Annual Report and Accounts 2012/13 - Royal Devon & Exeter Hospital

1. ACCOUNTING POLICIES (CONTINUED)
1.15 Financial instruments and financial liabilities (continued)
Loans and receivables
ROYAL DEVON AND EXETER NHS FOUNDATION TRUST - ANNUAL ACCOUNTS 2012/13
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets.
The Trust’s loans and receivables comprise: cash and cash equivalents, NHS receivables, accrued income and ‘other
receivables’.
Loans and receivables are recognised initially at fair value, net of transactions costs, and are measured subsequently at
amortised cost, using the effective interest method. The effective interest rate is the rate that discounts exactly estimated future
cash receipts through the expected life of the financial asset or, when appropriate, a shorter period, to the net carrying amount
of the financial asset.
Interest on loans and receivables is calculated using the effective interest method and credited to the Statement of
Comprehensive Income.
Other financial liabilities
Other financial liabilities are recognised initially at fair value, net of transaction costs incurred, and measured subsequently at
amortised cost using the effective interest method. The effective interest rate is the rate that discounts exactly estimated future
cash payments through the expected life of the financial liability or, when appropriate, a shorter period, to the net carrying
amount of the financial liability.
They are included in current liabilities except for amounts payable more than 12 months after the statement of financial position
date, which are classified as non-current liabilities.
Interest on financial liabilities carried at amortised cost is calculated using the effective interest method and charged to finance
costs. Interest on financial liabilities taken out to finance property, plant and equipment or intangible assets is not capitalised as
part of the cost of those assets.
Impairment of financial assets
NOTES TO THE ACCOUNTS
At the Statement of Financial Position date, the Trust assesses whether any financial assets are impaired. Financial assets are
impaired and impairment losses are recognised if, and only 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.
For financial assets carried at amortised cost, the amount of the impairment loss is measured as the difference between the
asset’s carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective
interest rate. The loss is recognised in the Statement of Comprehensive Income and the carrying amount of the asset is
reduced through the use of a bad debt provision that is determined specifically on individual assets.
1.16 Corporation tax
The Trust is a Health Service Body within the meaning of s519A of the Income and Corporation Tax Act 1988 and accordingly
is exempt from taxation in respect of income and capital gains within categories covered by this. There is a power for HM
Treasury to dis-apply the exemption in relation to specified activities of an NHS foundation trust (s519A (3) to (8) of the Income
and Corporation Taxes Act 1988). Accordingly, the FT is potentially within the scope of corporation tax in respect of activities
which are not related to, or ancillary to, the provision of healthcare, and where the profits there from exceed £50,000 per
annum. Until the exemption is dis-applied then the FT has no corporation tax liability.
1.17 Non-current assets held for sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered principally through a
sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value.
1.18 Consolidation of NHS charitable funds
The Trust is the Corporate Trustee of the Royal Devon and Exeter NHS Foundation Trust General Charity. The Charity has not
been consolidated within these annual accounts as HM Treasury has granted a dispensation to the application of IAS 27 in
relation to the consolidation of NHS charitable funds for 2012/13. Further information relating to transactions between the Trust
and the Charity is disclosed in note 25.
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