Jersey Financial Reporting Manual 2021

STATES OF JERSEY

JERSEY FINANCIAL REPORTING MANUAL 2021

Presented to the States on 23rd March 2022 by the Minister for Treasury and Resources

STATES GREFFE

2022  R.31

Jersey Financial Reporting

Manual

2021

(Based on UK FReM 2020-21)

Table of contents

1 Introduction

1. Objectives and scope of the Manual ........................................................................................... 4
2. Using the Manual .......................................................................................................................... 5
3. Budgetary Controls ....................................................................................................................... 5

2 Accounting principles

1. Application of generally accepted accounting practice ........................................................... 6 General.6 Accounting convention ....................................................................................................... 7 No exemptions for smaller entities ..................................................................................... 7 Practical application of guidance ........................................................................................ 7
2. Preparation and Presentation of Financial Statements ............................................................ 7 Legal Responsibility for the preparation of Financial Statements ...................................... 7 IASB's Conceptual Framework for Financial Reporting (the Conceptual Framework) ...... 8 Financial statements must give a true and fair view........................................................... 9

3 Political Accountability

3.1  The Statement of Outturn against Approvals ............................................................................ 9 Introduction ......................................................................................................................... 9 The Statement of Outturn against Approvals ................................................................... 10 The Notes to the Statement of Outturn against Approvals ............................................... 10 4 Accounting boundaries

1. Accounting boundaries .............................................................................................................. 12
2. Business Combinations ............................................................................................................. 14 5 Form and content of the annual report and accounts

Error! Bookmark not defined.

6 Applicability of accounting standards

1. EU adopted IFRS ......................................................................................................................... 28
2. Interpretations and adaptations for the public sector context............................................... 30

7 Further guidance on accounting for assets and liabilities

1. Property, plant and equipment .................................................................................................. 37
2. Impairments ................................................................................................................................. 48

3. Inventories ................................................................................................................................... 49 8 Further guidance on accounting for income and expenditure

1. Income .......................................................................................................................................... 51
2. Expenditure.................................................................................................................................. 49

1 Introduction

1. Objectives and scope of the Manual

1. The Jersey Financial Reporting Manual (JFReM) is the technical accounting guide to the preparation of financial statements for the States of Jersey. It complements guidance on the handling public funds in the Public Finance Manual published separately by the relevant authorities in Jersey. The Manual is based on the UK Treasury Financial Reporting Manual, adapted for States of Jersey specific situations.
2. Arm's length organisations (ALO's) which are companies should comply with the Companies (Jersey) Law 1991 and should also follow the principles in this Manual and provide the additional disclosures required by the Manual where these go beyond the Companies Act.

However, references are made throughout the manual to the UK Companies Act 2006. Although the States of Jersey is not required to comply with this legislation it has chosen to consider its requirements as best practice and comply with those requirements which it considers relevant.

3. The JFReM applies directly to:

- All entities (reported entities'), and to funds, flows of income and expenditure and any other accounts (referred to collectively as reportable activities') that are prepared on an accruals basis and consolidated within States of Jersey Consolidated Accounts,

- defined in Chapter 4 whose accounts are required to be consolidated in the accounts of the States of Jersey.

4. The Manual is kept under constant review. It is updated to reflect developments in international financial reporting standards (IFRS), and, where appropriate, comments received from users. The Manual is available on the States of Jersey website.

This Manual applies EU adopted IFRS and Interpretations in effect for accounting periods commencing on or after 1 January 2020, except for IFRS 16 Leases, which is deferred until 1 January 2023 in the JFReM.

5. The principles underlying the application of accounting standards set out in this Manual may also be applied to other funds and accounts within the Jersey public sector. The Manual does not, however, consider the accounting requirements of these funds and accounts any further.

2. Using the Manual

1. The Manual provides guidance on the application of IFRS, adapted and interpreted for the public sector context. Preparers of financial statements covered by the requirements of this Manual are reminded that:

1. in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, accounting policies set out in IFRSs need not be applied when the effect of applying them is immaterial;
2. in accordance with IAS 1 Presentation of Financial Statements, applying the concept of materiality means that a specific disclosure requirement in a Standard or in an Interpretation need not be satisfied if the information is not material (disclosures should be limited to those necessary for an understanding of the entity's circumstances)[1]; and
3. for the avoidance of doubt, there is no need to develop accounting policies, or provide disclosure notes, in relation to accounting standards that do not apply to the States of Jersey's circumstances or are immaterial. However, additional commentary may be provided if helpful to the user and could be in the accounting policy note or next to an individual disclosure note.

2. Preparers are further reminded that the format and content of financial statements need to meet the information needs of the users of those financial statements.
3. Further guidance and examples will be issued by the Group Reporting to assist entities in applying the Financial Reporting Manual.

3. Budgetary Controls

1. Accounting policies are generally common to both accounting and budgeting.
2. The Public Finances (Jersey) Law 2019 introduced the principle of heads of expenditure that include both revenue and capital expenditure. Budgetary controls do not align with accounting on that basis as there is no longer a concept of capital expenditure in budgetary control; it has been replaced with project expenditure that may be accounted for as capital or revenue.
3. In selecting relevant accounting policies (see chapter 2), the States should have regard to budgetary and control requirements, but should give paramount importance to the need for financial statements to give a true and fair view.
4. Preparers of financial statements need to consult with The Treasury before changing significant accounting policies and estimation techniques where it appears that there could be a potential impact on budgets and on the Consolidated Accounts.
5. Where preparers consider it necessary to adjust retrospectively for changes in accounting policies or material errors, they should first contact the Treasury to ensure that the budgeting and estimates implications have been properly considered.

4. Trading funds

1.4.1  Trading funds are established under the Public Finances (Jersey) Law 2019 to engender a market based approach to managing activities. They might also be departments in their own right.

5. Reportable activities

1. Preparers of the financial statements of reportable activities should apply the guidance in this Manual only to the extent that it is relevant to those activities and in the light of any statutory requirements or other pronouncements that might from time to time be made by the relevant authorities.
2. Appendix 1: Choosing what to publish and how to publish it gives support to those considering whether to publish information in the annual report and accounts.
3. Appendix 2:Best practice in narrative reporting gives support to those writing the narrative of the information to be published in the annual report and accounts.

2 Accounting principles

1. Application of generally accepted accounting practice

General

1. The accounting principles contained in this Manual follow generally accepted accounting principles (GAAP) to the extent that it is meaningful and appropriate in the public sector context. Although the term GAAP' has no statutory or regulatory authority, for the purposes of this Manual, GAAP is taken to be:

1. the accounting and disclosure requirements of the Companies (Jersey) Law 1991;
2. the accounting and disclosure requirements of the Companies Act 2006 of the United Kingdom (the UK Companies Act) as per paragraph 1.1.1;
3. pronouncements by or endorsed by the International Accounting Standards Board (IASB), including the  Framework for the Preparation and Presentation of Financial Statements, the accounting standards – international accounting statements (IAS) and international financial reporting standards (IFRS) – and interpretations thereof issued by the Standards Interpretations Committee (SIC) or its successor, the International Financial Reporting Interpretations Committee (IFRIC);
4. the body of accumulated knowledge built up over time and promulgated in (for example) textbooks, technical journals and research papers.

2. For clarity, pronouncements as described inc) above are as reflected in the 2019-20 Financial Reporting Manual issued by HM Treasury (the UK FReM'). The States of Jersey therefore applies all such pronouncements as were relevant and effective at the date of issue of the UK FReM.

3. For the purposes of accounting by the entities covered by this Manual, GAAP is taken to mean primarily those items listed under (a), (b), and (c) above, interpreted as necessary in the light of the body of accumulated knowledge under (d).
4. In addition to the general principles underlying GAAP, entities covered by the requirements of this Manual need to apply two additional principles – political accountability and regularity. These principles are explained in the context of the States of Jersey in the separate Public Finance Manual.

