What is the purpose of IFRS 16?
A new international financial reporting standard (IFRS 16) is being applied to schools, as it is already for other parts of the public sector. Its purpose is to standardise the reporting of lease arrangements and clarify an organisation's lease assets and liabilities.
IFRS 16 implications for maintained schools
IFRS applies to the leasing arrangements for maintained schools from 1 April 2024. It changes how local authorities recognise the leases entered into by their maintained schools in their accounts.
IFRS 16 ends the distinction between operating and finance leases for accounting purposes. To all intents and purposes, any leases will be classed as borrowing and require the Secretary of State for Education’s consent. However, the Secretary of State has granted general approval for leases relating to certain types of assets, meaning that schools do not have to seek approval in these cases. The IFRS 16 Maintained Schools Finance Lease Class Consent 2024 document lists the exemptions, including IT equipment and telephony. The definition of IT equipment is encouragingly broad as it includes not only laptops, servers and the like but also door entry security systems and touchscreen boards.
IFRS 16 implications for academy trusts
Leasing arrangements for academy trusts will change from 1st September. The same arrangements for maintained schools will apply so trusts can enter into certain leases without prior approval from the Secretary of State. The 2024 edition of the academy trust handbook will be updated to reflect the change.
Academy trusts will still need to distinguish between operating and financial leases according to the Financial Reporting Standards.
The requirements around operating leases remain unchanged. The Secretary of State has published a list of asset types that can be acquired using a financial lease without prior approval, starting on 1st September 2024.
‘Changes to leasing agreements for academy trusts’ outlines the changes and provides a list of the type of assets granted prior consent. As with maintained schools, they include IT equipment with the same wide range of assets.
Usual principles still apply
The adoption of IFRS 16 does not remove the requirement for state schools of any type to enter into any lease agreements without doing the correct due diligence. The School Financial Value Standard requires the school to ensure that the lease agreement provides them with the best value for money.
All schools can now make more appropriate, informed decisions when considering the best way to purchase any IT assets. They have more flexibility in matching the terms and duration of leases to meet their needs. Academy trusts have the additional benefit of being able to decide whether to use capital or revenue budgets to finance the lease.
Leasing your technology from RM and edde
Leasing can be a great way for schools to secure the equipment you need to provide your students with a first-class education. Get in touch if you'd like to discuss possible leasing agreements for your school or trust – whether you are looking to fund a larger-scale infrastructure upgrade, to introduce a 1:1 device scheme, or have other technology requirements such as interactive whiteboards.
Devices such as the HP Chromebook 11 can be leased from as little as £6.17/month, or £9.99/month as part of RM StudyKIT – providing a protective case, next-business-day warranty and insurance cover whilst at school, home and on the move. Where ChromeOS isn't the ideal fit for your school age range, RM StudyKIT also offers a range of options of Microsoft Windows and Apple iPadOS devices.
The implementation of IFRS 16 opens up the potential to spread the costs of larger infrastructure projects over time. Your network requirements will be unique to your school, but taking indicative costs of wired and wireless infrastructure (inclusive of hardware, licensing and installation) a typical primary school could be facing upfront costs of £15,000-£20,000 and for a secondary school this could be £90,000-£100,000 or more. Spreading this expense over five years can be of particular advantage where cash flow considerations are key.
store.rm.com/leasing
getintouch@rm.com
01235 645 316