A government consultation has opened into whether the IFRS 9 statutory override should be allowed to elapse, be extended or made permanent.
IFRS 9 is the standard covering financial instruments and took effect in local government from the 2018-19 financial year. However, there were concerns that this could significantly impact councils with holdings in pooled investment funds.
Following a previous consultation, the government agreed to a five-year statutory override of IFRS 9’s requirements relating to fair value movements on pooled investments. This arrangement is due to expire on 31 March 2023, and so the government must decide quickly on its future approach.
Three options are proposed in the new consultation: allow the statutory override to elapse; extend the override on a time-limited basis; or make the statutory override permanent. Responses are required ahead of the 6 October 2022 deadline.
A Room151 survey in May found that treasury managers and section 151 officers were overwhelmingly in favour of the override either being made permanent (68%) or extended (19%).
David Green, strategic director at treasury advisers Arlingclose, told Room151 that the sharp fall and subsequent rebound in financial markets during the Covid-19 pandemic showed the value of the override.
“We will make the case for it to be made permanent so that local authorities are never required to raise council tax or cut services due to temporary market fluctuations just when their residents need them the most.,” he added.
The consultation includes questions on the “financial consequences”, impact on the audit process and effect on pooled funds if the override is allowed to elapse.
The document states: “In making any decision, it is important for the government to understand the risks and benefits of either allowing the statutory override to elapse, thereby bringing local government financial reporting in line with other entities, or to keep the statutory override in place on either an extended or permanent basis.”
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