Financial reporting requirements consultation
Comments from ACCA
February 2005
MANUAL OF ACCOUNTS
Q1. Do respondents agree with the approach adopted in the draft Manual, or should the Manual follow the existing approach to the preparation of the accounts of NHS Trusts?
We agree with Monitor's proposal to allow NHS Foundation Trusts some degree of freedom in the way that they present their accounts so long as this flexibility will not hinder sector wide comparisons.
We consider that, in general, both the primary statements and the notes to the accounts of NHS Foundation Trusts should follow a similar format to those of NHS Trusts. This will help minimise the administrative burden on organisations when they move from the NHS Trust accounting regime to the NHS Foundation Trust accounting regime.
However, the different nature of NHS Foundation Trusts may mean that for clarity of reporting some organisations will want to provide additional information to that which is required. The flexible approach adopted in the draft Manual will allow this to happen.
We note that the form and content of the consolidation schedules has not yet been determined. We consider that these should be of a similar format to the accounts to enable NHS Foundation Trusts to use the same reporting tool for completion of both the accounts and the consolidation schedules.
Q2. The general principle is that the accounts of NHS Foundation Trusts should be presented on a going concern basis even if it is clear that the Trust will be dissolved and its property, rights and liabilities transferred to a successor body. Should this principle be applied to non-protected assets as well as protected assets?
We agree with the principle that the accounts of NHS Foundation Trusts should be presented on a going concern basis.
We consider it is important, however, that the accounts of NHS Foundation Trusts clearly differentiate between those assets which are protected for the provision of mandatory services and those which assets are non-protected that creditors may have a charge over.
Q3. Should this principle apply to transfers from NHS Foundation Trusts to other NHS bodies, as well as transfers to other NHS Foundation Trusts?
We consider that this principle should apply to transfers from NHS Foundation Trusts to other NHS bodies as well as to other NHS Foundation Trusts.
This is consistent with the principle that the accounts of NHS Foundation Trusts should be presented on a going concern basis even if it is clear that the Trust will be dissolved and its property, rights and liabilities transferred to a successor body.
It also makes sense from the patients' perspective; the services may be provided by a different NHS body but the provider is still �the NHS'.
Q4. Do respondents consider that the transfers of activities between NHS Foundation Trusts and between NHS Foundation Trusts and other NHS bodies should give rise to the recognition of a discontinued activity in the accounts of the transferor and an acquired activity in the accounts of the transferee?
We do not consider that the transfer of activities between NHS Foundation Trusts and between NHS Foundation Trusts and other NHS bodies should give rise to the recognition of a discontinued activity in the accounts of the transferor and an acquired activity in the accounts of the transferee.
We believe that activities should only count as �acquired' if they are acquired from outside the public sector and that activities should only count as �discontinued' if they cease completely.
Q5. Do respondents agree that the reconciliation of opening and closing funds should be presented as a note to the accounts, rather than a fifth primary statement?
We agree that the reconciliation of opening and closing funds should be presented as a note to the accounts, rather than a fifth primary statement. The accounts of NHS Foundation Trusts will then be consistent with those of NHS Trusts.
Q6. Do respondents believe that combinations involving existing NHS Foundation Trusts, or existing Foundation Trusts and other NHS bodies should be accounted for using merger accounting or acquisition accounting principles?
We consider that it will be necessary to review the circumstances of each combination involving existing NHS Foundation Trusts, or existing Foundation Trusts and other NHS bodies to assess the most appropriate accounting method. In general, however, we would expect merger accounting to be the most appropriate method.
Q7. Do respondents believe that the format of the published income and expenditure account should be consistent with the format of the quarterly financials required by the Monitor for monitoring purposes?
We believe that the basic format of the published income and expenditure account should be consistent with the format of the quarterly financials. This will minimise the administrative burden for NHS Foundation Trusts as they will be able to use the same reporting tool for completion of both returns.
However, we consider that although the basic format should be the same, NHS Foundation Trusts should have a degree of flexibility around the level of detail to be provided under each of the key headings on the published income and expenditure statement.
Q8. Are these classifications appropriate for NHS Foundation Trusts?
We do consider these classifications to be appropriate. The accounts of NHS Foundation Trusts will then be consistent with those of NHS Trusts.
Q9. Should there be a separate fixed asset disclosure note distinguishing between protected and non-protected assets?
We believe that, for the purposes of transparency, there should be a separate fixed asset disclosure note distinguishing between protected and non-protected assets.
This is consistent with the requirement for NHS Foundation Trusts to hold publicly available asset registers listing all protected property and it will also help potential creditors to identify the assets that may be transferred by order of the Secretary of State in the event of a NHS Foundation Trust being wound up.
Q10. The Manual prescribes the detailed format of the STRGL. Do respondents feel that this level of prescription is appropriate, or should NHS Foundation Trusts be given more flexibility to decide on the format of this statement?
We consider that the prescribed format of the statement of total recognised gains and losses (STRGL) is appropriate but consider that there should also be sufficient flexibility for NHS Foundation Trusts to provide additional information on the STRGL where this would improve the clarity of reporting.
Q11. The Manual prescribes the detailed format of the Cash Flow Statement. Do respondents feel that this level of prescription is appropriate, or should NHS Foundation Trusts be given more flexibility to decide on the format of this statement?
We consider that the prescribed format of the Cash Flow Statement is appropriate but that, due to the different nature in which NHS Foundation Trusts may be financed, there should also be sufficient flexibility for organisations to add new lines under the standard headings.
CAPITAL ACCOUNTING MANUAL GUIDANCE
Q12. The Capital Accounting Manual is intended to complement the Foundation Trust Manual for Accounts (MFA) and provides more detailed technical interpretation. Do respondents feel that this provides adequate detail for completion of the accounts?
We consider that the Capital Accounting Manual does provide adequate technical guidance to enable NHS Foundation Trusts to complete their accounts.
ANNUAL REPORT GUIDANCE
Q13. The Annual Reporting Guidance outlines the requirements for the annual report required under the Act. Do respondents feel that this provides adequate detail for completion and timescales to be followed?
We consider that the Annual Reporting Guidance does provide NHS Foundation Trusts with adequate detail to enable completion of the Annual Report.
We believe that the proposed timescale of publication is tight but that with careful and disciplined planning it will be achievable.