Proposals to avert £4.5m threat

Inside Housing has reported:

Proposals to avert a £4.5 billion threat to housing association balance sheets have been put before the accountancy watchdog.

As currently drafted, new accountancy rules due to take effect next January, would force the sector to recognise huge impairment charges, potentially halting the construction of up to 50,000 homes.

But the Financial Reporting Council, the accountancy regulator implementing the UK-wide requirement to bring businesses in line with international accountancy standards, has opened the door for changes, following concerns raised by landlords.

A working party of social landlords, sector bodies and financial experts, tasked by the FRC with developing a draft statement of recognised practice, or SORP, to reflect the requirement, has now rewritten the section of SORP relating to impairment with three or four ‘significant’ changes in mind.

The exact nature of the changes is not yet known, but it is understood they involve allowing landlords to take the social value of their homes, as well as their cash generating potential, into account when assessing their value.

The working party will need to present the proposed changes to two FRC committees, followed by a consultation with the sector and further FRC committees.

Kevin Williamson, head of policy at the National Housing Federation, said: ‘The FRC needs to consider whether it is consistent with the principle of [the accountancy changes] and that its going to lead to robust reporting across the sector.’

Jack Stephen, deputy chief executive of Thames Valley Housing and chair of the SORP working party, said: ‘My feeling is that the changes we have developed would take away most of the problem, if not all of it.’

The second consultation would mean the SORP would likely not be released until September, leaving associations with a short time to prepare year-end accounts.