Summary of Responses Received from English Housing Associations
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SORP responses –June 2014 English housing associations Summary of responses received from English housing associations Organisation Name Accent Group Ltd Look Ahead Care and Support Adactus Housing Group Limited Magenta Living Affinity Sutton Magna Housing Group Alliance Homes Moat Homes Limited Alpha (RSL) Limited Network Housing Group Ltd Arcon Housing Association North Devon Homes Arhag Houssing Association Notting Hill Housing Trust Asra Housing Group One Housing Group Bracknell Forest Homes Orbit Group Bromford Group Origin Housing Limited Byker Community Trust Limited Orwell Housing Association Limited Central & Cecil Housing Trust Paradigm Housing Association Ltd CHS Group Plymouth Community Homes Circle Housing Progress Housing Group City West Housing Trust Radian Housing Coastline Housing Ltd Rooftop Housing Group Limited DCH Sadeh Lok Housing Group Derby Homes Ltd SAFFRON HOUSING TRUST LTD East Thames Group Selwood Housing Eastlands Homes Partnership Limited Sentinel Housing Association Limited EMH Group Ltd shropshire housing group First Wessex Shropshire Rural Housing Association Four Housing Southern Housing Group Freebridge Community Housing Sovereign Housing Association Gateway Housing Association Spectrum Housing Group Gentoo Group Staffordshire Housing Group Great Places Housing Group SYHA Ltd GREENSQUARE GROUP LTD Thames Valley Housing Halton Housing Trust The Guinness Partnership Hanover Housing Association The Hyde Group Harrogate Families Housing Association Town & Country Housing Group Helena Partnerships Ltd Trafford Housing Trust Home Group Limited Unity Housing Association Ltd Hundred Houses Society Waterloo Housing Group Isos Housing Limited WM Housing Group L&Q Housing Trust York Housing Association livin Housing Ltd Yorkshire Housing Longhurst Group Ltd Your Housing Group Page 1 of 39 SORP responses –June 2014 English housing associations Question 1: Do you agree with the SORP Working Party’s conclusion that the assessment of whether a property is held for its service potential should be consistent with the principles set out in the earlier section of the SORP for classifying a housing property as property, plant and equipment or investment property based on its intended use? Q1 (N=75) yes 97% no 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Comments: Accent Group Ltd An alternative approach would bring more complexity, cost and reduce the usefulness of the accounts. Adactus Housing Group Limited In general a housing association's properties are built, held and managed for social housing purposes for community benefit in line with its business objects. This is very much different to a profit making organsiation which uses its fixed assets for the generation of profit. It may be more transparent to have a separate fixed asset category for social assets which fall outside the illogical impairment regime. Circle Housing It would be helpful to further define the use of the production or supply of services Eastlands Homes Partnership Limited Consistency of approach to classifying properties (be it Service Potential, PPE, Inv Prop) is desirable. Home Group Limited We agree that the assessment of whether a property is held for its service potential should be consistent with the approach taking in classifying a property as either PPE or investment property. In arriving at a decision as to how to treat a property, a Registered Provider is obliged under the draft SORP to give consideration as to whether an asset is Page 2 of 39 SORP responses –June 2014 English housing associations held for social benefit. We believe that the assessment of whether an asset is held for service potential / held for social benefit are, in essence, one and the same. We note however that similar assets may be held for different reasons by different RPs. livin Housing Ltd Whilst the overall reason an asset is held may be considered, several assets such as shops etc can be held for the economic benefit of the local community. This allows a provider to maximise rental income that actually supports the overall charitable objectives of an organisation. Therefore we believe that these should not necessarily be valued at Market Value Look Ahead Care and Support As noted in the previous consultation response it would be helpful for the SORP to clarify whether commercial property let at market rates but forming part of a development for social benefit (e.g. Doctors’ surgeries) could be classified as held for social benefit because of its purpose in context. In other respects the conclusion is sound because it provides consistency within the SORP and does not draw the definition of service potential so broadly as to be inconsistent with holding investment properties at valuation, which is widely accepted practice. Magna Housing Group The principle that assets should be held in the BS at a realistic realisable value should prevail. It is dangerous to overstate asset values in BSs, that’s the reason for the financial crash. The argument that social housing assets could be used for a different purpose