Agenda item

The Director of Corporate Services presented the report.  It was noted that the International Standard on Auditing (ISA) 540: Auditing Accounting Estimates and Related Disclosures was revised in December 2018 by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting body that serves the public interest by setting high-quality international standards for auditing, quality control, and review.  The auditing standard was revised because Statement of Accounts were increasingly subject to judgements and estimations performed by management and experts on a range of items within them, as required by current accounting standards.  These changes required that auditors should understand and evaluate: “the nature and extent of oversight and governance that the entity has in place over management’s financial reporting process relevant to the accounting estimates.” 

The Audit Committee needed to understand what significant estimates would be included within the Statement of Accounts which were those that:

·           Required significant judgement by management to address subjectivity;

·           Had high estimation uncertainty;

·           Were complex to make;

·           Had, or ought to have had, a change in method, assumptions or data compared to previous periods; or

·           Involved significant assumptions.

The Statement of Accounts contained estimated figures that were based on assumptions about the future or that were otherwise uncertain.  Estimates considered past and current trends and/or other relevant factors.  However, because balances could not be determined with certainty, actual results could be materially different from the assumptions and estimates.

It was noted that the Statement of Accounts were prepared with the underlying significant assumption of Going Concern, which meant that the Authority considered its financial position to be stable for the foreseeable future, as assessed at the most recent budget setting exercise finalised in February 2022.  Accounting standards required that management made an annual assessment of going concern, although the Code recognised that Local Authorities could not be created or dissolved without statutory prescription, the accounts must therefore be prepared on a Going Concern basis.   Management had prepared the assessment in line with requirements.

Members considered the significant Accounting Estimates for 2021/22 including the: estimated value, degree of uncertainty and methodology used for the: i) valuation of land and buildings; ii) depreciation of property and equipment; iii) valuation of both Firefighter and Local Government Pension Scheme (LGPS) liability; iv) valuation of LGPS pension asset; v) fair value measurement – private finance initiative schemes; vi) revenue accrual – s31 grant re: business rates additional reliefs in 2021/22; and vii) holiday pay expenditure accrual.

The Director of Corporate Services tabled an amendment to the estimate for Fire value measurements – PFI schemes (as detailed on pages 81 and 82 of the agenda pack) to reflect in the final paragraph that ‘The bond yield rate forecasts had increased since last year end, reflecting the increase in expected future Bank of England base rate forecasts.  The reduction in the fair value of the liability, was a product of both the underlying reduction in the liability, as a result of repayments made during the year, and the increase in the future interest rates’.

It was noted that each year Executive Board was asked to consider whether there were any transactions, events, or conditions (or changes in these) that might trigger the recognition of an additional significant accounting estimate, or the potential recognition, known as a contingent liability.  Based on the returns received from Executive Board, the contingent liabilities note had been updated to reflect the current position, but there were no further significant events or transactions identified by this process.

RESOLVED: - That the report be noted and the accounting estimates including the tabled amendment as reported be endorsed.