FINANCIAL REPORT AND ACCOUNTS 2011 - States Assembly

NOTES TO THE ACCOUNTSNOTE 1: STATEMENT OF ACCOUNTING POLICIESXCritical Judgements and key sources of estimation uncertaintyX.1 In the application of the State’s accounting policies, which are described in this note, it isnecessary to make judgements, estimates and assumptions about the carrying amountsof assets and liabilities that are not readily apparent from other sources. The estimatesand associated assumptions are based on historical experience and other factors that areconsidered to be relevant. Actual results may differ from these estimates.X.2 The estimates and underlying assumptions are reviewed on an ongoing basis. Revisionsto accounting estimates are recognised in the period in which the estimate is revised if therevision affects only that period, or in the period of the revision and future periods if therevision affects both current and future periods.X.3 Valuation of AssetsIn determining the value of property assets under FRS15 ‘Tangible Fixed Assets,’ there is adegree of uncertainty and judgement involved. The Operating Cost Statement, Statementof Total Recognised Gains and Losses and Balance Sheet items relating to the States’accounting for valuation of properties under FRS15 are based on external professionalvaluations. The States use external professional valuers to determine the relevant amounts.With market conditions that currently prevail there is likely to be a greater than usual degreeof uncertainty.X.4 Investments, other than those held for strategic purposes, are accounted for at fair value.If a market value cannot be readily ascertained, the investment is valued on a basisdetermined by the holder in agreement with the Treasurer of the States, to be appropriatein the circumstances. Market value is impacted by a number of factors, including the typeof investment and the characteristics specific to the investment. Investments with quotedprices will have a lesser degree of judgement used in measuring fair value. Fair valuesdetermined through the use of models or other valuation methodologies will have a higherdegree of judgement due to the assumptions used in the valuation.X.5 Valuation of PensionsThe States provides various pension schemes for its employees (see policy P for details)including some accounted for in accordance with FRS17 ‘Retirement Benefits’. TheOperating Cost Statement, Statement of Total Recognised Gains and Losses and BalanceSheet items relating to the States’ accounting for pension schemes under FRS17 are basedon actuarial valuations. Inherent in these valuations are key assumptions, including discountrates, earnings increases, mortality rates and inflation. These actuarial assumptions arereviewed annually in line with the requirements of FRS17 and are based on prior experience,market conditions and the advice of the scheme actuaries.87