Annual report and accounts 2009 (PDF) - Coventry Building Society

PENSION COSTSThe Society operates both a defined contribution and a defined benefit pension scheme for members of staff.Contributions to the defined contribution pension scheme are recognised as an expense in the income statement as incurred, on anaccruals basis.The Society’s net obligation under the defined benefit pension scheme is assessed annually by an independent qualified actuary.The net obligation is calculated as the difference between the fair value of the scheme’s assets and the amount of futureentitlements earned by scheme members from service in the current and prior periods, discounted back to present values using arate based on an index of long dated AA rated corporate bonds. This calculation allows the scheme’s net obligations to beexpressed as either a surplus or deficit, which is recognised as respectively either an asset or liability in the Society’s accounts at thebalance sheet date.Pension costs for service in the period are assessed in accordance with advice from a qualified actuary and are recognised in theincome statement. Pension fund actuarial gains or losses are recognised in full in the year they occur in the statement of othercomprehensive income.FOREIGN CURRENCY TRANSLATIONThe consolidated financial statements are presented in sterling, which is the functional currency of the Group.Foreign currency transactions are translated into sterling using the exchange rates prevailing at the dates of the transactions.Monetary items denominated in foreign currencies are retranslated at the rate prevailing at the year end.Foreign exchange gains and losses resulting from the retranslation and settlement of these items are recognised in the incomestatement.LIQUID ASSETSLiquid assets consist of cash in hand and balances with the Bank of England, loans and advances to credit institutions and debtsecurities.The Society uses various debt securities (certificates of deposit, gilts, etc) to maintain its liquidity position. These debt securities areclassified as available-for-sale under the terms of IAS 39 and, as such, are recorded in the accounts at fair value, with changes infair value taken to the available-for-sale reserve within equity.If debt securities are sold, the gain or loss on sale is measured as the difference between sale proceeds and original cost (net of anydiscount or premium on acquisition). Any fair value adjustments already recognised are released from reserves at the time of thesale.When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objectiveevidence that the asset is impaired, the cumulative loss recognised in equity is removed and recognised in the income statement.CASH AND CASH EQUIVALENTSFor the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturityfrom the date of acquisition, including cash and non-restricted balances with central banks and amounts due from other banks.PROVISIONS AND CONTINGENT LIABILITIESA provision is recognised when there is a present obligation as a result of a past event, it is probable that the obligation will besettled and the amount can be estimated reliably.Contingent liabilities have not been recognised.EXCEPTIONAL ITEMSExceptional items are items of income and expenditure that, in the judgement of management, should be disclosed separately onthe basis that they are material, either by their nature or their size, to an understanding of the Society’s financial performance andsignificantly distort the comparability of financial performance between periods.39