ITF

5. Summary of significant accounting policies (continued) o) Derivative financial instruments and hedging The group uses forward currency contract derivative financial instruments to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date at which a derivative contract is entered into and are subsequently restated at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. 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 accounting, hedges utilised by the ITF are classified as cash flow hedges. Cash flow hedges are when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction, or the foreign currency risk in an unrecognised firm commitment. At the inception of a hedge relationship, the group documents the economic relationship 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 objective and strategy for undertaking its hedge transactions. The fair values of derivative financial instruments designated in hedge relationships are disclosed in note 38. Movements in the hedging reserve in equity are shown in note 38. The full fair value of a hedging derivative is classified as a current asset or liability. The group has hedges which meet the criteria for cash flow hedge accounting and are accounted for as follows. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the cash flow hedge reserve within equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative 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 preparation of the ITF's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. Significant judgements include those made in connection with the accounting for the Billie Jean King Cup Ltd joint venture as set out in note 27. Significant estimates and judgements have been applied in a number of areas. Historically, estimates were required in determining the fair value of intellectual property contributed to the joint venture, which impacts the carrying value of the investment in joint ventures and the gain recognised on initial transfer, as set out in note 27. In the current year, significant judgement and estimation uncertainty have been applied in assessing the recoverable amount of the Group's investment in Billie Jean King Cup Limited, including the interpretation of external valuation information, the assessment of the underlying cash flows, and the impact of funding arrangements within the joint venture. This has resulted in the recognition of a full impairment of the investment. In addition, judgement has been applied in assessing the recoverability of the loan receivable from BJKCL under IFRS 9, including consideration of expected cash flows, repayment profiles and the time value of money, to determine whether an expected credit loss allowance is required. These areas involve significant judgement and estimation uncertainty and have a material impact on the Group's financial position and performance in the current year. ITF Trust Annual Report and Consolidated Financial Statements 23

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