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HSRC Annual Report 2016/17
PART E: Annual Financial Statements
1.7.2. Subsequent measurement
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the asset
to which it relates. The amortisation is calculated at a rate considered appropriate to reduce the cost of the asset less
residual value over the shorter of its estimated useful life or contractual period. Residual values and estimated useful
lives are reviewed annually.
Amortisation is charged to the Statement of Financial Performance to write off the cost of intangible assets over their
estimated useful lives, using the straight-line method as follows:
IT software
Average of 5–22 years
User rights
20 years
1.7.3. Impairment of non-financial assets
The HSRC assesses at each reporting date whether there is any indication that an asset may be impaired. If any such
indication exists, the entity estimates the recoverable amount of the individual asset. If it is not possible to estimate
the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset
belongs is determined.
A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent
of the cash inflows from other assets or groups of assets.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value
in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. That excess is an impairment loss and is charged to the Statement of Financial Performance.
An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately
in the Statement of Financial Performance. Any impairment deficit of a revalued asset is treated as a revaluation decrease
in the revaluation reserve only to the extent of the existing reserve.
The HSRC assesses at each reporting date whether there is any indication that an impairment loss recognised in prior
periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of
those assets are estimated and matched against their carrying values and any excess of the recoverable amounts over
their carrying values is reversed to the extent of the impairment loss previously charged in the Statement of Financial
Performance.
1.8. Inventory
Inventories are valued at the lower of cost price or net realisable value. The net realisable value is the estimated selling
price, less the estimated completion costs or selling costs. Inventory consists of cafeteria consumables and publications
(comprising completed books and work in progress).
Inventory is valued using the weighted average method. Cost for publications is determined by using specific identification
of their individual costs.
When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which
the related revenue is recognised.
The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an
expense in the period the write-down or loss occurs.
1.9. Leases
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to
ownership. The classification of the leases is determined using GRAP 13 – Leases.