Recycled capital grant fund
Grants repayable on property disposals are calculated in
accordance with relevant Homes and Communities Agency
procedures and included within a recycled capital grant fund.
Interest is credited to the fund and calculated on a daily basis with
the interest rate being determined by the level of total deposits.
The fund can be used in the same manner as a new project
funded with social housing grant with certain permitted uses. It
is intended to use the fund in the provision of either new social
housing for rent and/or housing for sale on shared ownership
terms or to supplement the major repair programme.
Grants are repayable in certain specific circumstances including
where the Homes and Communities Agency concludes that the
Group is unlikely to use the fund for a permitted purpose within
three years. The fund is included within long term creditors.
Disposal proceeds fund
Net proceeds from the disposal of property under voluntary
purchase grant and statutory right to acquire legislation and
regulations are included within a disposal proceeds fund. Interest
is credited to the fund and calculated on a daily basis with the
interest rate being determined by the level of total deposits.
The fund can be applied for specific purposes ranging from
acquisition of dwellings for letting, to repairs or improvement of
vacant dwellings or buildings otherwise subject to demolition.
The fund may be repayable at the discretion of the Homes and
Communities Agency, in certain specific circumstances. The fund
is included in long term creditors.
Other long term creditors
Other long term creditors include the costs of arranging long
term funding. These amounts are amortised over the period of
the underlying financial instrument. Loan termination costs are
charged to the statement of comprehensive income in the year in
which they are incurred.
Provisions for liabilities
Provision are recognised when:
a. There is a present obligation as a result of a past event;
b. It is probable the association will be required to settle the
obligation; and
c. A reliable estimate of the obligation can be made.
The amount recognised as a provision is the best estimate of
the consideration required to settle the present obligation at the
end of the reporting period, taking in to account the risks and
uncertainties surrounding the obligation.
expected to be required to settle the obligation is recognised at
present value using a per-tax discount rate. The unwinding of
the discount is recognised as a finance cost in the statement of
comprehensive income as it arises.
The association recognises a provision for annual leave accrued by
employees as a result of services rendered in the current period,
and which employees are entitled to carry forward and use within
the next 12 months. The provision is measured as the salary cost
payable for the period of absence.
Leases
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards of
ownership of the leased asset to the association. All other leases
are classified as operating leases. Rentals payable under operating
leases are charged to the statement of comprehensive income on
a straight-line basis over the lease term.
Financial Instruments
Financial instruments which meet the criteria of a basic financial
instrument as defined in Section 11 of FRS102 are accounted for
under an amortised historic cost model. Where the association
holds non-basic financial instruments they are recognised using a
valuation technique with any gains or losses being reported in the
statement of comprehensive income.
Derivatives
The association uses interest rate swaps to reduce its exposure
to future increases in the interest rate on floating rate loans. The
notional principal is not reflected in the association’s statement of
financial position. Payments made under swaps are accrued over
the payment period on a straight-line basis and adjusted against
interest payable on loans.
Impairment
The association undertakes an annual impairment review. As
part of this review the Depreciated Replacement Cost (DRC)
is used to determine whether an impairment is required
on housing property fixed assets. Using the DRC method,
impairment is calculated, assessed and determined at scheme
level using appropriate construction costs and land prices.
This is considered to be the best estimate of the recoverable
amount. Comparing this to the carrying value of each scheme,
an impairment provision as calculated. Other categories of
assets and investments, where applicable, are also subject
to an annual impairment review. Management recommends
no provision for impairment in the current financial year.
Where the effect of the time value of money is material, the amount
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