ITF

18 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) k) Impairment of financial assets In rela on to trade receivables, a provision for impairment is made when there is objec ve evidence, such as the probability of insolvency or significant financial difficul es of the debtor, that the ITF will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectable. In addi on to this, the ITF fully provides for all debts more than one year overdue, except where those older debts are specifically considered to be recoverable. l) Opera ng leases Leases where the lessor retains substan ally all the risks and benefits of ownership of the asset are classified as opera ng leases. Opera ng lease payments are recognised as an expense in the income and expenditure statement on a straight line basis over the lease term. m) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short term deposits with an original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents are net of any outstanding bank overdra . n) Deriva ve financial instruments and hedging The group uses deriva ve financial instruments such as forward currency contracts to hedge its risks associated with foreign currency fluctua ons. Such deriva ve financial instruments are ini ally recognised at fair value on the date on which a deriva ve contract is entered into and are subsequently restated at fair value. Deriva ves are carried as assets when the fair value is posi ve and as liabili es when the fair value is nega ve. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. For the purpose of hedge accoun ng, hedges u lised by the ITF are classified as cash flow hedges. Cash flow hedges are when hedging exposure to variability in cash flows that is either a ributable to a par cular risk associated with a recognised asset or liability or a highly probably forecast transac on or the foreign currency risk in an unrecognised firm commitment. At the incep on of a hedge rela onship, the group formally designates and documents the hedge rela onship to which the group wishes to apply hedge accoun ng and the risk management and strategy objec ve for undertaking the hedge. The documenta on includes iden fica on of the hedging instrument, the hedged item or transac on, the nature of the risk being hedged and how the en ty will assess the hedging instrument's effec veness in offse ng the exposure to changes in the hedged item's fair value or cash flows a ributable to the hedged risk. Such hedges are expected to be highly effec ve in achieving offse ng changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effec ve throughout the financial repor ng periods for which they were designated. Hedges which meet the strict criteria for hedge accoun ng are accounted for as follows: Fair value hedges The change in the fair value of a hedging deriva ve is recognised in income and expenditure. The change in the fair value of the hedged item a ributable to the risk hedged is recorded as a part of the carrying value of the hedged item and is also recognised in income and expenditure. For fair value hedges rela ng to items carried at amor sed cost, the adjustment to carrying value is amor sed through income and expenditure over the remaining term to maturity. Any adjustment to the carrying amount of a hedged financial instrument, for which the effec ve interest rate method is used, is amor sed through income and expenditure. Amor sa on may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value a ributable to the risk being hedged. If the hedge item is derecognised, the unamor sed fair value is recognised immediately in income and expenditure. NOTES (forming part of the financial statements)

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