Accounting convention

5. Financial statements should be prepared under the historical cost convention, modified by the revaluation of certain assets and liabilities to fair value as determined by the relevant accounting standards, subject to the interpretations and adaptations of those standards in this Manual.

Practical application of guidance

6. The following chapters refer to practical guidance on the application of GAAP where the Treasurer of the States feels that such guidance will assist in preparing the financial statements. The Treasurer of the States will provide additional guidance on request.

2. Preparation and Presentation of Financial Statements

Legal Responsibility for the preparation of Financial Statements

1. The Public Finances (Jersey) Law 2019, article 37 states the following:

Annual financial statements

The Treasurer must, within 3 months of the end of a financial year –

1. prepare a financial statement in respect of the accounts of the States for that financial year; and
2. send the statement to the Comptroller and Auditor General for auditing.

2. After the annual report and accounts have been certified by the Comptroller and Auditor General (or other appointed auditor) there is an expectation that they will not be changed prior to laying in the States Assembly. Where an entity wishes to make any change to a certified annual report and account prior to laying in the States Assembly, that entity must first discuss with their external audit team

IASB's Conceptual Framework for Financial Reporting (the Conceptual Framework)

3. The Conceptual Framework sets out the principles that the IASB believes should underlie the preparation and presentation of general purpose financial statements. In particular, preparers should be familiar with the objective of financial statements, which is to provide financial information about the reporting entity or reportable activity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to it. For the States of Jersey the objective of the financial statements is also to provide information about its financial position, financial performance, changes in financial position and cash flows that is useful to a wide range of users to permit them to assess the stewardship and accountability of management for the resources entrusted to them.
4. The key users of the information in the financial statements of the States of Jersey are the States Assembly. Other users include the Corporate Strategy Board, the States of Jersey Risk and Audit Committee and the taxpayer.
5. In presenting information in their financial statements, preparers should also be familiar with the:

• underlying assumption (financial statements shall be prepared on a going concern basis);

• qualitative characteristics of financial statements;

• elements of financial statements;

• recognition of the elements of financial statements; and

• measurement of the elements of financial statements.

6. The Conceptual Framework notes that financial statements cannot meet all the information needs of users, who may need to consider pertinent information from other sources. However, the provision of financial statements that meet the requirements of the States Assembly will also meet most of the needs of other users.
7. The entities covered by the requirements of this Manual will prepare general purpose financial statements that are sufficient for the needs of the key users. However, where departments are required by the relevant legislation to demonstrate accountability to States Assembly, they should prepare a statement on political accountability, which, within the meaning of the Conceptual Framework, can be regarded as a special purpose financial report.
8. The Conceptual Framework also sets out the principles behind the technical concepts that form the basis for all International Financial Reporting Standards. The Standards interpret these principles into guidance, which takes precedence over the Conceptual Framework for entities preparing accounts. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors sets out this relationship and also provides guidance on when and how it is appropriate to refer back to the Framework to develop an accounting policy.
9. In 2018, the IASB published a revised Conceptual Framework. References to the Framework in IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32 have been updated in amendments that are effective for periods beginning on or after 1 January 2020.

Financial statements must give a true and fair view

10. Financial statements prepared in accordance with the requirements of this Manual:

1. should give a true and fair view of the state of affairs of the States of Jersey at the end of the financial year and of the results for the year; and
2. where, in exceptional circumstances, the Treasurer of the States concludes that compliance with a requirement in the JFReM would be so misleading that it would conflict with the objective of the financial statements set out in the Framework it shall depart from that requirement following the principles set out at paragraphs 20-24 of IAS 1. Particulars of any departure, the reasons for it and its effects should be disclosed in the financial statements.

11. The Treasurer of the States and Minister for Treasury and Resources should not provide approval unless they are satisfied that the accounts give a true and fair view of the assets, liabilities, financial position and net income or expenditure of the entity, and where relevant, of the group.

3. The budgeting system

Reporting performance against budgeting rules

12. Departments produce monthly budgetary information in Departmental Financial Reports; which is then consolidated into a Government Financial Report. The Statement of Outturn against Approvals is produced for the Annual Report, as part of the Political Accountability Report. (see section 3.2 of this Manual).

3 Political Accountability

3.1  The Statement of Outturn against Approvals

Introduction

1. This section of the chapter explains the Statement of Outturn against Approvals.

Approvals refer to:

1. amounts of income from taxation intended to be raised approved by the States in the Budget Statement;
2. appropriations to heads of expenditure approved by the States in the Government Plan, after any amendments approved in accordance with the Public Finances (Jersey) Law 2019. Under the Public Finances (Jersey) Law 2019, the approval by the States of a head  of expenditure  authorises the body to withdraw amounts not exceeding that approval from the consolidated fund; and
3. estimates of States Trading Operations approved by the states in the Government Plan.

The Statement of Outturn against Approvals

2. The Statement of Outturn against Approvals is the States' accountability statement. It reports the following to the States:

1. a comparison of outturn against the approval for each head of expenditure (or equivalent) for both net revenue expenditure, and capital expenditure;
2. a reconciliation of the revenue outturn to net revenue expenditure disclosed in the Statement of Comprehensive Net Expenditure; and
3. a statement showing the unallocated consolidated fund balance at the end of the financial year.

3. Explanations of variances between the approval and outturn should be given in the Management Commentary and any accompanying reports and information.

The Notes to the Statement of Outturn against Approvals

4. The Statement of Outturn against Approvals is supported by notes to the statement. The following information must be given in the supporting notes, however some detail may be included as an annex to the supporting notes.

Analysis of net revenue expenditure outturn

5. This note analyses the net revenue expenditure outturn against approval as follows:

1. Net General Revenue Income by income line as presented in Summary Table 1 of the Government Plan, against the Estimate.
2. Near cash net revenue expenditure outturn for the Consolidated Fund by head of expenditure, comparing the net total outturn for each head of expenditure with the Approval.
3. Non-cash net revenue expenditure outturn for the Consolidated Fund by head of expenditure, comparing the net total outturn for each head of expenditure with the Approval.
4. Net revenue expenditure outturn for each Trading Operation, comparing the net total outturn for each operation with the Estimate.

6. A brief explanation of the reasons for significant variances between approvals and outturn should be given in the Management Commentary and any accompanying information to the Accounts.

Analysis of project expenditure outturn

7. This note analyses the project expenditure outturn against approval as follows:

1. Project expenditure outturn for the Consolidated Fund by head of expenditure, comparing the net total outturn for each head of expenditure with the Approval.
2. Project expenditure outturn for Trading Operations by project, comparing the net total outturn for each project with the Estimate.

Other notes relating to Political accountability

8. In addition to the requirements for notes supporting the Statement of Outturn against Approvals the States should also disclose in notes to the accounts:

1. the names of any public sector bodies outside the group boundary for which the States had lead policy responsibility in the year, together with a description of their status (for example, trading fund or public corporation);
2. a brief description of the nature of material remote contingent liabilities (that is, those that are disclosed under political reporting requirements and not under IAS 37) and, where practical, an estimate of its financial effect;
3. a statement of losses, special and other payments; and
4. gifts made over £10,000.

9. Departments should note these disclosures will be subject to an audit opinion as described in 5.3.3.

4 Accounting boundaries

1. Accounting boundaries

Accounting boundaries

1. The States of Jersey shall prepare an annual report and consolidated financial statements (as defined in Chapter 5) covering all entities within its accounting boundary.
2. Arm's length bodies which are companies shall prepare consolidated (as relevant) financial statements in accordance with the requirements of the JFReM, without adaptation and interpretation.
3. The group boundary is similar to the concept of a group under generally accepted accounting practice, but it is based on direct control principles. The direct control principles which are to be applied when considering whether an entity is within or without the group boundary are when the States, Council of Ministers, a Minister, Corporate Strategy Board or any other state body evidences Direct control:

• By exercising in year control over operating practices, income, expenditure, assets or liabilities of the entity.

• By demonstrating control for the purpose of the Island's affairs, the realisation of value for the States' interests or the management of the States' liabilities shall be considered within the group boundary.

