Income & Expenditure Account

The following notes give an abbreviated summary of the forecasting routines. See How the Forecast Works for a more detailed discussion.

Business stream-based items

The model generates a forecast based partly on the appropriate set of different business streams for which there is material stock. For the property-based streams the income projections are a function of the number of units each year adjusted for all increases and reductions, times the relevant unit rents and service income, profit on disposal etc. The expenditure is based on incremental unit costs by category, capital expenditure and disposal costs per unit etc.

All items of income and expenditure are based on year zero data, inflated in line with either the general assumptions or the business-stream specific assumptions. These are then adjusted by the appropriate reconciliation factors to capture any “real growth” issues.

To enable the model to calculate the reconciliation factors, accounting totals for gross rental income, service income, charges for support services, rent losses from bad debts, capital expenditure, social housing grant received etc, are required for each relevant business stream.

Revenue grants, voids and bad debts are forecast as percentages of income, these being derived from user inputs.


Non business stream-based items

To obtain expenditure items the existing “fixed” cost will be inflated at the appropriate rates by category and added to the incremental or variable costs based on the changes in number of units in each business stream. The total of incremental and fixed costs in each category will again be adjusted by the relevant reconciliation factors to produce “reconciled” amounts.

The remainder of the Income is based on General Assumptions eg depreciation rates, interest rates, the percentage of fixed-rate debt, the effective corporation tax rate, (all adjusted as appropriate by reconciliation factors). Most of these assumptions are derived from the input financial statements, the exceptions being the average interest rate on fixed rate debt and on cash deposits, and the percentage of total debt that is fixed rate. Reconciliation factors are therefore not required. For a discussion of the detailed mechanics see How the Forecast Works.