Question – “Background to infrastructure assets”
Question 1: Has the (…) description (in the consultation document) set out all the technical and practical difficulties for reporting infrastructure assets? If not, please provide further information and details for CIPFA LASAAC and the Task and Finish Group.
8. The description in the consultation document aligns with the difficulties that
have been reported to us.
Question – “Deliberations by the Task and Finish Group and CIPFA LASAAC”
Question 2: Has the (…) description (in the consultation document) of the deliberation of the Task and Finish Group considered all the relevant issues for the reporting infrastructure assets? If not, please provide further information and details for CIPFA LASAAC and the Task and Finish Group.
9. The description in the consultation document considers all the immediately relevant issues that have been reported to us. We strongly agree with the reported view of the Task and Finish Group “that for any solution the costs must not outweigh the benefits to the users of the financial statements and other stakeholders.” The solution must be proportionate to the problem being solved.
Questions – “Temporary Solution for the Reporting of Infrastructure Assets” (Questions 3 to 6)
Question 3: Do you agree that the net book value of infrastructure assets is generally capable of being relied on? If not, why not? Please provide your views on why this might be the case?
Question 4a: Do you agree that replacement expenditure takes place when parts of assets have been fully consumed so that the proposed adaptation (included for the avoidance of doubt) is appropriate? If not, why not? Please provide your views on why this might be the case?
Question 4b: Do you agree with the proposed wording of the adaptation ie that:
‘…the carrying amount of the part of the asset derecognised may be a zero amount…’
or do you consider that the wording should be more affirmative and indicate that it is a zero amount? Please provide the rationale for your response.
Question 5: Do you agree that, temporarily, the gross historical cost and accumulated depreciation need not be reported? If not, why not? What alternatives do you suggest?
Question 6: Do you agree with CIPFA LASAAC’s new sentence providing additional guidance for the depreciation of infrastructure assets? If not, why not? What alternatives do you suggest?
10. The technical proposals outlined in questions 3 to 6 appear to be reasonable. However, we would suggest that the views of individual local authorities and of finance practitioners within the sector should be taken into account. The important point in our view is whether the proposals will unblock this immediate additional problem with finalising local accounts, and we believe that will be the case. However, as noted above, there are still many other outstanding factors that will continue to cause delay in finalising local authority audits.
Question 7: Do you agree with the time period for the amendments to the Code ie from 1 April 2010 to the financial year commencing 1 April 2022? If not, why not? What alternatives do you suggest?
(Note that this change is from the move to the IFRS-based Code as of 1 April 2010.)
11. We understand that this time period is necessary to achieve the proposed change. However, as a minimum, we suggest that the amendments should be extended into the code for the year 2023/24 as well, at the time the code for that year is set. We believe that this will be necessary to give time for alternative permanent solutions to be explored and, if appropriate, implemented.
Questions – Possible Longer-Term Solutions
Question 8: What are your views on the possible solutions to the approach to derecognition and the reporting of infrastructure assets? Please set out the rationale for your response.
12. As stated above, we strongly agree with the view of the Task and Finish Group that the cost of any long-term solution must not outweigh the benefits to the users of the financial statements and other stakeholders. The solution must be proportionate to the problem being solved. This factor should continue to be uppermost when considering long term solutions. In the meanwhile, as outlined above, we suggest that the temporary amendments be extended into the code for 2023/24.
Question 9: What are your views on the measurement of infrastructure assets at depreciated replacement cost? Please set out the rationale for your response.
13. We do not have views on this. We suggest that the views of individual local authorities and of finance practitioners within the sector should be taken into account.
Question – Other Infrastructure Assets
Question 9: Please outline the other types of infrastructure assets and comment on whether more guidance might be needed for these assets. Please set out the rationale for your response.
14. We would refer you to responses from individual local authorities and from finance practitioners within the sector.