• For the avoidance of doubt, the operation of the Common Investment Fund (the CIF') as a State administrated investment pooling arrangement is under the direct control of the States. However, the proportion of the CIF that relates to out of group participant entities shall be recognised as a liability in the States of Jersey consolidated financial statements.

4. Trust Funds are monies donated or left to the government through citizens wills with their wishes over what these funds are to be used for. The States of Jersey will do its best to ensure these funds available are effectively utilised to satisfy the wishes of the donors. Where the wishes of the donor are unclear or unable to satisfy very specific wishes the State will approach the courts to redirect the funds to the closest possible outcome to the original wish. These trust funds (including bequest funds) that invests into the CIF's pooling arrangement will be treated as out of group participants.
5. The JFREM considers that it has direct control over the following subsidiary companies and as such they are deemed to be within the group boundary:

• States of Jersey Development Company,

• Andium Homes Limited and

• Ports of Jersey Limited.

6. Entities which are not under the direct control of the States, Council of Ministers, a Minister, Corporate Strategy Board or any other state body shall not be considered within the group boundary.
7. The States of Jersey has made the irrevocable election under IFRS 9: Financial Instrumentsto account for the following investment entities, to which the state holds equity instruments for, as fair value through other comprehensive income:

• JT Group Limited;

• Jersey Post International Limited;

• Jersey Electricity plc; and

• The Jersey New Waterworks Company Limited.

These entities are catagorised in the States of Jersey Consolidated accounts as "Strategic Investments".

8. There are a number of smaller entities which fall within the accounting boundary of the States of Jersey but which are not consolidated as they are immaterial to the financial statements as whole. These are referred to as "Minor Entities" and comprise:

• Government of Jersey London Office

• Jersey Sport Limited

• Digital Jersey Limited

• Jersey Legal Information Board

• Jersey Business limited

• Bureau des Iles Anglo-Normandes

• Jersey Finance Limited

• Channel Islands Brussels Office

• Visit Jersey Limited

9. Where one entity has an investment in a second entity that does not meet the criteria for consolidation, it should be treated as an investment in the States of Jersey consolidated financial statements. Investments in other entities should be accounted for following the requirements of IFRS 9: Financial Instruments. This includes all investments in entities classified as Strategic Investments, Associates or Joint Venture.
10. For the purposes of applying the principles of consolidation, the States of Jersey will be the parent entity in the consolidated financial statements. The States of Jersey will present consolidated financial statements for the entire accounting boundary, and for the core departments in order to meet reporting obligations as detailed in 5.5.3. The financial statements of all entities whose results are to be consolidated will generally have the same accounting reference date. Where a subsidiary has:

An accounting reference date more than 3 months different to the accounting reference date of the department; and

The subsidiary is material to the group;

The relevant authority will consider the treatment of the non-coterminous reference dates. In other cases, the entity shall approach the consolidation of subsidiaries with non-coterminous year ends in line with IFRS 10 paras B92-B93.

2. Business Combinations

Applicability

1. IFRS 3 excludes from its scope business combinations involving entities or businesses under common control. Public sector bodies within the States of Jersey accounting boundary are deemed to be under common control. The combination of two or more public sector bodies within the Accounting Boundary into one new body, or the transfer of functions from the responsibility of one part of the public sector to another, will be accounted for as either a Transfer by Merger or as a Transfer by Absorption as detailed below.
2. For the purposes of this manual, a function is defined as an identifiable business operation with an integrated set of activities and recognised assets and/or liabilities that are capable of being conducted and managed to achieve the objectives of that business operation.
3. IFRS 3 applies to all combinations involving an entity or entities within the accounting boundary with an entity outside the Accounting Boundary.
4. When a business combination has been incorrectly reported by preparers, IAS 8 should be applied in determining whether it is necessary to adjust retrospectively for material errors, as set out in Chapter 2 of this Manual. Any prospective change to an entity's reporting boundary where the business combination is not under common control should apply IFRS 3 in full.

Transfer by Merger or Transfer by Absorption

5. The accounting treatment for transfers of function under common control should be determined by aligning the reporting with the accountability for financial performance. The underlying objective is to ensure the financial reporting supports the accountability for the transferring function, and to do so in a symmetrical way to ensure there is no transparency gap. As both entities will be within the Accounting Boundary there will be no effect on the consolidated financial statements.
6. Under a Transfer by Merger, the carrying value of the assets and liabilities of the combining bodies or functions are not adjusted to fair value on consolidation. The results and cash flows of all the combining bodies (or functions) should be brought into the financial statements of the combined body from the beginning of the financial year in which the combination occurred. Restatement of comparatives including that of the results for all the combining bodies (or functions) for the previous period, should be provided in accordance with IAS 1 as interpreted by this manual. Comparatives should be adjusted as necessary to achieve uniformity of accounting policies and consistency of presentation.
7. Under a Transfer by Absorption the carrying value of the assets and liabilities of the combining bodies or functions are not adjusted to fair value on consolidation. There should be no recognition of goodwill and no restatement of comparatives in the primary financial statements. The recorded amounts of net assets should be brought into the financial statements of the transferee from the date of transfer. The net asset/liability carrying value should be recorded at carrying value. Revaluation reserves should be transferred in full, with the remaining balance transferred to the accumulated reserve.

Disclosure

8. An entity that receives a transfer of functions should be disclosed in the Accounts and accompanying information that the transfer has taken place (including a brief description of the transferred function), giving the date of the transfer, the name of the transferring body and the effect on the financial statements. Where accounted for as a Transfer by Absorption, the reporting entity should apply judgment as to whether the additional disclosure of historical financial performance of the function should be provided, to enable users to understand the operation performance.
9. Transfers of function under common control can have a significant impact on the accounts, budgets and Estimates of the transferee if the data pertaining to the assets and liabilities of the transferring function are not accurate. It is in the interests of both the transferor and the transferee to ensure such data are accurate to prevent post-transfer disputes between the two parties.
10. Both the transferor and the transferee of a business combination under common control should apply a symmetrical accounting treatment for the transfer. A reporting entity that transfers functions to another reporting entity should also provide the same information about the transfer in its financial statements. Entities controlled by a parent entity should provide the necessary information required by the parent entity to meet the requirements set out in paragraphs 4.2.5 to 4.2.7.

Other requirements

11. Transfers of non-current assets that are not part of a transfer of functions should be transferred at fair value following the fair value measures in IFRS 3. Where a States Decision specifies the value that should be used for such a transfer, this will be used instead (for example the Protocols for the Transfer of assets to and from the States of Jersey Development Company included in P.73/2010).
12. Any departure from the accounting treatments in 4.2.5 to 4.2.11 must be agreed with the Relevant Authority, and applied symmetrically by the transferor and transferee.

5 Form and content of the annual report and accounts

1. Introduction

1. This chapter sets out the requirements for the format and content of the annual reports and accounts of the States of Jersey, incorporating the entities covered by the requirements of this Manual. The annual report and accounts includes:

1. the Performance Report (section 5.2);
2. the Accountability Report (section 5.3);
3. the Audit Report and the report of the Comptroller and Auditor General (section 5.4); and
4. the Primary Financial Statements and notes (section 5.5).

2. Reporting entities that comply with this Manual and are not incorporated as companies will apply chapters 4, 5 and 6 of Part 15 of the UK Companies Act 2006, plus associated statutory instruments, with interpretation for the public sector context. The remaining chapters of Part 15 will not apply.
3. Guidance on the requirements for a Statement of Outturn against Approvals is set out in Chapter 3.

Summary financial information

4. If the States wishes to publish a document additional to its annual report and accounts that contains supplementary material including summary financial information it should comply with the requirements of Chapter 7, section 426 of Part 15 of the UK Companies Act 2006, as amended by SI1970 (2013). The summary data must not be published in advance of the full annual report and accounts where this summary data refers to audited financial information.

