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 cash flows 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 3 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. All interest-bearing financial instruments held by the association have been classified as basic financial instruments. These include the association’s fixed interest loans. The loan agreement includes a clause which specifies that, in certain circumstances, compensation on early settlement would be payable to the association. Notwithstanding the presence of this clause, the Board considers that the loan meets the requirements set out in FRS 102 for it to be classified as basic. Financial assets and liabilities are offset in the Statement of Financial Position when, and only when there exists a legally enforceable right to set off the recognised amounts and the association intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Annual Report 2021-2022 55
RkJQdWJsaXNoZXIy NDA3NTg=