenue only’), and a shift in the explanatory narrative from using programme allocation to total expenditure, which could obscure comparability with previous years.

They also questioned the rationale for calculating mental health expenditure as a proportion of total expenditure rather than allocation.

DHSC decision

The detailed design of the proposed note meets the objective of disclosure for users of the financial statements. No further amendments are required.

Using total expenditure rather than programme allocation meets the requirements of the National Health Service Act 2006 and covers the current reporting requirements for the annual report, with the annual report cross referencing to the disclosure in the annual accounts.

NHS trust external financing limit (EFL)

EFL is considered one of the duties that NHS trusts must comply with, alongside the capital resource limit and the breakeven duty. The EFL does not apply to NHS foundation trusts. The historic processes around the EFL and its disclosure no longer correspond with the current control frameworks for NHS providers and it is not actively used. Accordingly, we have removed the EFL disclosure from chapter 5 of the GAM. DHSC intends to backdate this change and remove the disclosure from the 2024 to 2025 GAM as part of the year-end update to the GAM.

Do you agree with the approach taken to removing the requirement to disclose performance against an EFL for NHS trusts and if not, why?

Summary of responses

All respondents agreed with the proposed removal of the requirement to disclose NHS trusts’ performance against the EFL. Some noted that removing the EFL improves alignment across NHS bodies and questioned the continued relevance of the breakeven duty, suggesting a broader review of related disclosures and audit requirements. One respondent raised concerns about the unintended omission of capital resource limit disclosures in the draft 2025 to 2026 GAM. They also flagged the potential ongoing relevance of financial objectives under the NHS Act 2006.

DHSC decision

DHSC and NHS England intend to review the breakeven duty disclosure requirements in the future. If any changes for 2025 to 2026 are required, this will be captured as an in-year update to the guidance. The paragraph 5.285 relating to disclosure of performance against the capital resource limit has been reinstated in the guidance.

Other changes to the GAM

There were no other standards updates effective for the 2025 to 2026 financial year that required further contextualisation in the GAM. The pandemic response accounting treatments are no longer relevant so those sections in chapter 4 have been removed.

Do you have any other general comments on the GAM?

Summary of responses

Several responses provided a broad range of technical and editorial suggestions across multiple paragraphs of the GAM. These included:

• clarifying outdated references (for example, to NHS Digital and IFRS 15 to 16 transition)
• updating or removing obsolete content (for example, maternity pathways and intangible asset revaluation)
• improving alignment with current governance frameworks (for example, provider codes and severance approvals)
• enhancing specificity (for example, website publication of annual reports and off-payroll engagement thresholds)
• improving clarity or structure of certain sections

Some respondents suggested streamlining the GAM, noting its excessive length and limited readership. There was a comment on lack of clarity around the definition and application of ‘fees and charges’, and practical challenges in applying the related party disclosure rules under IAS 24 due to incomplete or inaccurate ministerial control lists.

DHSC decision

We considered comments received from the respondents and updated and simplified content where possible, for example by removing legacy references (for example NHS Digital and IFRS 15 to 16 transition). We also removed guidance on maternity pathways in annex 10 to chapter 4, and clarified guidance on publication of annual reports and accounts by making it more specific and making reference to publication on the entities’ website.

Some comments will be taken forward and considered for in-year updates to the manual such as clarifying the definition of ‘fees and charges’, and practical challenges in applying the related party disclosure rules under IAS 24 due to incomplete or inaccurate ministerial control lists.

Consultation questions on prospective changes to the GAM

Payment performance disclosures

Chapter 5 of the GAM contains requirements in relation to disclosures regarding the better payment practice code, late payment of commercial debts and wider compliance with public contract regulations. The Procurement Act 2023 and associated statutory instruments provide for specific disclosures to be made by entities that will not coincide with ARA production timelines. When the relevant primary and secondary legislation comes into force, the extent of these disclosures in the GAM will be revisited. This will be considered as part of the cycle of regular updates made to the 2025 to 2026 GAM in January and March 2026.

Do you have any other comments in regards to the procurement related GAM disclosures in light of the Procurement Act 2023 and associated statutory instruments?

Summary of responses

Consultation responses broadly supported removing or relocating procurement-related disclosures, particularly those relating to the Better Payment Practice Code (BPPC), from the ARA. Respondents noted that while prompt payment metrics may support internal oversight and cash management, they do not necessarily enhance users’ understanding of an NHS body’s financial performance. There was support for aligning disclosures with the Procurement Act 2023, which requires separate reporting not tied to ARA timelines. Some concerns were raised about inconsistent interpretation of current requirements and the need for clearer guidance if retained. Overall, the preference was for BPPC and late payment data to be published separately, with minimal duplication in the ARA.

DHSC decision

In light of the consultation feedback, we will consider the changes to the procurement-related disclosures with this update targeted for inclusion in the March 2026 in-year update, subject to the relevant provisions of the Procurement Act 2023 coming into force.

Capitalisation threshold

A capitalisation threshold of £5,000 has been detailed in the GAM and not updated for many years. DHSC has previously received comments from a small number of stakeholders as to whether it will consider increasing the threshold, given that the sorts of costs this threshold now captures are quite different to the costs the threshold captured when originally posed. DHSC expressed in the consultation it is open to revisiting this threshold and assessing the impacts of any change, such as implications for local and national plans and the steps to implementing any revised threshold.

No change was proposed to the capitalisation threshold in the short term, but if there was significant support for a change of threshold raised through response to this consultation, we signalled an intention to consult on a specific proposal in a future GAM consultation. In giving views, preparers were encouraged to consider the practical implications of such a change and the need to apply any threshold consistently.

Do you have any views regarding what a reasonable revised capitalisation threshold is and what issues would arise if that suggested revised capitalisation threshold was either halved or doubled?

Summary of responses

The majority of respondents supported increasing the threshold to £10,000 or more, citing inflation and reduced administrative burden such as small items of equipment requiring capital investment cases. However, some respondents raised consideration of the impact on an entity’s financial position of taking more items to in-year expenditure and a concern that items not on an asset register may be managed less closely. Accounting firms commented on any change being treated akin to an estimate, and so could be applied prospectively.

DHSC decision

The department will further consider the responses given in determining any future proposed change which would be formally consulted on. Any proposal to change this threshold in the future will cover the approach to previously capitalised assets as well as clarifying treatment of grouped assets and suggest principles for when grouping is or is not appropriate.

Conclusion to the consultation

We are grateful for all the responses we received to our consultation. As a result of these, we made several changes to the 2025 to 2026 GAM.

In considering the comments received, we have needed to ensure that the guidance given in the GAM is clear and sufficient, without becoming overly detailed or prescriptive. In some cases, therefore, we have noted comments made but have concluded that the guidance should remain as drafted, as identified above.

We would like to thank all respondents for their direct input into delivering a product that FRAB was content to approve.

There is always scope to deliver further improvements to the GAM. We have taken away a number of issues from this consultation for consideration in drafting the 2025 to 2026 additional guidance updates and the 2026 to 2027 manual, which will be subject to consultation in early 2026.

Annex 1: list of respondents to the consultation

The following respondents responded to the GAM consultation directly through the consultation platform:

• Grant Thornton UK LLP

• Forvis Mazars LLP

• Deloitte LLP

• Azets UK

• Healthcare Financial Management Association

• NHS Suffolk and North East Essex ICB

We also received a small number of comments from anonymous respondents.

Separately, the following respondents discussed the contents of the consultation with DHSC during and after the consultation had concluded to help finalise contents of the guidance provided in the GAM:

• Financial Reporting Advisory Board

• NHS England