2. The Performance Report

Scope of the performance report

1. The purpose of the performance section of the annual report is to provide information on the entity, its main objectives and strategies and the principal risks that it faces. The requirements of the performance report are based on the matters required to be dealt with in a Strategic Report as set out in Chapter 4A of Part 15 of the UK Companies Act 2006. The requirements of the Companies Act 2006 have been adapted for the public sector context.
2. The performance report must provide a fair, balance and understandable analysis of the entity's performance, in line with the overarching requirement for the annual report and accounts as a whole to be fair, balance and understandable (paragraph 5.3.11 of this manual).
3. Auditors will review the performance report for consistency with other information in the financial statements.
4. The performance report shall be signed and dated by the Chief Executive Officer.

5. The performance report is required to have two sections: an Overview' and a Performance analysis'.

Overview

6. The purpose of the Overview' is to give the user a short (no more than 10 to 15 pages) summary that provides them with sufficient information to understand the organisation, its purpose, the key risks to the achievement to of its objectives and how it has performed during the year. The Overview should be enough for the lay user to have no need to look into the rest of the annual report and accounts unless they were interested in further detail or had specific accountability or decision making needs to be met.
7. As a guide, the Overview should include the below although it could also be captured elsewhere in the Performance Report:

• A short summary explaining the purpose of the overview section;

• A statement from the Minister for Treasury and Resources providing their perspective on the performance of the Government/States of Jersey over the period;

• A statement of the purpose and activities of the Government/States of Jersey including in respect of a brief description of the business model and environment, organisational structure, objectives and strategies;

• The key issues and risks that could affect the Government/States of Jersey in delivering its objectives; and

• A performance summary.

Performance analysis

8. The purpose of the Performance analysis' is for entities to provide a detailed performance summary of how their entity measures its performance, more detailed integrated performance analysis and long term expenditure trend analysis where appropriate.
9. As a minimum, the Performance analysis must include:

• Information on how the entity measures performance i.e. what the entity sees as its key performance measures, how it checks performance against those measures and narrative to explain the link between KPIs, risk and uncertainty;

• A more detailed analysis and explanation of the development and performance of the entity during the year and an explanation of the relationships and linkages between different pieces of information. This analysis is required to utilise a wide range of data including key financial information from the financial statements section of the accounts;

• Non-financial information including, for example, social matters, respect for human rights, anti-corruption and anti-bribery matters; and

• Reporting entities are expected to provide information on environmental matters including the impact of the entity's business on the environment. Entities must also comply with mandatory sustainability reporting requirements. It is envisaged that such reporting will be integral throughout the annual report and accounts and not a separate standalone report.

3. The Accountability Report

Scope of the accountability report

1. The purpose of the accountability section of the annual report is to meet key accountability requirements to the States Assembly. The requirements of the accountability report are based on the matters required to be dealt with in a Directors' Report, as set out in Chapter 5 of Part 15 of the Companies Act 2006 and Schedule 7 of SI 2008 No 410, and in a Remuneration Report, as set out in Chapter 6 of the Companies Act 2006 and Schedule 8 of SI 2008 No 410.
2. The requirements of the Companies Act 2006 have been adapted for the public sector context and only need to be followed by entities which are not companies to the extent that they are incorporated into this Manual.
3. Auditors will review the accountability report for consistency with other information in the financial statements and will provide an opinion on the following disclosures which should clearly be identified as audited within the accountability report:

• the Statement of Outturns against Approvals and any supporting notes, including any notes reported in an accompanying report to the financial statements;

• Regularity of expenditure;

• Disclosures of political accountability as detailed in 3.1.8;

• Single total figure of remuneration for each minister and director;

• CETV disclosures for each minister and director;

• Payments to past directors, if relevant;

• Payments for loss of office, if relevant;

• Fair pay disclosures;

• Exit packages, (if relevant); and

• Analysis of staff numbers and costs.

4. The accountability report shall be signed and dated by the Treasurer of the States.
5. The accountability report is required to have three sections: a Corporate Governance Report, a Remuneration and Staff Report, and a Political Accountability and Audit Report. The entity should provide a short overview of these sections and explain how they contribute to the entity's accountability to the States Assembly and best practice corporate governance norms and codes.

Corporate governance report

6. The purpose of the corporate governance report is to explain the composition and organisation of the States' governance structures and how they support the achievement of the States' objectives.
7. As a minimum, the corporate governance report must include:

• The directors' report;

• The governance statement; and

• Statement of responsibilities

The directors' report

8. The directors' report must include the following, unless disclosed elsewhere in the annual report and accounts in which a cross-reference may be provided;

1. the ministerial titles and names of all ministers who had responsibility for the State departments during the year;
2. the name of the chief executive unless disclosed elsewhere in the annual report;
3. the composition of the management board (including advisory and non-executive members) having authority or responsibility for directing or controlling the major activities of the States during the year. This means those who influence the decisions of the States as a whole rather than the decisions of individual directorates or sections within the reporting entity;
4. details of company directorships and other significant interests held by members of the management board which may conflict with their management responsibilities. Where a Register of Interests is available online, a web link may be provided instead of a detailed disclosure in the annual report; and
5. information on personal data related incidents where these have been formally reported to the information commissioner's office.

For the remainder of the manual, individuals described in bullets b) to c) above are referred to as directors.

Statement of Principal Accountable Officer's responsibilities

9. The role and functions of the Principal Accountable Officer should be explained in respect of the information reported within the Annual Report and Accounts.
10. The Treasurer of the States should explain his/her responsibility for preparing the financial statements. The Statement should be positioned as part of the Accountability report.
11. The Treasurer of the States is required to confirm that, as far as he or she is aware, there is no relevant audit information of which the States of Jersey's auditors are unaware, and the Treasurer of the States has taken all the steps that he or she ought to have taken to make himself or herself aware of any relevant information to establish that the States of Jersey's auditors are aware of that information.

Governance statement

12. The Chief Executive and the Treasurer of the States shall prepare a Governance Statement. They should refer to guidance in Public Finances Manual and guidance published separately by the Treasurer of the States for Governance Statements. Reference should also be made to the governance structure in place for the States of Jersey.
13. Accountable Officers of all entities covered by the requirements of this Manual shall prepare a Governance Statement. Entities should refer to guidance in  the Public Finances Manual published separately by the Treasurer of the States for Governance Statements. In preparing the statement, the Accountable Officer should reflect the particular circumstances in which the entity operates, and adapt the statement accordingly. These statements should not be included in full in the financial statements but will be kept on record by the Treasury.
14. The Chief Executive and the Treasurer of the States shall sign and date the Governance Statement.

Remuneration and staff report

15. The remuneration and staff report sets out the entity's remuneration policy for directors, reports on how that policy has been implemented and sets out the amounts awarded to directors and where relevant the link between performance and remuneration.
16. In addition the report provides details on remuneration and staff that the States Assembly and other users see as key to accountability.
17. The remuneration and staff report are fundamental to demonstrating transparency and accountability to State Assembly. There is a presumption that information about named individuals will be given in all circumstances and all disclosures in the remuneration report will be consistent with identifiable information of those individuals in the financial statements. However, individuals must be advised in advance of the intention to disclose information about them, with an invitation for sight of the intended information to be published and notification that the individual can object under Article 21 of the General Data Protection Regulation (GDPR).
18. If a member does not agree to disclosure, the entity must consider whether to accept it. Under such circumstances the GDPR requires the entity to demonstrate compelling legitimate grounds for the disclosure which override the interests, rights and freedoms of the member or for the establishment, exercise or defence of legal claims. Entities are strongly advised to take legal advice in such a case, because a decision not to publish may be challenged under the Freedom of Information Act. Where non-disclosure is agreed, the fact that certain disclosure has been omitted should be disclosed.

