ITF

NOTES (CONT.) (FORMING PART OF THE FINANCIAL STATEMENTS) 55 ITF FINANCIAL STATEMENTS g) Trade and other payables Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method. h) Financial income and expenses Financial income and expenses represent bank interest received and paid by the Group, respectively. i) Taxation The charge for taxation is based on the result for the year and irrecoverable withholding tax, and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. j) Impairment of financial assets In relation to trade receivables, a provision for impairment is made when there is objective evidence, such as the probability of insolvency or significant financial difficulties 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 addition 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. k) Operating leases Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income and expenditure statement on a straight line basis over the lease term. l) 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 overdraft. m) Derivative financial instruments and hedging The Group uses derivative financial instruments such as forward currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured 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 are classified as: • Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment (except for foreign currency risk); or • Cash flow hedges 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 probably forecast transaction or the foreign currency risk in an unrecognised firm commitment; or • Hedges of a net investment in a foreign operation. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management and strategy objective for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. 54 Competition income is recognised in the period in which the competition took place. iii) Grand Slam Development Fund and Wheelchair Tennis Development Fund income The Grand Slam Development Fund and Wheelchair Tennis Development Fund income and expenditure are shown through the ITF's income and expenditure statement. Income is recognised when qualifying expenditure is made, with any difference between income and expenditure held on the balance sheet as deferred income or a debtor. As at 31 December 2013, the Grand Slam Development Fund had a reserve of $520,000 (2012: $421,000), and the Wheelchair Tennis Development Fund had a surplus of $47,000 (2012: surplus of $49,000). The mission of the Grand Slam Development Fund is to increase competitive tennis opportunities worldwide. iv) Anti-doping income Anti-doping income is recognised in accordance with the terms of the agreement and the accounting period to which it relates, where anti-doping services are provided for specific events. Anti-doping income relating to penalties is recorded once it is probable that the economic benefit associated with the transaction will flow to the Group. v) Data Sales income Data Sales income is recognised in accordance with the terms of the contract and the accounting period to which it relates. vi) Technical and sundry income Technical income is derived from testing tennis equipment and is recognised in accordance with the terms of the agreement and the accounting period to which it relates. Sundry income is derived mainly from recharges to the Grand Slam Committee and Tennis Integrity unit for office and administration costs. Rent is charged and recognised as per the terms of the lease and the accounting period to which it relates. Also included within Technical and sundry income is iCoach online memberships, and subscription monies for the ITF Foundation which allows members to consult and collaborate with the ITF in the process of manufacturing tennis equipment. vii) Olympic income Olympic income, net of directly attributable expenses, is released to the income and expenditure statement over the four years of the Olympiad, starting in the year the games are held. Note 30 provides further information on Olympic income. viii) Investment income/expense and gains/losses on investments Investments are valued at their fair value, which is determined by reference to quoted market bid prices at the balance sheet date. Valuations are provided by the investment managers. Gains or losses arising from this valuation are shown in the consolidated income and expenditure statement in accordance with IAS 39.9. Interest is recognised in the income statement on an accruals basis, and dividend income is recognised when the ITF's right to receive payment is established. b) Currency translation Assets and liabilities in currencies other than US Dollars are translated into US Dollars at appropriate rates of exchange ruling at the balance sheet date. Income and expenses in such currencies during the year have been translated into US Dollars at the rates of exchange ruling at the dates of the relevant transactions. Exchange differences arising from these translations are recognised in the consolidated income and expenditure statement. Sterling was converted at $1.649 /£1 at 31 December 2013 ($1.615/£1 at 31 December 2012), for all subsidiaries except Hopman Cup Pty Ltd. In the case of Hopman Cup Pty Ltd, whose activities are recorded in Australian Dollars, income and expenses are converted at the average rate of exchange, US$0.965/AUS$1 (2012 – US$1.035/AUS$1), and its assets and liabilities are converted at the closing rate, US$0.887/AUS$1 (2012 – US$1.037/AUS$1), for consolidation in these financial statements. The resulting exchange differences are recognised through reserves. c) Property, plant and equipment Property, plant and equipment are stated at cost, less accumulated depreciation. The cost of the tangible fixed assets is written off in equal instalments over their useful lives as follows: Improvements to leasehold property Over the remaining period of the lease or asset life (if shorter) Computers and Databases 3 years Furniture and Equipment, Technical Equipment 4 years Challenge trophies, which are presented to the winners of the ITF's competitions, including Davis Cup and Fed Cup, are not valued. d) Inventories Inventories are valued at the lower of cost and net realisable value. e) Investments and other financial assets Investments are included on the Balance Sheet on trade date. Investments are valued at their fair value, which is determined by reference to quoted market prices at the balance sheet date, with changes recognised directly in the income and expenditure statement. f ) Trade and other receivables Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses. ITF FINANCIAL STATEMENTS

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