Treasury and Resources Minister
Report
Accounting standards to be adopted for the States of Jersey’s Annual Financial Statements 2016
- Purpose of Report
The purpose of this report is:
1) To set out the policy for implementing and updating the Accounting Standards to be used in the preparation of the States of Jersey annual financial statements.
2) To provide additional information on the basis on which the States of Jersey’s 2016 Annual Financial Report and Accounts will be prepared.
- Background
The Public Finances (Jersey) Law 2005 (as amended by P.73/2013) states that the annual financial statements of the States must be prepared in accordance with accounting standards issued by the Treasurer with the approval of the Minister.
In Ministerial Decision MD-TR-2015-0134, the Minister recognised that accounting standards are not fixed, that they evolve over time. The Minister’s policy is to update the accounting standards adopted by the States on an annual basis, following those standards adopted by the UK Government in their annually updated Financial Reporting Manual. This policy has been continued, with the 2016 version being based on the UK FReM for the year ending 31 March 2015, adapted as appropriate for the public sector in Jersey.
An updated policy for implementing and updating the GAAP-based Accounting Standards to be used in the preparation of the States of Jersey financial statements is set out in Appendix 1.
Under section 5.3.11 of the JFReM the Minister can exempt Accounting Officers of minor departments from the definition of senior managers. The rationale for the proposed exemptions and the list of approved exempt Accounting Officers is included in Appendix 2.
The JFReM 2016 is included in Appendix 3.
- Recommendation
That the Minister approves Jersey Financial Reporting Manual (JFReM), which sets out the accounting standards to be adopted in the preparation of the States of Jersey Financial Statement for 2016.
That the Minister approves the policy for implementing and updating the Accounting Standards to be used in the preparation of the States of Jersey annual financial statements.
That the Minister approves the list of exempt Accounting Officers.
- Reason for Decision
Following the Accounting Standards policy set in MD-TR-2015-0134, the JFReM has been updated in line with the the equivalent UK FReM for the year ended 31 March 2015, to implement GAAP-based accounting in the States of Jersey, and to ensure that the accounting standards that are applied are maintained appropriately
Due to changes in the Public Finances (Jersey) Law 2005 a Ministerial Order is no longer required to set Accounting Standards, and so the previous Order is to be withdrawn.
Appendix 1 – Treasury and Resources Accounting Policy
- Introduction
The Public Finances (Jersey) Law 2005 states that the annual financial statements of the States must be prepared in accordance with accounting standards issued by the Treasurer with the approval of the Minister. This policy sets out the proposed model for implementing the accounting standards to be used in the preparation of the States annual financial statements, and the process for updating these accounting standards.
- Maintaining Accounting Standards
The Minister’s policy is to require the States of Jersey accounting records to be maintained and accounts prepared in accordance with IFRS GAAP, modified for the Jersey public sector.
The Minister recognises that accounting standards are not fixed, that they evolve over time and also that the implementation of new standards in the public sector context can be a complex and resource hungry exercise.
The Minister’s policy, therefore, is to update the accounting standards adopted by the States on an annual basis.
The Minister intends to follow those standards adopted by the UK Government in their annually updated Financial Reporting Manual. The implementation of new accounting standards can be complex and resource intensive; there are obvious benefits to a small jurisdiction such as Jersey to learning from others and not being at the cutting edge of such implementations. The Minister intends to adopt the standards implemented by the UK central government with a one year delay. Therefore it is the Minister’s policy that the Jersey FReM for 2014 will adopt IFRS in line with the UK FReM for the year ending March 2013.
Future years will adopt the same one year delay, and so, for example, the Jersey FReM for 2016 will adopt IFRS in line with the UK FReM for the year ending March 2015.
As with the preparation of the initial JFReM, new standards introduced in the UK FReM may require some modification for the States of Jersey. The Minister intends to continue to consult the Comptroller and Auditor General and Audit Committee on all significant amendments to the JFReM before implementing them.
- Summary of significant differences between the JFReM 2015 and JFReM 2016
The most significant changes in the JFReM 2016 are:
- the adoption of new and amended standards were released with regard to consolidation and reporting of subsidiaries, associates, joint ventures and investment entities.
- IFRS 10 – Consolidated Financial Statements
- IFRS 11 – Joint Arrangements
- IFRS 12 – Disclosure of Interests in Other Entities
- IAS 27 – Separate Financial Statements
- IAS 28 – Investments in Associates and Joint Ventures
- the format of the JFReM, moving to a list of standards and how they have been adopted, interpreted or adapted, rather than having this information in a body of text.
A full amendment record has been prepared and is included as Appendix 4.