Remuneration policy

19. Entities must disclose their policy on the remuneration of ministers and directors for the current and future years.

Single total figure of remuneration for each minister and director

20. The States of Jersey Accounts must disclose each component and the overall single total remuneration figure for each minister and director. The components of the single total remuneration figure are:

1. Salaries and allowances – should be disclosed in bands of £5,000. Salary and allowances covers both pensionable and non-pensionable amounts and includes, but may not necessarily be confined to: gross salaries; overtime; recruitment and retention allowances; private-office allowances or other allowances to the extent they are subject to taxation and any severance or ex-gratia payments. It does not include amounts which are a reimbursement of expenses directly incurred in the performance of an individual's duties;
2. Performance pay or bonuses payable – should be separately reported from salaries, in bands of £5,000;
3. Non-cash benefits – the estimated value of non-cash benefits (benefits in kind) should be disclosed to the nears £100;
4. Accrued pension benefits – employer pension contributions will be used to represent accrued pension benefits. Accrued pension benefits will be disclosed in bands of £5,000.

Pension entitlements for each minister and director

21. Entities must disclose the pension entitlements for each minister and director. This must include:

• the real increase during the reporting year in the pension and (if applicable) related lump sum at pension age in bands of £5,000;

• the value at the end of the reporting year of the accrued pension and (if applicable) related lump sum at pension age in bands of £5,000;

• the value of the cash equivalent transfer value at the beginning of the reporting year to the nearest £1,000;

• the real increase in the cash equivalent transfer value during the reporting year, to the nearest £1,000; and

• the value of the cash equivalent transfer value at the end of the reporting year to the nearest £1,000.

Compensation on early retirement or loss of office

22. If a payment for compensation on early retirement for loss of office (paid or receivable) has been made under the terms of legislation or an approved Compensation Scheme, the fact that such a payment has been made should be disclosed, including a description of the compensation payment and details of the total amounts paid (the cost to be used must include any top-up to compensation provided by the employer to buy out the actuarial reduction on an individual's pension). This should include severance payments made to Ministers on loss of office. Ministerial severance should be stated by Minister and include actual and receivable payments.

Payments to past directors

23. Entities must provide details of any payments made to any person (minister or officials) who was not a director at the time the payment was made, but who had been a director of the entity previously, unless already disclosed within a previous directors' remuneration report, the current year single total remuneration disclosure or within the disclosure of compensation for early retirement or loss of office. Only payments of regular pension benefits which commenced in previous years and payments in respect of employment for the entity other than as a director may be excluded.

Fair pay disclosure

24. Entities must disclose the following information together with prior year comparatives:

• The median remuneration of the reporting entity's staff. This is based on annualised, full-time equivalent remuneration of all staff (excluding temporary and agency staff) as at the reporting date;

• The range of staff remuneration;

• The ratio between the median staff remuneration and the mid-point of the banded remuneration of the highest paid director; and

• An explanation for any significant changes in the ratio between the current and prior year.

Staff report

25. The staff report must include the following information:

1. Number of senior civil service staff (or equivalent);
2. Staff numbers and costs – an analysis of staff costs and numbers distinguishing between:

• Staff in a permanent employment contract;

• Other staff engaged on objectives of the States, such as short-term contract staff or agency/temporary staff. Where the number of staff under any one subset of "other staff" is significant, that subset should be separately disclosed; and

3. Staff composition – including an analysis of the number of persons of each sex who were directors, senior civil servants (or equivalent) and employees;
4. Staff policies applied during the financial year:

• For giving full and fair consideration to applications for employment by the company made by disabled persons, having regard to their particular aptitudes and abilities;

• For continuing the employment of, and for arranging appropriate training for, employees of the company who have become disabled persons during the period when they were employed by the company;

• Otherwise for the training, career development and promotion of disabled persons employed by the company.

5. Other employee matters – such as, other diversity issues and equal treatment in employment and occupation; employment issues including employee consultation and/or participation; health and safety at work; trade union relationships; and human capital management such as career management and employability, pay policy etc.;
6. Expenditure on consultancy;
7. Exit packages; and
8. States member's remuneration.

Political accountability Report

26. The political accountability report brings together the key political accountability documents with the annual report and accounts. It comprises:

1. Statementof Outturn against Approvals and supporting notes;
2. Regularity of expenditure; and
3. Political accountability disclosures as detailed in 3.1.8.

27. The requirements for a) andc) are detailed in Chapter 3.

4. The Audit Report and the report of the Comptroller and Auditor General

5.4.1  The financial statements laid before the States shall include the report issued by the auditors appointed by the Comptroller and Auditor General, the certificate of the Comptroller and Auditor General and any report by the C&AG under Article 12(3) of the Comptroller and Auditor General (Jersey) Law 2014.

5. Primary Financial Statements and notes

Introduction

1. This section of the chapter provides guidance on the format and content of the Statement of Comprehensive Net Expenditure, the Statement of Financial Position, the Statement of Changes in Equity and the Statement of Cash Flows, together with the relevant notes. This section sets requirements based on the UK Companies and details adaptations and interpretations of the following accounting standards that provide guidance on the formats of, and disclosures in, financial statements:

IAS 1 Presentation of Financial Statements; IAS 7 Statement of Cash Flows;

IAS 10 Events after the Reporting Period; IAS 24 Related Party Disclosures; and IFRS 8 Operating Segments.

2. Other accounting standards, which are dealt with in other chapters of this Manual, might include disclosure requirements. Unless indicated otherwise, those disclosure requirements apply in full.
3. Where group accounts are prepared IAS 1 is interpreted to require that the financial statements provide two columns, one showing the core entities and the other showing the group as a whole, where core entities are those subject to a regularity audit opinion and the entire group being all those within the group boundary for accounting purposes. Only the Statement of Comprehensive Net Expenditure shall be split in this way.

Statement of Comprehensive Net Expenditure

4. IAS 1 requires entities to prepare a Statement of Comprehensive Income. This manual adapts IAS 1 as set out below
5. The States of Jersey shall prepare a Statement of Comprehensive Net Expenditure. Row headings should be based on material sources of income and expenditure.

Statement of Financial Position

6. IAS 1 requires entities to prepare a Statement of Financial Position and provides guidance on the minimum presentation required on the face of the statement of financial position.

7. The Statement of Financial Position must be signed by the Treasurer of the States. Statement of Cash Flows
8. IAS 7 sets out the requirements for the format of the Statement of Cash Flows.
9. In reconciling the operating expenditure to operating cash flows, entities should exclude movements in debtors and creditors relating to items that do not pass through the Statement of Comprehensive Net Expenditure.
10. In analysing capital expenditure and financial investment, entities should adjust for debtors and creditors relating to capital expenditure and those relating to loans issued to or repaid by other entities in the accounting boundary.
11. In analysing financing, departments should adjust for debtors and creditors relating to the capital expenditure in respect of finance leases and on-balance sheet PFI contracts.

Statement of Changes in Equity

12. IAS 1 requires entities to prepare a Statement of Changes in Equity. IAS 1 is interpreted for the public sector context such that the States of Jersey is required to present a Statement of Changes in Taxpayers' Equity following the format in IAS 1.
13. The financing of public sector entities is ultimately tax-based and an IAS 1-based notion of capital does not apply.

Notes to the accounts

14. The notes to the financial statements provide additional detail to users onthe accounting policies of the entity and the numbers included in the core financial statements. Notes should only be included where additional information is material, i.e. where its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. In the public sector context, materiality can be by nature and contest as well as in value, and the decisions of users can be of a non-economic nature. Notes are not required where the information is immaterial to the user and this manual clearly notes that disclosures should be limited to those necessary for an understanding of the entity's circumstances. Entities should refer to the disclosure requirements in the International Financial Reporting Standards unless adaptations and interpretations are detailed below.

Accounting policies

15. The Group's accounting policies are attached as Appendix 4: Accounting Policies. Accounting policies are rules and guidelines that have been selected by the States of Jersey for use in preparing and presenting its financial statements. Accounting policies are important, as they set a framework, which all group entities follow, and provide comparable and consistent standard financial statements across years and relative to other governments.

