Impairment
Impairment: Investment, Goodwill and Intangibles
Each year the Association assesses whether there are any
Accord completed its annual review over the investment, goodwill
potential indications of impairment and if any such indication
and intangibles associated with the acquisition of Direct Health
is identified, undertakes an impairment review. As part of
Group Limited. The review takes account of current and future
this review the Depreciated Replacement Cost (DRC) is used
business and financial performance, and the longevity of existing
to determine whether an impairment is required on housing
contractual arrangements with local authority commissioning
property fixed assets. Using the DRC method, impairment
partners. The review also considers the operating environment
is calculated, assessed and determined at scheme level
and marketplace in which Direct Health operates. No impairment
using appropriate construction costs and land prices. This
was identified.
is considered to be the best estimate of the recoverable
amount. Comparing this to the carrying value of each scheme,
Estimation uncertainty
an impairment provision is calculated. Other categories of
Information about estimates and assumptions that have the
assets and investments, where applicable, are also subject to
most significant effect on recognition and measurement of
an annual impairment review. Management recommends no
assets, liabilities, income and expenses is provided below.
provision for impairment in the current financial year.
Actual results may be substantially different.
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
On 1 April 2016 social housing rents reduced by 1% per annum
for four years until 2019/20 in accordance with the Housing
and Planning Act 2016. Accordingly, an impairment review
on housing property fixed assets has been undertaken. 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.
Financial Instruments -
loans containing early repayment clauses
The Association has a number of fixed rate loan agreements in
place which contain an option to repay the underlying facilities
earlier than the respective maturity dates. The terms of such an
early repayment are such that in most instances the amount
to be paid is the higher of the outstanding principal balance
including any accrued interest or the fair value of the facilities
based on current market rates which are treated as basic financial
instruments in line with FRS 102, paragraph 11.9. However, a
number of fixed rate loans also include a provision that where the
market rate of interest is lower at the repayment date than the
agreed fixed rate, the borrower could receive compensation from
the lender. FRS 102 does not explicitly address compensation
that can be paid to the borrower. However, it is management’s
view that these instruments should be treated as basic as it is
considered that this will result in measurement, based on cost,
which provides more relevant information by better reflecting
the intentions of the contracting parties in entering into the
agreement and their expectations of future actions. This is
therefore significant judgement which will be reviewed annually.
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Accord Housing Association
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.