ITF

At the incep on of a hedge rela onship, the group documents the economic rela onship between hedging instruments and hedged items including whether changes in the cash flow of the hedging instruments are expected to offset changes in the cash flows of hedged items. The group documents its risk management objec ve and strategy for undertaking its hedge transac ons. The fair values of deriva ve financial instruments designated in hedge rela onships are disclosed in note 34. Movements in the hedging reserve in equity are shown in note 35. The full fair value of a hedging deriva ve is classified as a current asset or liability. The group has hedges which meet the criteria for cash flow hedge accoun ng and are accounted for as follows: The effec ve por on of changes in the fair value of deriva ves that are designated and qualify as cash flow hedges is recognised in the cash flow hedge reserve within equity. The gain or loss rela ng to the ineffec ve por on is recognised immediately in profit or loss. When forward contracts are used to hedge forecast transac ons, the group designates the full change in fair value of the forward contract (including forward points) as the hedging instrument. The gains or losses rela ng to the effec ve por on of the change in fair value of the en re forward contract are recognised in the cash flow hedge reserve within equity. When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accoun ng, any cumula ve deferred gain or loss in equity at that me remains in equity un l the forecast transac on occurs. When the forecast transac on is no longer expected to occur, the cumula ve gain or loss and deferred costs of hedging that were reported in equity are reclassified to profit or loss. 6. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The prepara on of the ITF's financial statements requires management to make judgements, es mates and assump ons that affect the reported amounts of revenues, expenses, assets and liabili es, and the disclosure of con ngent liabili es, at the repor ng date. However, uncertainty about these assump ons and es mates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future. Judgements In the process of applying the ITF's accoun ng policies, management has made the following judgements, apart from those involving es ma ons, which have the most significant effect on the amounts recognised in the financial statements: Olympic income and first year IFRS 15 applica on The group recognised Olympic income of $5,777,000 in the year for a contract rela ng to the Rio de Janeiro 2016 Summer Olympic Games (Rio 2016) with the Interna onal Olympic Commi ee (IOC). The contract takes the form of the Olympic Charter which sets out key performance obliga ons of the group which can be summarised as: to control and direct the tennis event at Rio 2016; and to develop and grow the sport of tennis worldwide. These obliga ons are also supported by the IOC's Annual Report and Financial Statements. The group has assessed that the first obliga on is sa sfied at a point in me at the conclusion of Rio 2016 and that the second obliga on is sa sfied evenly over a period of me. The group allocated the transac on price to the control and direc on of the tennis event at Rio 2016 using the cost plus margin approach, and to the development of the sport of tennis using the residual approach. The group has determined that the obliga on to develop the sport of tennis rela ng to the contract for Rio 2016 begins on 1 January 2016 and ends on 31 December 2019 and is sa sfied evenly over this period. 1 January 2016 is the point at which the group has assessed that all the condi ons within IFRS 15 [9(a)-(e)] are met and so is the point at which IFRS 15 is applied to the contract. 31 December 2019 is the expected last day before the contract for the Tokyo 2020 Summer Olympic Games meets the same criteria in IFRS 15. The group has made three cri cal judgements for the accoun ng treatment of this contract: iden fica on of the performance obliga ons; alloca on of the transac on price; and the iden fica on of the beginning and period of the contract. Each judgement could have a material effect on these financial statements. The group is confident, however, that each judgement is supported by the fact pa ern of the contract with the IOC, the IOC's external publicly available communica ons, and the point at which the group has confidence in the commercial substance of the contract. The group is also confident that the resul ng accoun ng treatment results in a revenue recogni on profile that provides the greatest level of understandability to the users of these financial statements and gives a true and fair view of the state of the group's affairs with regard to the Olympic Income for the period of the four-year Olympiad from 2016 to 2019. Notes (Forming part of the financial statements) ITF ANNUAL REPORT AND FINANCIAL STATEMENTS / 18 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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