Annual Report and Accounts - The Great Western Hospital

Great Western Hospitals NHS Foundation Trust
Accounts for the year ended 31 March 2012
ACCOUNTING POLICIES (continued)
1.10.6
Impairment of financial assets
At the Statement of Financial Position date, the Trust assesses whether any financial assets, other
than those held at ‘fair value through income and expenditure’ are impaired. Financial assets are
impaired and impairment losses recognised if there is objective evidence of impairment as a result of
one or more events which occurred after the initial recognition of the asset and which has an impact
on the estimated future cash flows of the asset.
1.10.7 Accounting for derivative financial instruments
Embedded derivatives that have different risks and characteristics to their host contracts, and
contracts with embedded derivatives whose separate value cannot be ascertained, are treated as
financial assets at fair value through income and expenditure. They are held at fair value, with any
subsequent movement recognised as gains or losses in the Statement of Comprehensive Income.
1.11
Trade receivables
Trade receivables are recognised and carried at original invoice amount less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that
the Trust will not be able to collect all amounts due according to the original terms of receivables.
The amount of the provision is recognised in the Statement of Comprehensive Income.
1.12
1.13
Deferred income
Deferred income represents grant monies and other income received where the expenditure has not
occurred in the current financial year. The deferred income is included in current liabilities unless the
expenditure, in the opinion of management, will take place more than 12 months after the reporting
date, which are classified in non-current liabilities.
Borrowings
The Trust can borrow within the limits set by Monitor's Prudential Borrowing Code. The Trust's
position against its prudential borrowing limit is disclosed in note 22.1 on Page 28. The PFI noncurrent
lease liability counts as part of the Trust's Prudential Borrowing Limit.
1.14 Leases
1.14.1 Finance Leases
Where substantially all of the risks and rewards of ownership of a lease asset are borne by the Trust
the asset is recorded as property, plant and equipment and a corresponding liability is recorded. The
value at which both are recognised is the lower of the fair value of the asset or the present minimum
value of the lease payments, discounted using the interest rate implicit in the lease.
The asset and liability are recognised at the commencement of the lease. Thereafter the asset is
accounted for as an item of property, plant and equipment.
The annual rental is split between the repayment of the liability and a finance cost so as to achieve a
constant rate of finance over the life of the lease. The annual finance cost is charged to Finance
Costs in the Statement of Comprehensive Income. The lease liability is de-recognised when the
liability is discharged, cancelled or expires.
1.14.2 Operating Leases
Other leases are regarded as operating leases and the rentals are charged to operating expenses on
a straight-line basis over the term of the lease Operating lease incentives received are added to the
lease rentals and charged to operating expenses over the life of the lease.
1.14.3
Lease of Land and Buildings
Where a lease is for land and buildings, the land component is separated from the building
component and the classification for each is assessed separately.
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