16. The notes to the accounts must include a statement that the accounts have been prepared in accordance with International Financial Reporting Standards as adapted and interpreted by this Manual. Significant accounting policies should be disclosed particularly in the event of a change in policy or in relation to a material item. The accounting policy for a particular item within the financial statements may be disclosed within the note for that item. Where an entity considers that additional information on accounting policies is necessary to assist users then this should be included in the accounting policies note or next toan individual disclosure note.

Operating Segments

17. IFRS 8 applies in full to all entities within scope of this Manual. Entities should provide an analysis of their operating segments, products and services, the geographical areas in which they operate, and their major customers in accordance with the requirements of IFRS 8.

Expenditure

18. Entities should provide an analysis of expenditure as recorded in the Statement of Comprehensive Net Expenditure in separate notes to the financial statements. This should include service charges under PFI contracts, the individual components of non-cash items, and an analysis of other significant expenditure items. A brief summary of staff costs should also be included with a reference to more detailed disclosures (per 5.3.25b) in the Accountability Report.

Cash and cash equivalents

19. Entities shall disclose the opening position, the change in balances and the closing position separately for cash and cash equivalents.

Financial instruments

20. Where the entity is exposed to material financial instrument risk the relevant IFRS 7 disclosures should be made. Particular emphasis should be placed on considering appropriate disclosure requirements relating to significant credit risk from receivables.

Commitments under PFI contracts

21. Commitments under Private Finance Initiative (PFI) contracts will need to be disclosed. The Treasurer of the States will provide advice on a case by case basis.

Information about related undertakings

22. If not disclosed elsewhere in the annual report and accounts, entities shall disclose the name of each of its subsidiaries, or provide a web link to where this information is available.

Third party assets

23. These are assets for which an entity acts as custodian or trustee but in which neither the entity nor government more generally has a direct beneficial interest. Third party assets are not public assets, and should not be recorded in the primary financial statements. Material third party assets should be disclosed. Where significant, the note should differentiate between:

1. third party monies and listed securities: the minimum level of numerical disclosure required is a statement of closing balances at financial year-end. For listed securities, this will be the total market value. Optionally, when considered significant by the entity

and at its discretion, further disclosures may be made, including gross inflows and outflows in the year and the number and types of securities held;

2. third party physical assets and unlisted securities: disclosure may be by way of narrative note. For physical assets, the note should provide information on the asset categories involved. Such disclosure should be sufficient to give users of the financial statements an understanding of the extent to which third-party physical assets and unlisted securities are held by the entity; and
3. in the event that third party monies are found to have been in a public bank account at the end of an accounting year, commentary should be included in the note on cash at bank and in hand and in the disclosures above on the amount of third party monies held in the bank account.

Grants and subsidies payments

24. A note should analyse all grants and subsidies payments by entity. It should categorise all grants/subsidies, and should separately disclose grants/subsidies of £75,000 or more to any individual/organisation in the year. In the rare instances where disclosure of this detailed information would seriously prejudice the position of the States of Jersey, a general disclosure should be made, together with a reason why the detailed information has not been disclosed.

Trade and other receivables

25. Entities shall analyse trade and other receivables by type (as appropriate) as set out below:

1. Income Tax Receivables and Accrued Income;
2. GST Receivable and Accrued Income;
3. Provision for taxation receivables;
4. Trade receivables;
5. Contract assets
6. Prepayments and accrued income;
7. Other Receivables;
8. Provision for non-taxation debtors; and

Trade and other payables

26. The consolidated financial statements shall analyse payables by type (as appropriate) as set out below:

1. Trade payables;
2. Contract liabilities
3. Other payables;
4. Income Tax receipts in advance
5. Accruals and deferred income;

6. Receipts in advance
7. Other headings as appropriate.

Currency in circulation

27. A note should disclose the States liability in relation to currency incirculation, split between currency and coinage, including the balances held by the States of Jersey.

Entities within the departmental boundary

28. The States of Jersey should disclose in a note to the accounts a list of entities within the accounting boundary.
29. A note including a Statement of Net Comprehensive Expenditure and Statement of Financial Position for each of the Social Security Fund, Health Insurance Fund, Social Security (Reserve) Fund, Long Term Care Fund and Jersey Dental Scheme should also be included.

6  Applicability of accounting standards

1. EU adopted IFRS

6.1.1  A list of EU adopted IFRS is shown in Table 6.1, together with a record or whether they have been adapted or interpreted for the public sector context in this Manual. All standards apply to all reportable activities and reporting entities applying this Manual to the extent that each standard is relevant to those activities and in the light of any statutory requirements or other pronouncements that might from time to time be made by the Treasurer of the States.

Table 6.1

2. Interpretations and adaptations for the public sector context

6.2.1  Table 6.2 provides details of those adaptations and interpretations for the public sector context. Where an adaptation or interpretation to a standard results in an inconsistency with a related Interpretation  issued  by  the  IFRS  Interpretations  Committee  (IFRIC)  or  Standards Interpretations Committee (SIC), the Interpretation is similarly adapted or interpreted. In all other cases, IFRIC and SIC Interpretations will apply in full.

Table 6.2

7 Further guidance on accounting for assets and liabilities

1. Property, plant and equipment

Valuations (excluding networked assets, donated assets and heritage assets)

1. In considering how best to apply the valuation requirements of IAS 16 so as to ensure that the Statement of Financial Position gives a true and fair view of the value of the assets at the reporting date, entities should consider the following guidance on property and non-property assets. The flowchart at the end of this section will assist in determining the appropriate accounting treatment of PPE excluding networked assets, donated assets and heritage assets. (More detailed guidance is available in the Capital Accounting Manual).
2. Entities should value their property using the most appropriate valuation methodology. Such methods might include:

• a quinquennial valuation supplemented by either annual indexation or regular desktop valuation update;

• a quinquennial valuation supplemented by an interim professional valuation in year 3;

• annual valuations;

• a rolling programme of valuations; or

• for non property assets only, appropriate indices.

3. It is for valuers, using the Royal Institution of Chartered Surveyors; (RICS) Red Book' (RICS Valuation – Professional Standards), and following discussions with the entity, to determine the most appropriate methodology for obtaining a fair value.
4. Assets which are held for their service potential (i.e. operational assets used to deliver either front line services or back office functions) should be measured at their current value in existing use. For non-specialised assets current value in existing use shouldbe interpreted as market value in existing use which is defined in the RICS Red Book as Existing Use Value (EUV). For specialised assets current value in existing use should be interpreted as the present value of the assets remaining service potential, which canbe assumed to be at least equal to the cost of replacing that service potential.
5. Assets which were most recently held for their service potential but are surplus should be valued at current value in existing use as per paragraph 7.1.15 if there are restrictions on the entity or the asset which would prevent access to the market at the reporting date. If the entity could access the market then the surplus asset should be valued at fair value under IFRS 13.
6. In determining whether an asset which is not in use is surplus, management should assess whether there is a clear plan to bring the asset back into future use as an operational asset. Where there is a clear plan, the asset is not surplus and the current value in existing use should be maintained. Otherwise, the asset should be assessed as surplus and valued under IFRS 13.
7. Assets which are not held for their service potential should be valued in accordance with IFRS 5 or IAS 40 depending on whether the asset is actively held for sale.

8. Where an asset is not being used to deliver services and there is no plan to bring it back into use, with no restrictions on sale, and it does not meet the IAS40 and IFRS 5 criteria, these assets are surplus and should be valued at fair value using IFRS 13.
9. Where a valuer, following discussion with the entity, determined that depreciated replacement cost (DRC) is the most appropriate, entities and their valuers should have regard to the guidance contained in the most recent RICS Red Book.
10. Where DRC is used as the valuation methodology:

• entities should normally value a modern equivalent asset in line with the Red Book;

• entities should use the instant build' approach;

• the choice of an alternative site will normally hinge on the policy in respect of the locational requirements of the service that is being provided.

