Audit Committee 28 June 2011 Financial Accounts 2010-11

1. Audit Committee28 June 2011Financial Accounts 2010-11 Claire Cook -Assistant Finance Director and Joanne Watts – Head of Finance Accountancy Services

2. Overview • Format of Accounts • Key changes for 2010-11 • Background to IFRS and key adjustments • Walk through the key financial statements • Segmental Reporting • Next steps • Questions

3. Format of Accounts • Explanatory Foreword (page 4) • Four primary statements: • Comprehensive Income & Expenditure account (page 20) • Balance sheet (page 21) • Movement in Reserves Statement (page 22) • Cash flow Statement (page 23) • Statement of Accounting Policies (page 24) • Notes to the accounts (page 39) • Pensions Accounts (page 127) • Local Government Pension Fund Accounts • Fire-fighter's Pension Fund Accounts • Glossary of Terms (page 160)

4. Key changes for 2010-11 • Financial year 2010/11 is first year actual IFRS based accounts produced • Note 1 to the accounts provides details of the adjustments involved in the restatement exercise

5. Key changes for 2010-11 • Required: • Restatement of 2009/10 financials for comparative purposes • Review & revision of accounting policies to ensure full compliance with IFRS • New formats for key financial statements • Presentation of 3rd balance sheet (this year only)

6. What is IFRS and why change? • Consistent set of standards for financial reporting • Governs approach to accounting across the public & private sector • Allows comparability of accounts at global level • One set of accounting rules

7. Overview of Main Changes from UK GAAP to IFRS

8. Walkthrough: Things to consider in reviewing financial statements • Comparison with previous year – significant movements up or down? • Are you happy with the reasons for those movements? – should be set out in the notes • Are the results and changes from previous year in line with your understanding with events in year? • Do figures seem reasonable including those that are zeros?

9. Walkthrough: Comprehensive Income and Expenditure statement (CI&E) • CI&E Statement format covers the equivalent of • the SORP’s Income & Expenditure Account; and • the SORP’s STRGL • Details:- • Cost of Services: Gross Income and Expenditure costs incurred • Surplus or deficit on Provision of Services • Other Comprehensive Income and Expenditure • Sets out how the costs are financed (see Note 11 – page 72) • Government grants • Income from taxpayers

10. Walkthrough: CI&E 2010/11Page 20 Note 28 Segmental Reporting provides a bridge to budget Financing of services from tax and grants Surplus for 2010/11

11. Walkthrough: Balance sheet • Shows the value as at 31st March 2011 of the assets and liabilities recognised by the Council • Provides details of: - • Long term Assets • Current Assets • Long term Liabilities • Current Liabilities • Net Assets matched by the reserves held (£1,824.560 m) : - • Usable reserves, • Unusable reserves

12. Walkthrough: Balance sheet extract Page 21 • Provides details of: - • Long term Assets • Current Assets • Long term Liabilities • Current Liabilities • Net Assets (£1,824.560 m) are matched by the reserves held by the Council : - • Usable reserves (see Note 23 – page 86) • Unusable reserves (see Note 24 – page 87)

13. Walkthrough: Movement in Reserves Statement Page 22 • Important consideration is whether Council has a surplus of deficit compared to its budget for the year • Council achieved a surplus • Other CI&E is predominately driven from actuarial position on pensions • Adjusts for differences between Accounting Basis and Funding Basis under Regulation(see Note 7 page 63). • Transfers to / from Earmarked Reserves (see Note 8 page 67). Links to CI&E Note 7 Note 8

14. Walkthrough: Cash flow statement Page 24 • Details changes in cash & cash equivalents during the reporting period. (see Note 19 page 82) • Shows how the Council generates and uses cash by classifying cash flows as: • Operating; • Investing; and • Financing activities.

15. Walkthrough: Cash flow statement • The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. (£64,069K) (see Note 25 page 91) • Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. (£46,894K) (see Note 26 page 91) • Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council. (£7,323K) (see Note 27 page 92)

16. Segmental Reporting (Note 28) Page 92 • Based on internal management structures • Prepared on a different basis from the financial statements. • No charges are made in relation to capital expenditure • Retirement benefits are only reflected at the end of the year • Some centrally budgets not charged to services • Various adjustments are not reflected (e.g. contributions to/ from reserves) • Reconciles the management accounts (monitor) to the financial accounts (CI&ES)

17. Segmental Reporting Extract (Note 28) Page 92 • This extract shows the reconciliation to the CI&ES, where the analysis of income and expenditure by service is that specified by the Best Value Accounting Code of Practice (BVACOP) • Other reconciling items are • Depreciation, amortisation and impairment (capital charges) • Other service expenses • Net Pension Costs Per CI&ES page 20

18. Next steps

19. Questions?