Agenda item

The DoCS presented the report to members.

It was noted that the International Standard on Auditing (UK) 540, Auditing Accounting Estimates and Related Disclosures, were revised in December 2018 and applied to audits of financial statements for periods commencing on or after 15 December 2019. The revised standard strengthened the focus on estimation uncertainty, complexity, subjectivity, management bias and the adequacy of related disclosures. The standard was relevant because a number of balances in the Authority’s Statement of Accounts could not be measured with absolute certainty and therefore required management judgement, specialist advice and the use of assumptions. Auditors were required to understand and evaluate the nature and extent of the oversight and governance arrangements in place over management’s financial reporting process for accounting estimates.

It was noted that the Audit Committee should understand which significant estimates are included within the Statement of Accounts. Significant estimates are those that:

• Require significant judgement by management to address subjectivity;
• Have high estimation uncertainty;
• Are complex to make;
• Had, or ought to have had, a change in method, assumptions or data compared to previous periods; or
• Involve significant assumptions.

The Statement of Accounts included balances based on assumptions about future events or other matters that were inherently uncertain. Estimates were made having regard to historical experience, current trends and other relevant factors. As a result, actual outcomes may differ materially from those estimates.

The Statement of Accounts were prepared in accordance with the most recent edition of the Code of Practice on Local Authority Accounting in the United Kingdom (the Code), published by the Chartered Institute of Public Finance and Accountancy (CIPFA).

It was noted that the Statement of Accounts were prepared on a ‘going concern’ basis, reflecting the Authority’s assessment that its financial position remained sustainable for the foreseeable future, having regard to the 2026-27 budget-setting process approved in February 2026, the Medium Term Financial Strategy, the reserves position and the statutory framework within which fire and rescue authorities operate.

Accounting standards required management to undertake an annual assessment of going concern. Although the Code recognises that local authorities could only be created or dissolved through statutory provision, the accounts must nevertheless be prepared on a going concern basis. Management had completed this assessment and was not aware of any material uncertainty that would prevent the Authority from continuing to provide services for the foreseeable future.

Members considered the significant Accounting Estimates for 2025-26 including the estimated value, degree of uncertainty and methodology used for the:

1. Valuation of land and buildings
2. Depreciation of property and equipment
3. Valuation of Firefighter (FF) and Local Government Pension Scheme (LGPS) liability
4. Valuation of LGPS pension asset
5. Holiday pay expenditure accrual.

It was noted that each year the Executive Board was asked to consider whether there were any transactions, events, or conditions (or changes in circumstances) that may require either the recognition of a further significant accounting estimate or disclosure as a contingent liability. This provided a formal management check that the estimates and disclosures remained complete and up to date.

Based on the confirmations received from Executive Board, the contingent liabilities note had been updated to reflect the current position. One additional contingent liability had been identified in 2025-26 in respect of on-call sick pay, with an estimated potential exposure of £300,000. This matter was disclosed as a contingent liability rather than recognised as a provision because the timing, likelihood and final value of any obligation remained uncertain.

In response to a question from the Chair in relation to the valuation of land and buildings, the DoCS indicated that to the value had depreciated due to a  change in the construction cost and valuation indices that were being used.

Resolved: - The Chair moved to note the report.