11. The cost of enhancements to existing assets (such as building of a new wing within an existing prison) should be capitalised during the construction phase as an asset under construction. At the first valuation after the asset is brought into use, any write down of cost should be treated as an impairment and charged to the Statement of Comprehensive Net Expenditure.
12. The States of Jersey should:

• disclose in the accounting policies note the fact that assets are carried at fair value. Entities should also provide information about the approach to valuing their estates, including a statement (where applicable) that alternative sites have been used in DRC valuations;

• disclose in the notes on tangible non-current assets: the date of the last valuations of those property assets that are subject to revaluation, and the names and qualifications of the valuer; and

• discuss in the Management Commentary, where they hold extensive estates: their estate management strategy; the indicative alternative use values provided by the valuer as part of the routine valuation work, and what those alternative use values mean.

13. As part of the Property, Plant and Equipment note entities are required, in the year the asset is acquired, to separately disclose the fair value of those assets funded by capital grant or donation. Where the funder provides cash, rather than the physical assets, any difference between the cash provided and the fair value of the assets acquired should also be disclosed.
14. Entities may elect to adopt a depreciated historical cost basis as a proxy for fair value for assets that have short useful lives or low values (or both). For depreciated historical cost to be considered as a proxy for fair value, the useful life must be a realistic reflection of the life of the asset and the depreciation method used must provide a realistic reflection of the consumption of that asset class. If depreciated historical cost is used as a proxy for current value in existing use or fair value then this fact should be disclosed, including the classes of assets where it has been used (where appropriate), the reasons why, and information about any significant estimation techniques (where applicable).

Flowchart of valuation for property, plant and equipment (excluding networked assets, donated assets and heritage assets)

Is the asset held for its  Is the asset available for  Is the asset held to earn service potential or was  No immediate sale in its  No rentals or for capital

it most recently held for  present condition and is a  appreciation or both?

its service potential?  sale highly probable?

Yes Yes No

Apply IFRS 5  Apply IFRS 13 Yes  Measure at lower of its  Apply IFRS 40  Measure at fair

carrying amount before  Measure at fair  value, option for cost classification and fair  value, option for cost  model is withdrawn value less costs to sell model is withdrawn (Surplus category)

No No Are there restrictions on

bIrsingth ethree aa scsleaet rbpalanck inttoo  the entity or the asset

Is the asset in use? use? which prevent access to  

the market No Yes Yes

Yes

Apply adaptations to IAS 16 Measure at current value in existing use. For non-specialised assets, this will be at market value in existing use. For specialist assets, it will be the present value of the asset's remaining service potential

Networked assets

15. Networked assets  comprise  assets  that  form  part  of  an  integrated  network  servicing  a significant  geographical  area.  These  assets  usually  display  some  or  all  of  the  following characteristics:

• they are part of a system or network;

• they are specialised in nature and do not have alternative uses;

• they are immovable; and

• they may be subject to constraints on disposal.

Examples of networked assets include road networks, sewer systems and sea defences. The road network

16. Land, Structures and Communications will be accounted for following the guidance in IAS 16.

17. The road surface asset will be recognised as a single asset following the additional guidance in this manual.
18. The road surface asset will be held at depreciated replacement cost based on service potential.
19. Subsequent expenditure on the road surface will be capitalised where it enhances or replaces the service potential. Spending that does not replace or enhance service potential will be expensed.
20. The annual depreciation charge for the road surface will be the value of the service potential replaced through the maintenance programme plus, or minus, any adjustment resulting from the annual condition survey. The value of maintenance work undertaken will be used as an indication of the value of the replaced part. Where the condition survey show that deterioration in the road surface exceeds the service potential replaced by the maintenance programme the additional deterioration will be taken to the Statement of Comprehensive Net Expenditure as part of the depreciation charge. Where the condition survey shows that deterioration in the road surface is less than the service potential replaced by the maintenance programme the depreciation charge will be reduced by the excess maintenance.
21. The road surface will be subject to annual valuations as measured by suitable indices. Upward movements in value will be taken to the revaluation reserve and included in comprehensive net expenditure. Downward movements in value will beset against any credit balance held in the revaluation reserve until this credit is exhausted and thereafter to net operating expenditure.
22. The road surface will be subject to an annual impairment review. Impairments will be recognised as required by IAS 36 Impairment of Assets as applied by the manual (see section 7.2).

Other Infrastructure

23. The road accounting methodology detailed above should also be used for the foul and surface water sewerage system and the sea defences network. Where entities hold other networked assets the road surface accounting methodology detailed above may be used where it is appropriate to do so. However approval to use the road surface methodology should first be obtained from Treasurer of the States.

Donated assets

24. Assets donated by third parties (see also paragraph 7.1.30 on asset transfers), either by gift of the asset or by way of funds to acquire assets should be capitalised at current value in existing use or fair value on receipt depending on whether the assets will be held for their service potential and as set out in paragraphs 7.1.4 to 7.1.7.The funding element should be recognised as income as required by IAS 20 as interpreted in this Manual.
25. To qualify for treatment as a donated asset there should beno consideration given in return.
26. Donated assets do not include:

1. assets financed by States of Jersey Funds;
2. the subsequent capitalised expenditure on a donated asset which is capitalised;
3. assets constructed or contributed to by a developer to benefit the developer's business;

4. assets accepted in lieu of tax.

27. The assets listed in 7.1.26 should be accounted for in accordance with IAS 16 in the same way as other assets of that general type.
28. Donated assets should be revalued, depreciated and subject to impairment review in the same way as other non-current assets.
29. Details of any restrictions or conditions imposed by the donor on the use of the donated asset should be disclosed in a note to the financial statements.

Asset transfers

30. Entities may give or receive assets to/from another public sector body (including public sector bodies not covered by the requirements of this Manual) for no consideration. Assets acquired in this way will normally be recognised in accordance with IAS 20 as interpreted in this Manual. Entities should consult the Treasurer of the States before entering into such a transaction.

Heritage assets

Definition

31. A heritage asset is a tangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture. Heritage assets are those assets that are intended to be preserved in trust for future generations because of their cultural, environmental or historical associations. They are held by the reporting entity in pursuit of its overall objectives in relation to the maintenance of the heritage. Non-operational assets are those that are held primarily for this purpose. Operational heritage assets are those that, in addition to being held for their characteristics as part of the nation's heritage, are also used by the reporting entity for other activities or to provide other services (the most common example being buildings).
32. The entity holding the asset should attest annually to the ongoing heritage credentials of its heritage assets. Heritage assets include historical buildings, archaeological sites, military and scientific equipment of historical importance, museum and gallery collections and works of art.
33. In principle, heritage assets should be accounted for in the same way as any other asset under IAS 16. There are, however, certain characteristics associated with heritage assets that give rise to the need for interpretation of IAS 16:

1. Their value to government and the public in cultural, environmental, educational and historical terms is unlikely to be fully reflected in a financial value derived from a market mechanism or price.
2. Established custom and, in many cases, primary statute and trustee obligations impose prohibitions or severe restrictions on disposal by sale.
3. They are often irreplaceable and their value may increase over time even if their physical condition deteriorates.
4. They may require significant maintenance expenditure so that they can continue to be enjoyed by future generations.
5. Their life might be measured in hundreds of years.

6. Antiques and other works of arts held by reporting entities outside the main collections should be classified as heritage assets only when they fulfil the above requirements. Otherwise, antiques and other works of art should be accounted for in the same way as other assets.

Recognition and measurement

34. Operational heritage assets should be valued in the same way as other assets of that general type (buildings, for example).
35. Non-operational heritage assets should be valued subject to the requirements set out in paragraphs 7.1.36 to 7.1.39 below.
36. Where information is available on the cost or fair value of heritage assets:

1. they should be presented in the Statement of Financial Position separately from other tangible assets;
2. the Statement of Financial Position or the notes to the accounts should identify separately those classes of heritage assets being reported at cost and those at fair value; and
3. changes in the valuation should be recognised in the Other Comprehensive Expenditure section of the Statement of Comprehensive Net Expenditure, except impairment losses that should be recognised in accordance with section 7.2 of this Manual.

