From 1 April 2024, councils have been required to adopt IFRS 16 as adapted for local authorities. Norwich City Council recognised the extra demands that implementing IFRS 16 would place on the finance team, in addition to delivering business as usual.
They asked us for support with IFRS 16 implementation, as well as preparation of group financial statements, cashflow statement, and providing assistance with technical accounting matters such as the impact upon the minimum revenue provision (MRP).
The challenge
Norwich City Council has over 350 leases which needed to be reviewed as part of its IFRS 16 implementation. The council recognised that due to capacity constraints, it needed additional support on this, as well as further support in relation to technical matters and the production of the group statement of accounts.
The solution
We partnered with the council to provide flexible support in four key areas:
1 Completeness and lease assessments
Performing lease assessments across more than 350 leases against the indicators as set out in IFRS 16, as well as the practical expedients of the Code of Practice on Local Authority Accounting in the United Kingdom 2024/25 (the Code). We also did extensive completeness exercises on data sources not considered by the council in its own processes, to ensure a robust capture process for all leases upon transition.
2 Data modelling
We created a model to calculate the impact of IFRS 16 for each lease. The model will allow the council to see the calculations being made and also update the model for future years to ensure a sustainable solution.
3 Key accounting judgements
To write the key acc
ounting judgements of the council, including low value, short-term and the grandfathering approach. This area expanded in scope across the project to include: consideration of holdover leases, tenancies at will and licence arrangements and break clauses.
4 Financial statement disclosures
Providing a template complying with all requirements of the Code in order for the council to produce robust disclosures for their financial statements.
Beyond IFRS 16
In addition to the implementation of IFRS 16, we worked flexibly with the council to assist the finance team with a number of technical accounting matters and its consolidation of the group statement of accounts. We held regular meetings with relevant members of the finance team to ensure that knowledge and insight was shared with the council, beyond the delivery. This knowledge sharing provided opportunities to learn from the joint work that had been completed, to improve future efficiency and sustainability.
The result
Norwich City Council has successfully implemented IFRS 16 and included the required disclosures within their financial statements. In addition, it has developed its understanding of how to prepare various technical areas of the financial statements and improved its processes in areas such as cashflow production.
"Grant Thornton provided invaluable support during a critical period of transition in our financial reporting. Their expertise in implementing IFRS 16, particularly across our extensive lease portfolio, was instrumental in ensuring compliance with the new standards. They worked flexibly with our finance team to deliver robust data modelling, clear accounting judgements, and comprehensive financial statement disclosures. In addition, their assistance with the preparation of our group financial statements and cash flow statement helped us overcome internal capacity challenges. Through regular engagement and knowledge sharing, Grant Thornton not only delivered high-quality outputs but also strengthened our internal capability for future reporting cycles."
Robert Mayes, Head of Finance and Deputy S151, Norwich City Council
