Time to plan for October Atol refresh: New rules mean testing times for Atol holders
Following our introduction to the changes to Atol regulations in my last post, I will continue the series by looking at the new Atol reporting requirements in more detail.
We take a closer look at the enhanced Atol financial reporting and the introduction from April 2016 of managed assurance reporting by Atol holders’ accountants, who will have to become Atol Reporting Accountants through the Institute of Chartered Accountants in England and Wales, Association of Chartered Certified Accountants, Institute of Financial Accountants or Institute of Chartered Accountants of Scotland under arrangements being agreed with the CAA.
Existing and new full Atol holders will be aware that aside from submission of their annual financial statements, they must complete an annual licensable turnover report for each category of protected sales made. This is in turn reviewed by the company’s reporting accountants, who are directed by the CAA under Guidance Note 10 to provide an assurance report on the integrity of the licensable turnover report. This currently requires a careful review of the quarterly or monthly turnover reporting made during the year and reconciliation with the annual accounts as far as licensable turnover.
A series of prescribed tests are set out in ICAEW technical guidance that seek to authenticate the categorisation of revenue and provide support for the assurance certificate submitted to the CAA. The current reporting includes details of sales by departure date and booking date and reconciles the APC (Atol Protection Contribution) due based on the qualifying bookings taken within the annual licence year. In practice, the annual reports assist the CAA to confirm that APC has been appropriately calculated and remitted into the Air Travel Trust Fund, which is used to meet calls arising on Atol holder failures.
While Small Business Atol (SBA) holders submit a simplified annual licensable turnover report, they have not previously had to provide details of their financial statements, and as such their financial resilience has not to date been tested. With the enhanced assessment for SBAs, it will be necessary from October 2015 for the circa 950 SBA holders to satisfy a solvency test (details of which will be released in May) or alternatively consider registering as a member of one of the eight accredited bodies or establish a franchise arrangement with the TTA.
The Rebalancing Atol Document sets out that there will be greater financial reporting by full Atol holders with under £5 million of licensable turnover (more details of which will be released in May) with emphasis on a more risk-based, analytical approach. Below are some of the proposed changes that will need to be prepared for over the transitional period during which they are to be introduced:
Introduction of an online self-assessment facility to allow Atol holders to evaluate their financial resilience and identify any requirements for additional equity, cash or subordination of loans in advance of their annual renewal
Deferred revenue (customer deposits) relating to future holidays at balance-sheet date to be included as liability in Atol holders’ accounts
Reconciliation of reported turnover to be provided between financial statements and annual accountants’ reports.
The enhanced financial reporting will require Atol holders to review their current accounting and sales reporting systems and prepare to provide more comprehensive information that is capable of being authenticated by their Atol Reporting Accountants. Given the timetable for introduction of these measures, it would be sensible to start this process now through consultation with your current accountants to enable adjustments to be made in a timely manner.
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