to generate additional funds is not correct, because they would normally have grant or transfer covenants attached which mean that they cannot be used for other purposes. Those that truly can, say a HA bought a house on the open market and decided to let it at social rent, should be held at full OMV because that is what it could sell it for if is wanted (or had) to. This is basic accounting fundamentals that should have applied to the HA sector from the start. Using the augment that HAs must develop so we will bend the rules, should not be accepted by the FRC in my opinion. Lender are perfectly capably of assessing whether they want to lend or not, and if showing assets at a realisable value means that they don’t want to, that it probably the right decision to stop HAs overstretching themselves. Network Housing Group Ltd The sector classifies properties for a social purpose which is consistent with the SORP approach and therefore units have service potential. Radian Housing Value to business should be measured against intended use, wih criteria used to encompass the overarching purpose SAFFRON HOUSING TRUST LTD It makes sense if agree that Social Benefit = Service Potential Sovereign Housing Association It is not wholly clear, but we believe that what is being proposed is that housing property classified as PPE is considered to be held for its service potential whereas anything classified as investment property is not. The Guinness Partnership Shops and other commercial property are sometimes included in a housing development as a planning or funding requirement for the whole scheme. Clarification would be useful if such assets, that are provided and held due to such external requirements for social benefit purposes, can be treated as PPE. If not, then there is a case that such investment assets, as part of the same cash generating unit as the housing properties, could also have service potential WM Housing Group This will help to maintain the integrity and consistency of financial reporting within the housing sector. Your Housing Group Page 3 of 39 SORP responses –June 2014 English housing associations This should ensure consistency throughout the financial statements. This will require associations to document more on assets and their intended use, though this is considered to be achievable. We would want the ability to be able to reallocate assets if their intended purpose changes. Page 4 of 39 SORP responses –June 2014 English housing associations Question 2: If the SORP permits social landlords to use VIUSP as an alternative estimation technique in determining value in use when performing an impairment assessment, do you consider that the resulting financial statements would provide sufficient, relevant and reliable information to the users of those financial statements, provided appropriate additional disclosures were made setting out the extent to which it has been applied? Q2 (N=72) yes 92% no 4% don't know 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Comments: Accent Group Ltd However, the suggested process will be subjective and judgement could vary widely between RP’s making comparability more difficult. More subjectivity may require Boards and auditors to seek more external advice in deriving VIUSP leading to increased costs. It might also allow boards to ignore the cash impact of development on organisations which stores up risk. This outcome however, is significantly more preferable to the previous SORP draft. Asra Housing Group Yes as long as the disclosure in the notes to the accounts is indeed detailed enough. Bromford Group Appropriate for SORP to add that this should be disclosed as part of the accounting policy and which assets it has been applied to. Circle Housing The only issue will arise when an RP has to use RP to RP transaction as the basis of DRC when there is no active market. Derby Homes Ltd Other approaches would be a threat to housing development potential Page 5 of 39 SORP responses –June 2014 English housing associations Dexia .... this should be OK, but remains reliant on Management giving full disclosue of the basis on which this was done and that Auditors equally remain strong in enforcing a strong approach - they must not become complicit in allowing Management to water down their approach East Thames Group On the basis that nothing has really chnaged in terms of cash flows and objectives as a result of FRS 102, this seems appropriate. Eastlands Homes Partnership Limited Appropriate additional disclosures would be needed to aid the reader of the accounts. Gentoo Group New developments - How would we account for planet smart costs i.e. building homes that are above standard code but would address fuel poverty - would this element have to be impaired. Quality versus quantity - would we all have to build minimum standard at cheapest cost Great Places Housing Group Some users of financial statements will grasp this more easily than others Harrogate Families Housing Association But non-experts in the field may still have some difficulty understanding L&Q Housing Trust Depreciated Replacement Cost is a clear and measurable altermative fully understood by all users.