BRITISH TOURIST AUTHORITY TRADING AS VISITBRITAIN ...

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VisitBritain and VisitEngland Notes forming part of the financial statements for the year ended 31 st March 2010 (Continued) 2 Significant accounting estimates and judgements (continued) (c) Provisions The group recognises provisions in accordance with its accounting policy described in Section 8 – ‘Results for the year and other financial information’. In arriving at estimates for provisions, estimates and judgements are made, in particular with regard to timing and amount. Calculations are based on anticipated future cash flows relating to the relevant event, which are estimated by management and where appropriate supported by the use of external advisers. Provisions are made where an obligation exists for a future liability in respect of a past event and where the amount of the obligation can be reliably estimated. The provision under note 23 is made based on professional advice received. 3 Financial instruments and risk management Principal Financial Instruments The principal financial instruments are as follows: Trade and other receivables Cash at bank and in hand Trade and other payables Forward exchange contracts The following tables show financial instruments by category: 2010 2009 2008 Loans and Financial assets at fair value through profit Receivables & loss Total Loans and Financial assets at fair value through profit Receivables & loss Total 46 Loans and Financial assets at fair value through profit Receivables & loss Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Group Financial assets Trade and other receivables 5,056 5,056 5,380 5,380 5,528 5,528 Derivative financial assets 222 222 37 37 Cash and cash equivalents 1,897 1,897 1,089 1,089 1,029 1,029 6,953 222 7,175 6,469 37 6,506 6,557 6,557 VisitBritain Financial assets Trade and other receivables 5,139 5,139 5,515 5,515 5,575 5,575 Derivative financial assets 222 222 37 37 Cash and cash equivalents 1,751 1,751 934 934 963 963 6,890 222 7,112 6,449 37 6,486 6,538 6,538 Financial instruments measured at fair value are classified according to a fair value hierarchy that reflects the significance of the inputs used in making the measurements. All financial instruments measured at fair value are classified as Level 1 on the fair value hierarchy i.e. quoted prices in active markets for identical instruments are used to fair value the instruments. Financial liabilities held at amortised cost include trade payables and other short-term monetary liabilities, which are recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. There is no material difference between the net carrying amounts and the fair values, and consequently no amortisation of interest on this financial liability class due to their short term nature.
VisitBritain and VisitEngland Notes forming part of the financial statements for the year ended 31 st March 2010 (Continued) 3 Financial instruments and risk management (Continued) The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s financial performance. The Group’s financial instruments comprise cash and liquid resources and various items such as trade payables and receivables that arise directly from its operations. The Group is exposed through its operations to the following risks: Credit risk Liquidity risk Market Risk In common with all other organisations, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks and consequently the objectives, policies and processes are unchanged from the previous period. The Board has overall responsibility for the determination of the group’s risk management policies. The objective of the Board is to set policies that seek to reduce the risk as far as possible without unduly affecting the Group’s competitiveness and effectiveness. Further details of these policies are set out below: Credit risk VisitBritain is exposed to credit risk primarily on its trade receivables, which are spread over a range of customers and countries, a factor that helps to dilute the concentration of the risk. It is the Group’s policy, implemented locally, to assess the credit risk of each new customer before entering into binding contracts. Each customer account is then reviewed on an ongoing basis (at least once a year) based on available information and payment history. Quantitative disclosure of the credit risk exposure in relation to trade and other receivables are given in note 20. Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. VisitBritain’s main banking arrangements are with RBS Bank plc. Amounts held by overseas operations with banks are kept to a minimum. VisitBritain does not enter into derivatives to manage credit risk. Liquidity risk Cash requirements of VisitBritain are met through grant-in-aid provided by Department for Culture, Media & Sport (DCMS) under the provision of the Act. Following the Government’s objectives, VisitBritain seeks to ensure that optimum use is made of all resources during the financial year and, so far as is consistent with its objectives, seek to maximise non-exchequer resources generally through close working partnership with the private sector and commercial activities. As a result VisitBritain is not exposed to significant liquidity risk. Market Risk Market risk arises from VisitBritain’s interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value, or future cash flows, of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or foreign currency exchange rates (foreign currency risk). Interest Rate Risk VisitBritain is exposed to interest rate risk through its financial assets and financial liabilities. These financial assets and liabilities carry no or nominal interest, thus VisitBritain consider its exposure to interest rate risk not to be significant. Bank balances are placed on overnight deposit at current bank deposit rates. 47
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