1. Statement of Accounting Policies
The financial statements have been prepared
in accordance with the Resource Accounting Manual issued by HM
Treasury. The particular accounting policies adopted by the Ministry
are described below. They have been applied consistently in dealing
with items which are considered material in relation to the accounts.
1.1 Accounting Convention
These accounts have been prepared under the
historical cost convention, modified to account for the revaluation
of fixed assets at their value to the Ministry by reference to
their current costs.
1.2 Basis of Consolidation
The Ministry accounts comprise a consolidation
for the core-Department and its on-vote Agencies; Farming and
Rural Conservation Agency (FRCA), Central Science Laboratory (CSL),
Veterinary Laboratory Agency (VLA), Veterinary Medicines Directorate
(VMD), Pesticides Safety Directorate (PSD), Meat Hygiene Service
(MHS) and the Centre for Environment, Fisheries and Aquaculture
Science (CEFAS). The Agencies also each produce and publish their
own annual report and accounts.
1.3 Grants and Subsidies
Expenditure on grants and subsidies, partly
or fully funded by the EU, are accrued where the claims have met
all the conditions appertaining to the particular scheme but have
not been paid. The element of the expenditure that is reimbursable
by the EU is taken as accrued income.
The Treasury Resource Accounting Manual requires
that the expenditure should be recognised as close as possible
to the underlying event or activity that gives rise to a liability.
In respect of the livestock schemes the underlying event or activity
is deemed to be the completion of the livestock retention period
and for the arable schemes the delivery of the harvest. The underlying
event for other schemes is date of approval of the claim.
By the very nature of the size of the Common
Agricultural Policy, this will lead to a large creditor for money
owed to the farming community and debtor for money owed by the
1.4 Tangible Fixed Assets
(a) Title to the freehold land and buildings
shown in the accounts is held as follows:
(i) Property on the Ministerial Estate title
to which is held by the Department and its agencies and shown
in the Balance Sheet.
(ii) Property held by the Department of the
Environment for which the Ministry assumed responsibility on 1
April 1996 as major occupier and therefore shown in the Balance
(b) Freehold land and buildings have been
included on the basis of professional valuations with subsequent
indexation using relevant indices. Plant, equipment, fixtures,
fittings, IT equipment, vehicles and vessels have been restated
using the appropriate indices. The minimum level for capitalisation
in the core-department accounts and agencies is as follows:
(c) Internally developed computer software has been capitalised
in accordance with Treasury instructions as a tangible asset and
included with IT Equipment.
1.5 Intangible Fixed Assets
The Ministry holds a number of licences and copyrights but
the income from these is of a minor nature and they have not been
capitalised. Should the income from these licences and copyrights
increase to be of a material amount then capitalisation will be
recognised. In addition, the Ministry holds various software licences
which have been capitalised.
Freehold land is not depreciated. Depreciation is provided
at rates calculated to write-off the valuation of freehold buildings
and other tangible fixed assets by the straight line method over
the estimated useful life of the asset and is charged in the month
of disposal but not in the month of purchase. Depreciation is
not charged on investment properties, assets declared surplus
and for sale and assets under the course of construction. Lives
are normally in the following ranges:
|Freehold Buildings||5 to 60 years
|Plant, Office, Scientific, IT equipment
||3 to 15 years|
|Fixtures and Fittings||5 to 10 years
|Vehicles||4 to 15 years
1.7 Stocks and Work-In-Progress
(a) CEFAS, CSL, FRCA and VLA hold stock levels material
to their business and are brought into the consolidated accounts
at the lower of cost, or where materially different, at current
replacement cost, and at the net realisable value only when they
cannot or will not be used. Core-MAFF holds a small stock of items
to assist with the work of the Animal Health and Veterinary Group.
(b) Work-in-progress is valued at the lower of cost and
net realisable value.
1.8 Research and Development
Expenditure on Research and Development is treated as an
operating (programme) cost in the year in which it is incurred.
Fixed assets acquired for use in R&D are depreciated over
their useful life in accordance with the asset category to which
1.9 Operating Income
Operating income is shown net of value added tax and comprises
fees and charges for services provided to external customers,
agencies and Public Sector repayment work on a full-cost basis
and receipts from the European Union.
1.10 Administration and Programme Expenditure and Income
The Operating Cost Statement is analysed between Administration
and Programme costs, together with associated operating income.
Administration costs reflect the costs of running the Ministry.
Programme costs reflect non-administration costs, including payments
of grants, subsidies and other disbursements by the Ministry.
1.11 Capital Charges
A charge, reflecting the cost of capital utilised by the
Ministry is included in the operating costs. The charge is calculated
at the Government's standard rate of six per cent on all assets
less liabilities, except Donated Assets and funds held by the
Office of the Paymaster.
1.12 Foreign Exchange
Revenue and expenditure incurred in foreign currencies are
translated at the rate of exchange ruling at the date of the transaction.
Balances held in foreign currencies are translated at the rate
of exchange ruling at the balance sheet date.
The majority of present and past employees are covered by
the provisions of the Principal Civil Service Pension Scheme (PCSPS)
which is non-contributory and unfunded. Although the Scheme is
a defined benefit scheme, liability for payment of future benefits
is a charge to the PCSPS. Departments, agencies and other bodies
covered by the PCSPS meet the cost of pension cover provided for
the staff they employ by payment of charges calculated on an accruing
basis. There is a separate statement for the PCSPS as a whole.
However, the majority of the members of the Meat Hygiene Service
transferred from local authorities on the founding of the Agency
are members of the Local Government Pension Scheme Regulations
1995 and administered by the London Pensions Fund Authority (LPFA).
1.14 Early Departure Costs
The Ministry is required to meet the additional costs of
benefits beyond the normal PCSPS benefits in respect of employees
who retire early. The Civil Service White Paper "Continuity
and Change (Cm2627)" published in July 1994 announced new
arrangements for funding early departure costs of civil servants
departing between 1 October 1994 and 31 March 1997. Under these
arrangements, 20 per cent of the cost will normally be borne by
Departments and the remaining 80 per cent, which would otherwise
fall on departments' running costs, will be made up centrally
from the Civil Superannuation Vote.
Government policy is to include the full cost of a department's
activities in its accounts even where, as in this case, some of
the costs are borne elsewhere in Government. Normal accounting
practice is to provide for the full cost of early departure of
employees in the year in which the early departure decision is
made. However, for departures covered by the 80:20 arrangements,
such treatment would not reflect the 80 per cent of the costs
which will be borne by the Civil Superannuation Vote rather than
the department. Consequently, the Treasury issued a direction
that, whereas the 20 per cent element borne by the Department
should be charged to the Operating Cost Statement immediately
and taken to provision on the balance sheet, the annual payments
from the Civil Superannuation Vote in respect of the 80 per cent
element should be reflected (as notional costs) in the departments'
Operating Cost Statement when actually paid.
From 1 April 1997 the 80:20 arrangements ceased for newly
retired staff with the department taking full responsibility for
the full costs of this revised policy.
The Ministry may, in certain circumstances, settle some or
all of its liability in advance by making a payment to the Paymaster
General's account at the Bank of England for the credit of the
Civil Superannuation Vote. The amount provided is shown net of
any such payments.