MPA - statement of accounts

22Statement of Accounting Policies13. VATIncome and expenditure excludes any amountsrelated to VAT, as all VAT collected is payable to HMRevenue & Customs and all VAT paid is recoveredfrom it.14. Financial LiabilitiesFinancial liabilities are initially measured at fair valueand carried at their amortised cost. Annual charges tothe Income and Expenditure Account for interestpayable are based on the carrying amount of theliability, multiplied by the effective rate of interest forthe instrument. For most of the borrowings that theMPA has, this means that the amount presented in theBalance Sheet is the outstanding principal repayable,interest is charged to the Income and ExpenditureAccount which is the amount payable for the yearcontained within the loan agreement.15. Financial AssetsFinancial assets are classified into two types:• Loans and receivables – assets that have fixed ordeterminable payments but are not quoted in anactive market.• Available for sale assets – assets that have aquoted market price and/or do not have fixed ordeterminable payments.Loans and receivables are initially measured at fairvalue and carried at their amortised cost. Annualcredits to the Income and Expenditure Account forinterest receivable are based on the carrying amountof the asset multiplied by the effective rate of interestfor the instrument. For most of the loans that the MPAhas made, this means that the amount presented inthe Balance Sheet is the outstanding principalreceivable, interest is credited to the Income andExpenditure Account with the amount receivable forthe year contained within the loan agreement.16. Contingent Assets and LiabilitiesThe MPA recognises material contingent assets andliabilities, which arise from past events, whoseexistence can only be confirmed by the occurrence ofone or more uncertain future events, which are notwholly within the MPA’s control. Details of the extent ofthe potential liabilities are described in the notes to theBalance Sheet.17. Stock and Assets Under ConstructionStock is shown in the Balance Sheet at the lower ofcost or net realisable value of the separate groups ofstock. Assets under construction are recorded in theBalance Sheet at cost.18. Private Finance InitiativePFI contracts are agreements to receive services,where the responsibility for making available the fixedassets needed to provide the service passes to thePFI contractor. Payments made by the MPA undercontract are charged to revenue to reflect the value ofservices received in each financial year. The MPA hasentered into two long term contractual agreementsunder PFI whereby the contractor is responsible forthe design, construction, finance and maintenance offour new police stations in South-East London and anew public order and firearms training centre. SuchPFI schemes meet the conditions set out in FRS 5Substance of Transactions and professional advicehas been provided which indicates there is no impacton the Balance Sheet of the Authority (other thanmentioned above). Details of the ongoing revenuecommitments are described on page 31.The loans made by the MPA are short-terminvestments consisting of fixed term deposits. TheMPA has no assets available for sale.