Additionally, it forms an essential part of an organisation’s financial management, ensuring that an organisation’s payable and receivable balances, and understanding of future cash flows are correct.Īgreeing, or not agreeing, a transaction or balance as part of the AoB process does not constitute a legal obligation to pay or not pay. The AoB process seeks to identify all income and expenditure transactions, and payable and receivable balances that arise from the contracts for the provision of goods and services between DHSC group bodies (intragroup).
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Under International Financial Reporting Standard 10 (IFRS10), paragraph B86, consolidated statements should “…eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group”.
The AoB processĭHSC is required to consolidate the accounts of all organisations (departmental group bodies) falling within the Resource Accounting Boundary (RAB), as expanded by the Constitutional Reform and Governance Act 2010 (HM Treasury’s alignment legislation). See ‘Agreeing balances – recording sub-entity transactions’ below for the processes to follow in agreeing balances with NHSE and its entities.
The definitions apply when referring to both payables or receivables and income or expenditure agreements.įor the purpose of this guidance document, the ‘national bodies’ means DHSC and NHS England ( NHSE). Payable organisation: this is the organisation receiving the invoice(s) or the trade payable and recording the expenditure (the purchaser or commissioner), unless using net accounting (see ‘Gross and net accounting and recharges’ and ‘Appendix 4: gross and net accounting and hosted services guidance’, below) Receivable organisation: this is the organisation sending the invoice(s) or carrying the trade receivable(s) and recording the income (the supplier or provider), unless using net accounting (see ‘Gross and net accounting and recharges’ and ‘Appendix 4: gross and net accounting and hosted services guidance’, below) The following definitions will apply to agreement of balances ( AoB), and will be used throughout the guidance: Definitions of terms used in this guidance
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