Question to the Ministry of Defence:

To ask the Secretary of State for Defence, with reference to page 158 of his Department's Annual Report and Accounts 2013 to 2014, what the constructive loss of £860,000,000 for impairment charges for certain non-current assets and current asset inventory resulting from inventory impairment exercise conducted in year relate to.

The Ministry of Defence Accounts had been subject to a National Audit Office (NAO) audit qualification in the years prior to 2013-14 due to failures to demonstrate adequate consideration of potential impairments of non-current and current asset inventory holdings. As a result, an extensive exercise was undertaken during 2013-14 of all such holdings which identified both historic and current year events that gave rise to accounting impairments.

For example, the then planned earlier retirement of Tornado necessitated an impairment as it was considered that not all asset holdings would now be fully utilised prior to end of service life. It was also identified that a number of other programme holdings were in surplus relative to usage profile whilst a smaller number had suffered damage or technical obsolescence limiting or precluding future use. The value of these assets therefore needed to be impaired to reflect their realistic useful value to MOD. The overall value of these impairment adjustments being £860 million.

As part of the activity, a business as usual process was also established to ensure enduring consideration and recognition of impairment. The full details of the exercise and conclusions reached were subject to internal audit review and then submitted to the NAO who conducted further testing, the result of which was the audit qualification was lifted.