The updated Academies Accounts Direction, for accounting periods ending 31 August 2022, has now been published – setting out guidance for trusts preparing their annual report and financial statements.

Here we take a look at some of the key changes to the AAD for this year:

Updated feedback on non-compliance

Feedback on non-compliance with the Direction has been updated (paragraph 1.21), along with the themes arising from the Education and Skills Funding Agency (ESFA) assurance work (paragraph 1.22).

Organisation structure of subsidiaries

There is clarification that academy trusts should, in line with SORP, describe the organisational structure of any subsidiaries within their trustee’s report. ESFA also require that academy trusts describe the organisational structure of any joint ventures or associates (paragraph 2.8).

Conflicts of interest

A new section has been added to the governance statement which requires academy trusts to explain the processes they have in place to manage conflicts of interest (paragraph 2.36).

Severance payments

A new disclosure requirement has been introduced on severance payments to reflect changes in guidance published by HM Treasury (paragraph 2.135). The values of any severance payments made by the academy trust must be disclosed in set bandings. This does not change the existing disclosure on special staff severance payments.

Service concession arrangements

The guidance on service concession arrangements has been updated (paragraph 3.46). Where academy trusts are committed to such payments, they are also encouraged to provide narrative to support the numerical disclosures to describe what these payments relate to.

Accounting for buildings

There is new guidance on accounting for buildings whose construction was overseen by the Department for Education (DfE) or a local authority and transferred to the academy trust on completion (paragraphs 3.50 and 3.51).

Business rates

A new section has been added to provide guidance on the accounting treatment for business rates (paragraph 3.66). Further details on the changes to the business rates payment process can be found here.

Dormant accounts

Academy trusts are no longer required to submit dormant accounts to ESFA, which was a requirement in previous AADs. However, they still have submission obligations to Companies House (paragraph 3.102).

Trading accounts for teaching school hubs

The requirement to produce trading accounts for teaching school (hubs) as separate notes in the financial statements has been removed.

There is clarification of where and how transactions relating to hub activities should be shown and the guidance around other types of hub which academy trusts may operate has been extended (paragraph 3.141)

Where an academy trust delivers activities outside of its core activities, for example provision of a teaching school, English or Maths hub, it must determine the status of the entity through which the activities are delivered to ascertain if it has a separate legal identity or is part of the academy trust. If it has a separate legal identity, it will be necessary to consider what control exists to determine if or how the entity should be recognised in the academy trust’s financial statements.

We are here to support you in understanding the guidance within the Direction and in complying with its requirements, should you have any queries regarding this year’s AAD please get in touch with your usual M+A Partners contact or email