Significant management judgements
Estimation uncertainty
The following are the significant management judgements made in
applying the accounting policies of the Group that have the most
significant effect on the financial statements.
Information about estimates and assumptions that have the
most significant effect on recognition and measurement of
assets, liabilities, income and expenses is provided below.
Actual results may be substantially different.
Impairment: Housing Property Fixed Assets
On 1 April 2016 social housing rents reduced by 1% per annum
for four years until 2019/20 in accordance with the Housing
and Planning Act 2016. Accordingly, an impairment review
on housing property fixed assets has been undertaken. The
depreciated replacement cost (DRC) method was applied
to each social housing property scheme using appropriate
construction costs and land prices. The resulting information
was then compared to the carrying amount of each scheme. No
impairment was identified.
Significant management judgements
Financial instruments - loans containing early repayment
clauses: The Association has a number of fixed rate loan
agreements in place which contain an option to repay the
underlying facilities earlier than the respective maturity dates.
The terms of such an early repayment are such that in most
instances the amount to be paid is the higher of the outstanding
principal balance including any accrued interest or the fair
value of the facilities based on current market rates which are
treated as basic financial instruments in line with FRS102,
paragraph 11.9. However, a number of fixed rate loans also
include a provision that where the market rate of interest is
lower at the repayment date than the agreed fixed rate, the
borrower could receive compensation from the lender. FRS102
does not explicitly address compensation that can be paid
to the borrower. However, it is management’s view that these
instruments should be treated as basic as it is considered that
this will result in measurement, based on cost, which provides
more relevant information by better reflecting the intentions
of the contracting parties in entering into the agreement and
their expectations of future actions. This is therefore significant
judgement which will be reviewed annually.
Impairment: Investment and Goodwill
Accord completed its annual review over the investment,
goodwill and intangibles associated with the acquisition of
Direct Health Group Limited. The review takes account of
current and future business and financial performance, and
the longevity of existing contractual arrangements with local
authority commissioning partners. The review also considers
the operating environment and marketplace in which Direct
Health operates. No impairment was identified.
78
Accord Group
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of
depreciable assets at each reporting date based on the
expected utility of the assets. Uncertainties in these estimates
relate to changes to decent homes standards which may
require more frequent replacement of key components.