Pre-accounts: pay attention to detail ahead of future accounting changes

As has been said before, 2017/18 is a year of little change in terms of preparing the annual report and accounts. And most of the required guidance has already been issued. Even so, this year’s HFMA pre-accounts planning conferences still provided timely reminders of key issues that should be consider in meeting end of year requirements and deadlines.

It is certainly a year to get the detail right, ahead of two busy years that will see the implementation of three new accounting standards. And although IFRSs 9, 15 and 16 are not applicable in 2017/19, their expected impact does need to be disclosed in this year’s accounts because they are standards that have been issued but not yet adopted.

Some analysis of the expected impact will therefore be necessary before this financial year-end.

For NHS trusts, 2017/18 is the first year that they will be responsible for making their own submissions to NHS Improvement – so an allowance for this needs to be built into the year-end timetable. NHS Improvement has produced a detailed schedule of what needs to be sent where and in what format. 

All of the regulators encountered problems last year when the summarisation schedules that they were using were not the same as the ones auditors submitted to the National Audit Office. The message here is to remember to send your auditors the final, final version – particularly where late changes have been made to the accounts.

The sustainability and transformation fund (STF) process will be the same as last year, although some of the details about the calculation are still to be resolved. The final STF apportionment cannot be calculated until the draft results are submitted, so it is vital that those draft results are as accurate as possible.

A change to one NHS body’s position can affect many others as the STF apportionment is recalculated. The closeness of some NHS bodies’ financial position to their control totals adds an extra risk – a small change in an estimate or balance can have a much larger impact if it has an impact on the achievement of a control total. 

Disclosures around significant judgements and estimates may well be the focus of auditors’ attention. This is partly because of the closeness to meeting control totals and the resulting impact on STF income, but also because this is an area that the Financial Reporting Council has identified could be done better in all financial statements.

The financial position of NHS bodies raises the profile of management’s consideration of going concern and, in particular, the disclosures around significant risks to that position.

Agreement of balances remains a key risk for the overall group consolidation and, although the process is as smooth as it has ever been, there is always room for improvement. The message here is: please read and follow the guidance.

One completely new transaction for 2017/18 is the apprenticeship levy.  This is to be accounted for as a tax as it is incurred. The use of the levy also needs to be reflected in the accounts and that will be different depending on whether the NHS body is a provider of training or not.

For clinical commissioning groups, the guidance on completion of note 45, on purchase of non-NHS healthcare, is being amended. The information in this note is disclosed in both NHS England and the Department of Health and Social Care’s accounts and is the subject of lots of external scrutiny.

In the staff report, the off-payroll disclosures have been amended as a result of the changes to the IR35 rules (see HFMA September 2017 briefing, Off payroll: reform of the intermediaries (IR35) legislation). 

In addition, the threshold for reporting has been increased to those engagements costing more than £245 per day.