37. The accounting convention in this manual is to recognise non-current assets at either current value in existing use or fair value but, where exceptionally, it is not practicable to obtain a fair value, the heritage assets may be reported at historical cost.
38. Where assets have previously been capitalised or are recently purchased, information on their cost or fair value will be available. Where this information is not available, and cannot be obtained at a cost commensurate with the benefits to users of the financial statements, the assets will not be recognised in the Statement of Financial Position and the disclosure required by this manual should be made.
39. Valuations may be made by any method that is appropriate and relevant. There is no requirement for valuations to be carried out or verified by external valuers, nor is there any prescribed minimum period between valuations. However, where heritage assets are reported at valuation, the carrying amount should be reviewed with sufficient frequency to ensure the valuations remain current.

Depreciation and impairment

40. Depreciation is not required on heritage assets which have indefinite lives.
41. The carrying amount of an asset should be reviewed where there is evidence of impairment, for example, where it has suffered physical deterioration or breakage or new doubts arise as to its authenticity. Any impairment recognised should be dealt with in accordance with the recognition and measurement requirements of IAS 36 Impairment of Assetsin section 7.2.

Donations

42. The receipt of donations of heritage assets should be recognised as income and taken through the Statement of Comprehensive Net Expenditure where there are no conditions specifically relating to the operating activities of the entity or recognised as deferred income in the Statement of Financial Position. Where exceptionally, it is not practicable to obtain a valuation for a donated heritage asset, the reasons why should be stated. Disclosures should also be provided on the nature and extent of significant donations.

Disclosures

43. The disclosures required for heritage assets are set out below and apply to all heritage assets:

1. The States of Jersey's financial statements should contain an indication of the nature and scale of heritage assets held by the entity;
2. The financial statements should set out the States' policy for the acquisition, preservation, management and disposal of heritage assets. This should include a description of the records maintained by the States of its collection of heritage assets and information on the extent to which access to the assets is permitted. The information required by this paragraph may alternatively be provided in a document that is cross- referenced from the financial statements;
3. The accounting policies adopted for the States' holding of heritage assets should be stated, including details of the measurement bases used;
4. For heritage assets that are not reported in the Statement of Financial Position, the reasons why should be explained and the notes to the financial statements should explain the significance and nature of those assets that are not reported in the Statement of Financial Position; and
5. The disclosures relating to assets that are not reported in the Statement of Financial Position should aim to ensure that, when read in the context of information about capitalised assets, the financial statements provide useful and relevant information about the entity's overall holding of heritage assets.

44. Where heritage assets are reported in the Statement of Financial Position, the following should be disclosed:

1. the carrying amount of heritage assets at the beginning of the financial period and at the Statement of Financial Position date, including an analysis between those classes or groups of heritage assets that are reported at cost and those that are reported at valuation; and
2. where assets are reported at valuation, sufficient information to assist in an understanding of the valuations being reported and their significance.

This should include:

1. the date of the valuation;
2. the methods used to produce the valuation;
3. whether the valuation was carried out by external valuers and, where this is the case, the valuer's name and professional qualification, if any; and
4. any significant limitations on the valuation.

45. An example of a limitation to be disclosed under paragraph 7.1.44 (ii) d) would be where an asset has a particular provenance, the effect of which is not fully captured by valuation.
46. Information that is available to the entity and is helpful in assessing the value of those heritage assets that are not reported in the entity's Statement of Financial Position should be disclosed.
47. The financial statements should contain a summary of transactions relating to heritage assets disclosing, for the accounting period and each of the previous four accounting periods:

1. the cost of acquisitions of heritage assets;
2. the value of heritage assets acquired by donation;
3. the carrying amount of heritage assets disposed of in the period and the proceeds received; and
4. any impairment recognised in the period.

This summary should show separately transactions in assets that are reported in the Statement of Financial Position and those that are not.

48. The disclosures required by paragraphs 7.1.43 to 7.1.47 may be presented in aggregate for groups or classes of heritage assets provided this aggregation does not obscure significant information. Separate disclosures should be provided for those assets reported at cost and those reported at valuation. Amounts in respect of assets that are not reported in the Statement of Financial Position should not beaggregated with amounts for assets that are recognised at cost or valuation.

Accounting for Public-Private Partnership (PPP) arrangements, including Private Finance Initiative (PFI) contracts, under IFRS

49. This section of the Manual deals with the accounting treatment of PPP arrangements, including PFI contracts, that meet the definition of service concession arrangements in IFRIC 12 Service Concession Arrangements. To be within the scope of IFRIC 12, the service concession arrangement must contractually oblige the private sector operator to provide the services related to the infrastructure to the public on behalf of the grantor (the public sector) (IFRIC 12.3). Contracts that do not involve the transfer or creation ofan infrastructure asset for the purpose of the contract fall outside the scope of IFRIC 12, as do arrangements that do not involve the delivery of services to the public. Examples of infrastructure for public services are: roads, bridges, tunnels, prisons, hospitals, airports, water distribution facilities, telecommunication networks, permanent installations for military etc. operations, and non- current assets used for administrative purposes in delivering services to the public.
50. The private sector operator will apply IFRIC 12 to those arrangements where:

5. the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them and at what price; and
6. the grantor controls – through beneficial entitlement or otherwise – any significant residual interest in the infrastructure at the end of the term of the arrangement.

Where the infrastructure asset is used for its entire useful life, and there is little or no residual interest, the arrangement would fall within the scope of IFRIC 12 where the grantor controls or regulates the services as described in the first condition (see also IFRIC 12.6). Significant residual interest will exist where the grantor is contractually required to purchase the infrastructure asset at the end of the term of the arrangement.

51. IFRIC 12 (Application Guidance paragraph 3) notes that, in determining the applicability of the first condition, non-substantive features (such as price capping that would apply only in remote circumstances) should be ignored and the substance of the arrangement considered.
52. IFRIC 12, including the Appendices, Information Notes, Illustrative Examples and Basis for Conclusions, provides guidance on how to apply IFRS to service concession arrangements. IFRIC 12 does not create exceptions from other IFRS for transactions that are within service concession arrangements, other than as specifically stated in IFRIC 12. Issues not addressed explicitly in this section of the Manual should be resolved by reference to other IFRS. IFRIC 12 applies to:

• arrangements where the infrastructure is used for its entire useful life;

• infrastructure that the operator constructs or acquires from a third party; and

• infrastructure that the grantor provides to the operator for the purpose of the concession.

IFRIC 12 does not specify the accounting for infrastructure that was held and recognised as an asset by the operator prior to entering the arrangement (IFRIC 12.6-8). This is because the operator would de-recognise the asset under IAS 16. Paragraph 7.1.48 interprets IFRIC 12 for the public sector by including an asset previously owned by the operator within the criteria for recognising the arrangement as a service concession. The flowchart overleaf will assist in determining the appropriate accounting treatment of PPP arrangements, including PFI contracts by public sector grantors.

Flowchart of accounting for PPP arrangements

Does the grantor control or regulate

what services the operator must  No  Does the arrange- No  Grantor provide with the infrastructure,  ment contain a lease  recognises Yes

Yes

Does the grantor control through  No

ownership, beneficial entitlement or  Grantor recognises

otherwise, any significant residual  lease in accordance

interest in the infrastructure at the

Yes

Is the infrastructure constructed or  The infrastructure is acquired by the operator from a  No  the existing

third party for the purpose of the  infrastructure of the grantor to which the

operator is given Yes

Yes

Report property as asset and related liability. Separate the unitary payment stream between the property element, the interest charge and service element either

The grantor continues to recognise the infrastructure on balance sheet as property, plant and equipment (IAS 16) or as a leased asset (IAS 17).

Initial recognition and measurement of assets and liabilities in new arrangements and contracts

53. Where there is infrastructure, whether previously owned by the contractor or the grantor, or constructed or acquired from a third party for the purpose of the service arrangement, and the grantor: