Impairment: Investment, Goodwill and Intangibles
Impairment
Accord completed its annual review over the investment,
Each year the Association assesses whether there are
goodwill and intangibles associated with the acquisition of
any potential indications of impairment and if any such
Direct Health Group Limited. The review takes account of
indication is identified, undertakes an impairment review.
current and future business and financial performance, and
As part of this review the Depreciated Replacement Cost
the longevity of existing contractual arrangements with local
(DRC) is used to determine whether an impairment is
authority commissioning partners. The review also considers the
required on housing property fixed assets. Using the DRC
operating environment and marketplace in which Direct Health
method, impairment is calculated, assessed and determined
operates. No impairment was identified.
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
Estimation uncertainty
each scheme, an impairment provision is calculated. Other
Information about estimates and assumptions that have the
categories of assets and investments, where applicable, are
most significant effect on recognition and measurement of
also subject to an annual impairment review. Management
assets, liabilities, income and expenses is provided below.
recommends no provision for impairment in the current
Actual results may be substantially different.
financial year.
Significant management judgements
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.
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.
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 FRS 102, 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. FRS 102 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.
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.
Preparation of group accounts
Following transfers of engagement and transfers of business
during 2016/17, Accord Group Treasury Limited is the
only remaining operational subsidiary of Accord Housing
Association Limited. The activities of this subsidiary are not
material to Accord Housing Association Limited and as such
group accounts have not been prepared.
Financial Statements 2017
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