Arhag Annual Report 2019/2020

1.10 Financial instruments Financial assets and financial liabilities are recognised when the Association becomes party to the contractual provisions of the financial instrument. Financial assets are only derecognised when the contractual rights to the cashflows from the financial asset expire or are settled. Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or expires. The Association does not use standalone derivative financial instruments to reduce exposure to interest rate movements. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and at bank and short-term deposits. Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash within three months without significant risk of change in value. Tenant arrears, trade and other debtors Tenant arrears, trade and other debtors are recognised initially at transaction price less attributable transaction costs. After initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of instrument for a similar debt instrument. Trade and other creditors Trade and other creditors are recognised initially at transaction price plus attributable transaction costs. Interest-bearing borrowings classified as basic financial instruments Debt instruments which meet the conditions of Section 11.9 of FRS 102 are measured at amortised cost using the effective interest method. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of instrument for a similar debt instrument. 1.11 Turnover Turnover represents rental and service charge income receivable (net of void losses), fees receivable, and amortisation of Social Housing Grant (“SHG”) under the accrual model. Rental income is recognised on the execution of tenancy agreements. Proceeds on sales are recognised on completion. Other income, such as Tampon Tax Fund (TTF) is recognised as receivable on the delivery of services provided. 1.12 Grant income Grants received from non-government sources are recognised using the performance model. A grant which does not impose specified future performance conditions is recognised as revenue when the grant proceeds are received or receivable. A grant that imposes specified future performance-related conditions on Arhag is recognised only when these conditions are met. A grant received before the revenue recognition criteria are satisfied is shown as a liability in the Statement of Financial Position. Annual Report 2019-2020 41