267694 EdinburghIT AR 2024 WEB - Flipbook - Page 64
62 / FINANCIAL REVIEW / THE EDINBURGH INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS
1. PRINCIPAL ACCOUNTING POLICIES
Accounting policies describe the Company’s approach to recognising and measuring transactions during the year and the
position of the Company at the year end.
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies
have been consistently applied during the year and the preceding year.
A. Basis of Preparation
Accounting Standards Applied
The financial statements have been prepared in accordance with the Companies Act 2006, applicable United Kingdom
Accounting Standards and applicable law (UK Generally Accepted Accounting Practice (UK GAAP)) including FRS 102
‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ and with the Statement of Recommended
Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts, issued by the Association of
Investment Companies (SORP) in April 2021 (as amended in July 2022).
The financial statements are issued on a going concern basis. Details of the Directors’ assessment of the going concern status
of the Company, which considered the adequacy of the Company’s resources are given on page 42.
As an investment fund the Company has the option not to present a cash flow statement. A cash flow statement is not required
when an investment fund meets all the following conditions: substantially all investments are highly liquid and are carried at
market value, and where a Statement of Changes in Equity is provided: all of which are satisfied.
However the Directors’ have elected to present a cash flow statement in the annual financial report to present additional
relevant information to readers of the financial statements.
Significant Accounting Estimates, Assumptions and Judgements
The preparation of the financial statements may require the use of estimates, assumptions and judgements which may affect
the reported amounts of assets and liabilities at the reporting date. While estimates are based on best judgement using
information and financial data available the actual outcome may differ from these estimates. The Directors have applied their
judgement for the allocation of the investment management fee and finance costs between capital and revenue in the income
statement as set out in Note 1G and the treatment of special dividend income between capital and income, as set out in Note
1J. The Directors do not believe that these judgements nor any accounting estimates, assumptions or judgements that have
been applied to the financial statements have a significant risk of causing material adjustment to the carrying amount of assets
and liabilities within the next financial year.
B. Foreign Currency and Segmental Reporting
(i) Functional and presentational currency
The financial statements are presented in sterling, which is the Company’s functional and presentational currency and the
currency in which the Company’s share capital and expenses, as well as its assets and liabilities, are denominated.
(ii) Transactions and balances
Transactions in foreign currency, whether of a revenue or capital nature, are translated to sterling at the rates of exchange ruling
on the dates of such transactions. Foreign currency assets and liabilities are translated to sterling at the rates of exchange
ruling at the balance sheet date. Any gains or losses, whether realised or unrealised, are taken to the capital reserve or to the
revenue account, depending on whether the gain or loss is of a capital or revenue nature. All gains and losses are recognised
in the income statement.
(iii) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business of investing in equity and debt
securities, issued by companies quoted mainly on the UK or other recognised stock exchanges.
C. Financial Instruments
The Company has chosen to apply Section 11 and 12 of FRS102 in full in respect of the financial instruments.
(i) Recognition of financial assets and financial liabilities
The Company recognises financial assets and financial liabilities when the Company becomes a party to the contractual
provisions of the instrument. The Company will offset financial assets and financial liabilities if the Company has a legally
enforceable right to set off the recognised amounts and intends to settle on a net basis.
(ii) Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire or it transfers
the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred. Any interest in the transferred financial asset that is created or
retained by the Company is recognised as an asset.
