Regulations for Consolidation of Accounts in the Local Public Sector

Order HAC/836/2021, of July 9, approved the regulations for the preparation of consolidated annual accounts in the local public sector (NOFCAC-SPL).

The NOFCAC-SPL regulations apply to the consolidated annual accounts for periods beginning on or after January 1, 2022, for municipalities with more than 50,000 residents and other higher-level local entities, and on or after January 1, 2024, for the rest of the local entities.

A document prepared by the ICJCE has been included, highlighting the main characteristics of this regulatory framework compared to private sector consolidation regulations to enhance understanding. However, due to size, certain entities are exempt from the obligation to consolidate (Article 7 NOFCAC-SPL):

• Municipalities with a budget not exceeding €300,000.
• Municipalities with a budget greater than €300,000 but less than €3,000,000, and with a population not exceeding 5,000 residents.
• Other local entities with budgets up to €3,000,000.

Additionally, entities that meet any of the following conditions are excluded from consolidation (Article 8 NOFCAC-SPL):

1. Entities that lack significant interest for the accurate representation of the consolidated annual accounts, individually or collectively.
2. When there are significant and continuous limitations that substantially interfere with the dominant entity's ability to exercise its rights over the assets or management of the subordinate entity.
3. When the information required for the consolidated accounts can only be obtained at excessive cost or with unavoidable delays that prevent the preparation of such accounts within the time frame established by current legislation.

Among the key provisions mentioned is the First Additional Provision of the Rules for the Formulation of Consolidated Annual Accounts in the Local Public Sector (NOFCAC-SPL). This rule mandates that public business entities and other local entities, different from commercial companies and governed by commercial accounting regulations, must, when controlling other entities also regulated by these norms, constitute a group according to the criteria specified in NOFCAC. They must also prepare their consolidated annual accounts to produce the corresponding consolidated statements for the local entity, following the criteria established in these rules.

All information extracted in this article is cited in the report "Accounting Consolidation in Local Entities: Following the Steps of Business Consolidation," prepared by the Institute of Chartered Accountants of Spain. You can access the full document for more information through this link.