Statement of Accounting Policies_________________________________________

1. General principles

1.1 The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in Great Britain: A Statement of Recommended Practice (SORP) 2003 and the Accounts and Audit Regulations 2003. Any significant non-compliance is explained in the following notes.

2. Debtors and creditors

2.1 Debtors and creditors have been accrued in accordance with the Code of Practice.

2.2 There is, however, one exception. Electricity and other utility companies' quarterly payments are accounted for at the date of meter reading rather than being shared between financial years.

2.3 The above exceptions apply every year and do not have a material effect on the year's accounts.

3. Reserves and provisions

3.1 In 2003/04 the Authority was not permitted to hold reserves.

3.2 Provisions represent legal liabilities when the amount or date of payment is uncertain. They are charged to the revenue account in the year they are recognised.

3.3 The Authority holds two provisions. The first is a provision for bad debts which is deducted from the total for debtors. The second is for uninsurable and other claims. This covers costs which may arise as a result of the Authority being uninsured for a period, possible tribunals and other claims made against the Authority.

4. Fixed Assets

4.1 All spending on a fixed asset which yields benefits for a period of more than one year is treated as capital expenditure in the accounts.

4.2 Fixed assets are valued on the basis recommended by the Chartered Institute of Public Finance and Accountancy (CIPFA) and in accordance with the Statements of Asset Valuation Principles and Guidance Notes issued by the Royal Institution of Chartered Surveyors. Fixed assets are classified into the groupings in the Code of Practice on Local Authority Accounting.

4.3 Land, property and other assets used for service provision are called "operational assets". They are included in the balance sheet at the open market value for their present use when there is sufficient evidence to support the value, or at depreciated replacement cost otherwise.

Statement of Accounting Policies_______________________________________________

4.4 Assets not used to provide services are called "non-operational assets" and are assets that are currently not in use. These are included in the balance sheet at open market value.

4.5 Surpluses arising on the valuations of fixed assets have been credited to the fixed asset restatement reserve. Land and building assets were revalued during 1999/00 and the accounts reflect these values.

4.6 Income from the disposal of fixed assets is accounted for in the year in which it occurs. This is used to meet expenditure for capital purposes.

5. Basis of charges for capital

5.1 Notional interest charges are based on asset valuations at the beginning of the financial year. In 2003/04 an interest rate of 3.5% was used as prescribed by the CIPFA/Local Authority (Scotland) Accounts Advisory Committee (LASAAC) Joint Committee.

5.2 Prior to 2000/01 depreciation charges were only made on vehicles, plant and equipment. Following the adoption of FRS 15 depreciation charges are now made on all fixed assets other than land and non-operational assets.

5.3 Depreciation is calculated on a straight line basis over the useful economic lives of the assets. In the case of permanent buildings a provisional average residual life has been assumed of 25 years for building components and 100 years for the other parts of the building pending a detailed review of the economic lives of individual assets. Furniture and equipment is assumed to have a life of ten years and vehicles between five and 15 years.

6. Deferred charges

6.1 The only category of expenditure coming under the heading of deferred charges is deferred revenue costs relating to the setting up of the Authority.

7. Redemption of debt

7.1 The Authority's borrowing limit for capital purposes is based on the cumulative amount of capital expenditure it has incurred and for which it has received borrowing approval from the Government. The borrowing limit increases each year by the amount of that years capital approvals and reduces by the amount of that years minimum revenue provision. The Council makes provision for the redemption of debt in accordance with requirement that a minimum revenue provision is put aside from revenue. This must be at least equal to 4% of the borrowing limit for capital purposes at the start of each financial year.

Statement of Accounting Policies________________________________________________

8. Stocks and stores

8.1 Stocks worth £501,000 have been included in the consolidated balance sheet.

Several stocks are held with the largest relating to vehicle spares, uniforms and operational equipment. All stocks are valued at latest buying price.

9. Support Services

9.1 The costs of the support services are allocated over services according to their usage by direct services with the exception of some corporate services which are allocated on the basis of net expenditure.

10. Pension arrangements

10.1 The Authority participates in two different pension schemes which meet the needs of employees. Both schemes provide members with defined benefits relating to pay and service. The costs of providing pensions for employees are charged to the accounts in accordance with the statutory requirements.

11. Leasing

11.1 The Authority has, on occasions, used operating leases to acquire vehicles as an alternative to capital financing. The rentals on the leases are charged to services in the revenue account. The Authority took the decision not to take out any further leases in February 2004.

12. Changes

12.1 The implementation of FRS 17 (the new accounting standard covering retirement benefits) has had a material effect on the presentation of the statement of accounts. The previous policy was to recognise liabilities in relation to retirement benefits only when the employer's contributions became payable to the pension fund (in the case of the Local Government Pension Scheme) or when payments fell due to the pensioners for which the Authority is directly responsible for (in the case of the Firefighters' Pension Scheme). The timing and amount of actual payments does not change, so there is no impact on the Council Tax. However, this does mean that the Authority's balance sheet reflects what it would cost to pay all the firefighters' current and future pension liabilities (i.e. £243.58m), in addition to £5.03m for support staff, should the Authority in effect be `closed down'. The new standard better reflects the current service cost accrued in the year by existing employees in the revenue account and the net pensions liability in the balance sheet.

12.2 The overall amount to be met from the Constituent Authorities has remained unchanged, and the costs disclosed for individual services are very similar after the replacement of the costs of retirement benefits paid to employees by current service costs. However Net Operating Expenditure is higher than it would have otherwise been.