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HSRC Annual Report 2016/17
PART E: Annual Financial Statements
1.10.3. Key estimates and assumptions applied by management
The cost of post-employment medical benefits is determined using actuarial valuations. The actuarial valuation involves
making assumptions about discount rates, expected rates of return of assets, future salary increases, mortality rates and
future pension increases. All assumptions are reviewed at each reporting date. Refer to Note 12 for a full disclosure of
post-retirement benefits as at 31 March 2017.
1.11. Foreign currency transactions
Transactions in foreign currencies are accounted for at the rate of exchange ruling on the date of the transaction. Assets
and liabilities in foreign currencies are translated at the rate of exchange ruling at the reporting date. Exchange differences
arising from translations are recognised in the Statement of Financial Performance in the period in which they occur.
A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying to the foreign
currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the
transaction. At each reporting date foreign currency monetary items are translated using the closing rate.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different
from those at which they were translated on initial recognition during the period or in previous Financial Statements
shall be recognised in surplus or deficit in the period in which they arise.
1.12. Provisions and contingencies
Provisions are recognised when:
•
The HSRC has a present obligation as a result of past events;
•
Probable that an outflow of resources embodying economic benefits or service potential will be required to settle
the obligations; and
•
A reliable estimate can be made of the obligation.
Provisions are not recognised for future operating losses. If the HSRC has a contract that is onerous, the present
obligation under the contract is recognised and measured as a provision. Contingent assets and contingent liabilities
are not recognised.
Provisions are measured as the present value of the estimated future outflows required to settle the obligation. In the
process of determining the best estimate of the amounts that will be required in future to settle the provision, management
considers the probability of the potential outcomes of the provisions raised, and provides the best estimate required
to settle the provision.
1.13. Financial instruments
1.13.1. Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using
the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit
or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor and
default or delinquency in payments (more than 120 days overdue) are considered indicators that the trade receivable
is impaired. The allowance recognised is measured for all debtors with indications of impairment.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is
recognised in the Statement of Financial Performance within operating expenses. When a trade receivable is uncollectable,
it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written
off are credited against operating expenses in the Statement of Financial Performance.
1.13.2. Trade and other payables
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost using
the effective interest rate method.