Further education colleges’ financial statements for the year to 31 July 2015 will be the last to be prepared in the current format with the new F&HE SORP (SORP 2014) being applicable for year ended 31 July 2016 and onwards.
A key date for colleges to consider is the transition date of 1 August 2014. The financial statements will need to be restated at this point in time, as if you had always applied the new accounting framework.
It is, therefore, important that colleges act promptly. Decisions by governing bodies on the accounting policies to be adopted need to be taken now so that you can ensure the relevant information is obtained. There are also other areas where there is a choice of treatment on transition which you need to decide upon.
Some of the main areas you need to consider include:
- whether to revalue certain fixed assets;
- how to treat government grants;
- the calculation of ‘holiday pay accruals’ or similar employee benefit liabilities; and
- ensuring you obtain the necessary information from your actuary.
A number of areas are likely to impact on banking covenants and, therefore, it is important that you consider how this will affect you and speak to your bankers at an early stage so that appropriate action can be taken.