With the ongoing challenges of public sector funding, schools often grapple with limited budgets. Purchasing new equipment or undertaking essential facility upgrades are frequently delayed due to financial constraints and stringent borrowing regulations. As a result, many schools struggle to provide the necessary resources for students and staff to thrive.

However, recent updates to financial regulations could be a turning point for UK schools. The introduction of IFRS 16 offers new possibilities for spreading the costs of equipment and facility upgrades through fixed, affordable financing.

What’s Changing?

Traditionally, schools were restricted to operating leases for equipment, unable to enter into agreements deemed as ‘borrowing’ without prior approval from the Secretary of State. The introduction of IFRS 16, a significant accounting change, now allows schools to utilize finance leases in addition to operating leases. Although certain assets still require Department for Education (DfE) approval, many assets have been pre-approved, such as:

-IT Equipment: Laptops, tablets, desktops, printers, servers, security systems, whiteboards, and touchscreens.

-Telephony: Mobile and landline phones, telephone systems.

-Catering and Cleaning Equipment: Tills, water coolers, vending machines, dishwashers, ovens, fridges, and washing machines.

-Furniture: Desks, tables, chairs.

-Bathroom Items: Hand dryers, towel dispensers, sanitary bins.

-Gym Equipment: Treadmills, weights, exercise bikes.

-Groundskeeping Equipment: Lawn mowers, leaf blowers, salt spreaders.

-LED Lighting Systems: Lightbulbs, control panels.

-Vehicles: Minibuses and other school-use vehicles.

-Temporary Classrooms: Portable structures for additional space.

Why the Change?

IFRS 16 is an international accounting standard that all organizations, including schools, must implement. The DfE has adopted these changes to align with global practices.

When Do the New Rules Take Effect?

For maintained schools, these changes were implemented on 1st April 2024. The updated Academy Trust Handbook will be released on 1st September 2024, marking the expected eligibility for academies. However, schools must still conduct due diligence before entering any lease agreements, ensuring they achieve the best value for money.

How Will IFRS 16 Affect Schools?

This update provides schools with more financing options, expanding the range of assets they can lease, the lenders they can approach, and potentially better interest rates and terms. Schools can now finance assets like infrastructure hardware, which previously did not qualify under the old operating lease rules, and spread costs over longer periods, easing budget pressures.

What About Operating Leases?

Operating leases will remain a key option for schools, allowing them to lease and return equipment at the end of its useful life, benefit from warranties, and ensure access to current technology.

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