RWS AR 23 Final Single pages - Flipbook - Page 117
In each of these modelled downside scenarios, the
Group continues to have signi昀椀cant covenant and
liquidity headroom over the period through to 31 March
2025. Consequently, the Directors are con昀椀dent that the
Group and Company will have su昀케cient cash reserves
and committed debt facilities to withstand reasonably
plausible downside scenarios and therefore continue to
meet its liabilities as they fall due for the period ending
31 March 2025 and therefore prepared the 昀椀nancial
statements on a going concern basis.
Business combinations
Under the requirements of IFRS 3 (revised), all business
combinations are accounted for using the acquisition
method (acquisition accounting). The cost of a business
acquisition is the aggregate of fair values, at the date
of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the acquirer.
Costs directly attributable to business combinations
are expensed. The cost of a business combination is
allocated at the acquisition date by recognising the
acquiree’s identi昀椀able assets, liabilities and contingent
liabilities that satisfy the recognition criteria, at their
fair values at that date. The acquisition date is the date
on which the acquirer e昀昀ectively obtains control of the
acquiree. The excess of the cost of the acquisition over
the fair value of the Group’s share of the net assets
acquired is recorded as goodwill.
Provisional fair values are provided when there has been
insu昀케cient time to 昀椀nalise a purchase price allocation
process. IFRS 3 allows a period of up to 12 months from the
date of acquisition for provisional fair values to be revised.
Any contingent consideration, which is classi昀椀ed as
a provision, is measured at fair value at the date of
acquisition and subsequently remeasured to fair value at
each reporting date, until the contingency is settled. Any
changes in the fair value of contingent consideration are
recognised in pro昀椀t or loss.
Foreign currencies
The presentation currency of the Group is Pound
Sterling, which is the ultimate Parent Company's
functional currency.
Transactions in foreign currencies are translated to the
functional currency of the Group at the exchange rate on
the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency
at the exchange rate at the reporting date. Nonmonetary assets and liabilities that are measured at
fair value in a foreign currency are translated into the
functional currency at the exchange rate when the
fair value was determined. Non-monetary items that
are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date
of the transaction. Foreign currency di昀昀erences are
normally recognised in pro昀椀t or loss in the statement of
comprehensive income.
The assets and liabilities of the Group’s foreign operations
are translated at exchange rates prevailing on the reporting
date. Income and expense items are translated using
average exchange rates, which approximate to actual rates,
for the relevant accounting period. Exchange di昀昀erences
arising, if any, are classi昀椀ed as other comprehensive income
and recognised in the foreign currency reserve in the
consolidated statement of 昀椀nancial position.
Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at exchange
rates prevailing on the reporting date. The Group has
elected to treat goodwill and fair value adjustments arising
on acquisitions before the date of transition to IFRS as
Sterling-denominated assets and liabilities.
Derivative 昀椀nancial instruments and hedging
The Group uses derivative 昀椀nancial instruments to manage
its exposure to foreign exchange volatility arising from
operational activities.
Derivative 昀椀nancial instruments are initially measured at
fair value (with direct transaction costs being included
in the statement of comprehensive income as an
expense) and are subsequently remeasured to fair value
at each reporting date. Changes in the carrying value
are also recognised in pro昀椀t or loss in the statement
of comprehensive income unless part of a designated
hedging arrangement.
The Group designates certain derivatives as hedging
instruments to hedge the variability in cash 昀氀ows
associated with highly probable forecast transactions
arising from changes in foreign exchange rates and certain
non-derivative liabilities as hedges of foreign exchange risk
on a net investment in a foreign operation.
At inception of designated hedging relationships, the
Group documents the risk management objective and
strategy for undertaking the hedge. The Group also
documents the economic relationship between the hedged
item and hedging instrument, including whether the
changes in cash 昀氀ows of the hedged item and hedging
instrument are expected to o昀昀set each other.
When a derivative is designated as a cash 昀氀ow hedging
instrument, the e昀昀ective portion of changes in fair value
of the derivative is recognised in other comprehensive
income and accumulated in the hedge reserve. The
e昀昀ective portion of changes in the fair value of the
derivative that is recognised in other comprehensive
income is limited to the cumulative change in fair value
of the hedged item, determined on a present value basis,
from inception of the hedge. Any ine昀昀ective portion of
changes in the fair value of the derivative is recognised
immediately in pro昀椀t or loss in the Statement of
Comprehensive Income.
NOTES TO THE CONSOLIDATED STATEMENTS
RWS Holdings plc — Annual Report 2023
117
