Annual Report and Accounts 2012/13 - Royal Bournemouth Hospital

Financial AccountsLoans and receivables are recognisedinitially at fair value, net of transactioncosts, and are measured subsequentlyat amortised cost, using the effectiveinterest method. The effective interestrate is the rate that discounts exactlyestimated future cash receipts throughthe expected life of the financial asset or,when appropriate, a shorter period, to thenet carrying amount of the financial asset.Interest on loans and receivables iscalculated using the effective interestmethod and credited to the Statement ofComprehensive Income.Other financial liabilitiesAll other financial liabilities are recognisedinitially at fair value, net of transactioncosts incurred, and are measuredsubsequently at amortised cost using theeffective interest method. The effectiveinterest rate is the rate that discountsexactly estimated future cash paymentsthrough the expected life of the financialliability or, when appropriate, a shorterperiod, to the net carrying amount of thefinancial liability.They are included in current liabilitiesexcept for amounts payable more than 12months after the Statement of FinancialPosition date, which are classified as noncurrentliabilities.Interest on financial liabilities carried atamortised cost is calculated using theeffective interest method and charged tothe Statement of Comprehensive Income.Impairment of financial assetsAt the Statement of Financial Positiondate, the Foundation Trust assesseswhether any financial assets, other thanthose held at ‘fair value through incomeand expenditure’ are impaired. Financialassets are impaired and impairmentlosses are recognised if, and only if, thereis objective evidence of impairment asa result of one or more events whichoccurred after the initial recognition ofthe asset and which has an impact on theestimated future cashflows of the asset.For financial assets carried at amortisedcost, the amount of the impairment loss ismeasured as the difference between theasset’s carrying amount and the presentvalue of the revised future cashflowsdiscounted at the asset’s original effectiveinterest rate. The loss is recognised inthe Statement of Comprehensive Incomeand the carrying amount of the asset isreduced directly.1.10 LeasesFinance leasesWhere substantially all risks and rewardsof ownership of a leased asset areborne by the Foundation Trust, theasset is recorded as property, plant andequipment and a corresponding liabilityis recorded. The value at which both arerecognised is the lower of the fair valueof the asset or the present value of theminimum lease payments, discountedusing the interest rate implicit in the lease.The asset and liability are recognisedat the commencement of the lease.Thereafter the asset is accounted for asan item of property, plant and equipment.The annual rental is split between therepayment of the liability and a financecost so as to achieve a constant rateof finance over the life of the lease.The annual finance cost is chargedto Finance Costs in the Statement ofComprehensive Income. The lease liabilityis de-recognised when the liability isdischarged, cancelled or expires.Operating leasesOther leases are regarded as operatingleases and the rentals are chargedto operating expenses on a straightlinebasis over the term of the lease.Operating lease incentives received areadded to the lease rentals and chargedto operating expenses over the life of thelease.Leases of land and buildingsWhere a lease is for land and buildings,the land component is separated from thebuilding component and the classificationfor each is assessed separately. Leasedland is treated as an operating lease.Annual Report and Accounts 2012/13 29