- 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 2017 Annual 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 2017 version being based on the UK FReM for the year ending 31 March 2016, 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 5.3.3 of the JFReM the Minister can exempt Accounting Officers of minor departments from the definition of Directors. The rationale for the proposed exemptions and the list of approved exempt Accounting Officers is included in Appendix 2.
The JFReM 2017 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 Statements for 2017.
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 equivalent UK FReM for the year ended 31 March 2016, 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 2017 will adopt IFRS in line with the UK FReM for the year ending March 2016.
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 2016 and JFReM 2017
The most significant changes in the JFReM 2017 are:
- the adoption of IFRS 13 Fair Value Measurement;
- the format of the Treasurer’s Report, moving towards a performance report.
A full amendment record has been prepared and is included as Appendix 4.
Appendix 2 – Accounting Officers of minor departments
Under section 5.3.3 of the JFReM the Minister may exempt Accounting Officers of minor departments from inclusion in the definition of Directors for the States. There are specific disclosure requirements (principally remuneration disclosures and related party disclosures) which are applicable to those persons deemed to be directors. Directors are those who have responsibility for the organisation as a whole, which in a private company are the Directors of the company. For the States of Jersey it is deemed that Accounting Officers most closely equate to the Directors of a private company, but it is recognised that some Accounting Officers of minor departments would have less influence over the overall control of the States of Jersey. It has been decided that those who are accountable for non-Ministerial department budgets below £5 million do not have significant influence over the States of Jersey. For this reason the Accounting Officers for the following departments are excluded from the definition in 5.3.3:
- Bailiff’s Chambers
- Viscount’s Departments
- Official Analyst
- Office of the Lieutenant Governor
- Office of the Data Protection Commissioner
- Probation and After-Care Service
- Office of the Dean of Jersey
- Comptroller and Auditor General
Appendix 3 – JFReM 2017 (attached)
Appendix 4 – Amendment Record (attached)