ITF

ITF Trust Annual Report and Financial Statements 2021 22 5. Summary of significant accoun ng policies (con nued) o) Deriva ve financial instruments and hedging (con nued) 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 accoun ng judgements, es mates and assump ons 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. Davis Cup and Billie Jean King Cup postponement and IFRS 15 income recogni on The group has recognised revenue associated with the delivery of the finals and remaining lower rounds of the Davis Cup and Billie Jean King Cup compe ons in 2021 using the percentage of par cipa on payments made to na ons as a basis for alloca on of revenue per round (a er alloca on of contractual finals costs for the Billie Jean King Cup). The result is the recogni on of all revenue received for the Davis Cup ($19.7m), and par al recogni on for Billie Jean King Cup (the $3m deferred from 2020). Two significant judgements have been made, which are that the Qualifiers and lower rounds represent a performance obliga on and the value of rounds is propor onal to par cipa on payments. The group is confident that the judgements made are supported by the contracts and result in a revenue posi on that is a true and fair view of the state of the group's affairs. Olympic income and IFRS 15 applica on Revenue was recognised for a contract with the Interna onal Olympic Commi ee (IOC) rela ng to the Tokyo 2020 Summer Olympic Games, which was held in 2021. The contract takes the form of the Olympic Charter which sets out key performance obliga ons of direc ng the tennis event at Tokyo 2020 and of developing and growing the sport of tennis worldwide. The group has assessed that the first obliga on is sa sfied at a point in me at the conclusion of Tokyo 2020 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 Tokyo 2020 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 Tokyo 2020 begins on 1 January 2020 and ends on 31 December 2024 and is sa sfied evenly over this period. However, 1 January 2021 is the point at which the group has assessed that all the condi ons within IFRS 15 [9(a)-(e)] are met and so this is the point at which IFRS 15 is applied to the contract. 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 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 produces 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 for the period of the three-year Olympiad from 2021 to 2024. Notes (continued, forming part of the financial statements)

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