Question to the Cabinet Office:

To ask His Majesty's Government, further to the Written Answer by Baroness Twycross on 28 January (HL3970), why the financial restatements in the Government Property Agency Accounts 2022–23 resulted in both an increase and a decrease in right of use assets; and whether there are any inconsistencies in the application of IFRS 16 across the head lease and sub-lease transactions.

The financial restatements of the Government Property Agency Accounts 2022/23 resulted in both an increase and a decrease in right of use assets because they related to two separate changes to lease terms for different properties at different stages of their lease lifecycle.

The surrender and grant of a new head lease in July 2022 related to a vacant property undergoing major refurbishment as part of the GPA’s Whitehall Campus Programme. The new head lease resulted in an increase to right of use assets because there was no corresponding finance sub-lease during the refurbishment. The GPA therefore retained all the risks and rewards incidental to ownership of the right of use asset.

The Deed of Variation in March 2023 to extend a sub-lease term by 12 years to align with the head lease resulted in the classification of the sub-lease being reassessed as a finance lease rather than an operating lease. This was because the sub-lease term now represented in excess of 75% of the expected useful economic life of the underlying right of use asset. The reclassification resulted in a decrease in right of use assets because the GPA derecognised the asset previously retained when the sub-lease was classified as an operating lease.

On that basis, we are satisfied that IFRS 16 has been applied appropriately across the head lease and sub-lease transactions.