News / Breakeven duty revised

The Department of Health has moved to minimise the impact of impairments on NHS trusts’ financial performance by revising its breakeven duty guidance.

The impact of all impairments will now not be taken into account when assessing financial performance.

There were a number of concerns. The department agreed that central support would no longer be available for trusts’ impairments from 2008/09 because the recognition of impairment funding as an income stream met neither UK GAAP nor IFRS requirements. The department’s figures show that at the end of quarter three in 2008/09, six trusts predicted year-end technical deficits due to impairments.

But there were also concerns about the one-off impact of impairments due to recognition of additional assets once private finance initiative (PFI) or local improvement finance trust (LIFT) assets were brought on balance sheet under IFRS.

While trusts can now choose the frequency and method of valuations, a full valuation of NHS bodies’ property is required between 1 April 2008 and 31 March 2010, increasing the potential for a higher level of impairments.

But the revised guidance means trusts can now adjust for impairments when reporting performance against the breakeven duty.