Question to the Cabinet Office:

To ask His Majesty's Government, with reference to page 62 of the Cabinet Office’s Annual report and accounts 2023 to 2024, published on 12 December 2024, what specific changes to the lease terms for the two buildings identified by the Government Property Agency during 2023–24 were not reflected in the International Financial Reporting Standard 16 accounting for 2022–23; and what was the financial impact of these errors on the restated accounts.

Further information on the GPA prior year adjustments can be found on page 165 of the 2023/24 Cabinet Office Annual Report and Accounts.

In July 2022 a head lease was surrendered and a new head lease granted with a revised rent which extended the lease term by 20 years. The right of use asset and lease liability were not remeasured to reflect the extended lease term. The financial impact of this error on the restated 2022/23 accounts was as follows:

• Right of use assets at 31 March 2023 increased by £81.5m

• Lease liabilities at 31 March 2023 increased by £76.1m

• Finance expense increased by £0.5m

• Right of use asset depreciation expenditure decreased by £0.6m

• (Gain)/loss on remeasurement of right of use assets decreased by £6.5m

In March 2023, a Deed of Variation was agreed with a client to extend the sub-lease term by 12 years to align with the head lease. The lease modification should have resulted in the GPA reclassifying the sub-lease from an operating lease to a finance lease in accordance with the GPA’s IFRS 16 accounting policies. The financial impact of this error on the restated 2022/23 accounts was as follows:

• Right of use assets at 31 March 2023 decreased by £135.3m

• Investment in sublease assets at 31 March 2023 increased by £154.5m

• Lease incentive receivable assets at 31 March 2023 decreased by £19.2m