Finance staff alerted to reporting changes in 2018/19 finance manuals

The DHSC published the first frequently asked questions that amend the 2018/19 Group accounting manual (GAM). The Treasury published revisions to its 2018/19 Financial reporting manual (FReM), as well as the 2019/20 FReM.

For 2018/19, some of the changes will have more of an impact than others. In the ‘less impact’ column are FAQs 2, 3 and parts of 5. FAQ 2 provides the annual update to the probability of non-recovery of income from the injury costs recovery scheme. FAQ 3 simply makes minor updates to wording and terminology in the GAM – these add clarity but make no changes. Parts of FAQ 5 should also cause little concern (see below).

The areas requiring more attention include FAQ 1, 4 and the other parts of 5. FAQ 1 sets out discount rates at 31 March 2019.  This is usually a straightforward annual update but, this year, there has been a change in methodology for discount rates with nominal rates now being applied rather than real rates. The FAQ sets out the different nominal and inflation rates that NHS bodies use for their various provisions and financial instruments.

FAQ 4 will be important for providers of maternity care as it sets out how the maternity incentive scheme with NHS Resolution should be accounted for. The maternity incentive scheme is not accounted for under IFRS 15 Revenue from contracts with customers. Instead amounts received from the incentive fund are offset against contributions to the Clinical Negligence Scheme for Trusts.

Any award from the incentive scheme is only recognised when NHS Resolution has confirmed the amount payable to the trust. 

FAQ 5 takes the Treasury changes to the FReM and applies them to the GAM. The changes include:

• Take account of the IASB’s Conceptual framework for financial reporting
• Introduce a link to the employer pension notices produced by the Cabinet Office
• Clarify that all public sector bodies should apply IFRS 8 Segmental reporting in full
• Refer to the new Contingent liability approval framework published by the Cabinet Office
• Reflect the language used in the UK Corporate governance code in relation to the annual report and accounts being fair, balanced and understandable in the statement of accounting officer’s responsibility.

The following three issues may need more attention:

• Replace references to the Data Protection Act 1998 with the Data Protection Act 2018: this amendment introduces new requirements to engage with senior managers in relation to their remuneration disclosures
• Reflect the requirements of the Trade Union (Facility Time Publication Requirements) Regulations 2017 (if not done already)
• Highlight further adaptation of IFRS 15:

• To the definition of a contract in the public sector to ensure consistency with IAS 32
• To provide additional detail in relation to revenue from fines, taxation and penalties, for NHS bodies. This has the practical impact of bringing injury cost recovery receivables into the scope of IAS 32 and therefore the financial instrument disclosures.

In addition to the manuals, the quarter 4 agreement of balances timetable and guidance has been published with no major changes. The NHS Business Services Authority has published its Greenbury guidance, which sets out how requests for senior manager pension information should be submitted and the timeframe to make those requests – between 7 January and 28 February 2019.

The supporting guidance and examples have been comprehensively reviewed and updated. So it is worth even the most hardened veteran revisiting it.

Looking further ahead, the Treasury has also published the 2019/20 FReM. The main change is that this FReM includes guidance on IFRS 16 Leases to allow for early adoption by those public sector companies that have to meet the requirements of the Companies Act 2006 and EU-adopted IFRS.

While NHS bodies will continue to apply IAS 17 in 2019/20, the IFRS 16 parts of the FReM and application guidance are worth looking at as they specify how the standard will be interpreted and amended for public sector bodies.

Debbie Paterson is HFMA policy and technical manager