Federation: grant change proposal would unsettle banks

The Accounting Standards Board wants grant received by registered social landlords to be recognised as revenue, rather than capital, on balance sheets.

But there are fears the changes would make RSLs’ income and expenditure accounts appear to fluctuate, causing lenders to see them as less financially healthy than they really are.

Bob Wilson, the NHF’s head of financial policy, said the proposals would result in lenders getting a “misleading” impression of housing associations’ balance sheets.

Wilson said: “The proposals could have an impact on the interpretation of financial statements. Grant awarded by the Housing Corporation is not a revenue grant and should not be treated as such.”

But an Accounting Standards Board spokesman said the proposals were unlikely to make banks more reluctant to lend.

He said: “There may have to be some kind of education for lenders, but the proposals would not change the underlying cash flows.”

A spokeswoman from HBOS, a major lender, agreed that such a move would probably not deter banks from lending to housing associations. She said: “It shouldn’t affect banks’ willingness to lend because the money is still there.”

But she added the changes could make housing associations’ balance sheets fluctuate because profits would increase. “If money is posted on the revenue side, it could make profits even larger. That could also have tax implications.”

The proposals will be put out for consultation in the new year.