46 | Accord Housing Association
Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the association . All other leases are classified as operating leases .
Rentals payable under operating leases are charged to the statement of comprehensive income on a straightline basis over the lease term .
Financial Instruments Financial instruments which meet the criteria of a basic financial instrument as defined in Section 11 of FRS 102 are accounted for under an amortised historic cost model .
Where the association holds non-basic financial instruments they are recognised using a valuation technique with any gains or losses being reported in the statement of comprehensive income .
Impairment Each year the association assesses whether there are any potential indications of impairment and if any such indication is identified , undertakes an impairment review . As part of this review the Depreciated Replacement Cost ( DRC ) is used to determine whether an impairment is required on housing property fixed assets . Using the DRC method , impairment is calculated , assessed and determined at scheme level using appropriate construction costs and land prices . This is considered to be the best estimate of the recoverable amount . Comparing this to the carrying value of each scheme , an impairment provision as calculated . Other categories of assets and investments , where applicable , are also subject to an annual impairment review . Management recommends no provision for impairment in the current financial year .
Significant Management Judgements The following are the significant management judgements made in applying the accounting policies of the Association that have the most significant effect on the financial statements .
Impairment : Housing Property Fixed Assets Accord completed its annual impairment review on housing property fixed assets . The depreciated replacement cost ( DRC ) method was applied to each social housing property scheme using appropriate construction costs and land prices . The resulting information was then compared to the carrying amount of each scheme . No impairment was identified .
Impairment : Investment , Goodwill and Intangibles Accord completed its annual review over the investment , goodwill and intangibles associated with the acquisition of Direct Health Group Limited . The review takes account of current and future business and financial performance , and the longevity of existing contractual arrangements with local authority commissioning partners . The review also considers the operating environment and marketplace in which Direct Health operates . No impairment was identified .
Estimation Uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets , liabilities , income and expenses is provided below . Actual results may be substantially different . The following are estimates made in applying the accounting policies of the Association that have the most effect on the financial statements .
Recoverable Amounts of Rental and Other Trade Receivables The recoverable amounts of rental and other trade receivables are reviewed regularly by management and appropriate provisions calculated for potential non recovery . The provision for rental debtors is based on the level of arrears owing by former tenants , other trade debtors is based on managements view of the recoverability of the debt outstanding .
Obligations Under Defined Benefit Pension Schemes The defined benefit accounting liability for the SHPS pension scheme has been provided by the scheme administrator , The Pensions Trust ( TPT ). The accounting liability has been formulated based on a series of assumptions which are set out in Note 28 to the financial statements . TPT provide a standard set of assumptions which it deems are appropriate , however , these are adjustable by individual providers to meet their own circumstances . The standard assumptions have been adopted by the Association as they are judged to be appropriate and reasonable .
If the discount rate was lower , and / or the inflation rates and life expectancy rates were higher , then the liability would increase . Conversely , if the discount rate was higher , and / or the inflation rates and life expectancy rates were lower , then the liability would decrease .
Allocation of Costs for Mixed Tenure Developments and Shared Ownership Sales Costs relating to mixed tenure developments and shared ownership sales are apportioned on a basis that management deems to be appropriate and can be calculated on unit basis or floor area basis .
Useful Lives of Depreciable Assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date based on the expected utility of the assets . Uncertainties in these estimates relate to changes to decent homes standards which may require more frequent replacement of key components .