Annual report and accounts 2023 - Flipbook - Page 151
Strategic Report
Corporate Governance
Accounts
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment charge is recognised in the income statement for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a
post-tax discount rate that is based on current market assessments of the time value of money and risks specific to the asset for which the future cash flow estimates have not
been adjusted.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the impairment
loss was recognised although any reversal cannot result in a carrying amount that would exceed the carrying amount that would have been recognised, net of depreciation,
had no impairment loss been recognised in prior years.
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, short-term investments, loans receivable, trade and other receivables, cash and cash
equivalents, loans and borrowings, put liability, contingent consideration and trade payables.
Trade receivables
Trade receivables are recognised initially at transaction price. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less
an allowance for expected credit losses (ECL). The Group always recognises lifetime ECL for trade receivables. The expected credit loss on these financial assets are estimated
using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. The carrying amount
of the asset is reduced by the allowance for expected credit losses and the amount of the loss is recognised in the income statement within administration costs.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
Investments
Investments in subsidiaries are carried at cost less impairment in the parent Company accounts.
Short-term investments
Short-term investments are interest-bearing deposits. They are recognised initially at fair value plus attributable transaction costs. Subsequent to initial recognition, they are
measured at amortised cost using the effective interest method. The Group always recognises 12-months ECL for trade short-term investments as they are low credit risk.
Financial assets classification
The Group classifies its financial assets at amortised costs if both the following criteria are met:
• The asset is held within a business model whose objective is to collect the contractual cash flows; and
• The contractual terms give risk to cash flows that are solely payments of principal and interest on principal outstanding.
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