Subject

• property – market value.
Notes to the Core Financial Statements
The change in the net pension’s liability is analysed into the following components:
• current service cost – the increase in liabilities as a result of years of service earned this year – allocated
to the revenue accounts of services for whom the employees worked;
• past service cost – the increase in liabilities arising from current year decisions whose effect relates to
years of service earned in earlier years – debited to the Net Cost of Services as part of Non Distributed
Costs;
• net interest on the net defined benefit liability – this is made up of two elements: (1) the value of the
liabilities increases as a year’s worth of interest is added on; and (2) the increase in assets used to fund
pensions in line with the discount rate. This is charged to the Financing and Investment Income and
Expenditure line of the CI&ES;
• return on plan assets – the funds that are built up to finance the pension payments are the plan assets
and this shows the return on them excluding amounts included in net interest on the net defined benefit
liability. This is charged to the Pensions Reserve as Other Comprehensive Income and Expenditure;
• changes in financial/democratic assumptions, loss of defined benefit obligation, other losses and return
on assets less interest – changes in the net pensions liability that arise because events have not
coincided with assumptions made at the last actuarial valuation or because the actuaries have updated
their assumptions. These are charged to the Pensions Reserve as Other Comprehensive Income and
Expenditure;
• contributions by scheme participants – cash paid by staff as employee contributions to the KCC Pension
Fund;
• employer contributions – cash paid by the Council to the KCC Pension Fund; and
• benefits paid – payments made directly to pensioners from the KCC Pension Fund.
The negative balance that arises on the Pensions Reserve measures the beneficial impact to the General Fund of
being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by
employees.
The Fund’s Actuary determines employers’ contributions to the pension scheme on a triennial basis. The last
actuarial valuation took place on 31 March 2013 and the change in contribution rates as a result of that valuation
took effect from 1 April 2014.
Estimation Techniques
Estimation techniques are the methods adopted by the Council to arrive at estimated monetary amounts,
corresponding to the measurement bases selected for assets, liabilities, gains, losses and changes in reserves.
Details of where these have been used are contained in the relevant note to the Accounts. Where a change in an
estimation technique is material, an explanation is also provided of the change and its effect on the results for the
current period.
Financial Instruments
Financial instruments are recognised on the Balance Sheet only when the Council becomes a party to the
contractual provisions of the instrument. Trade receivables are an exception as they are not recognised when the
Council becomes committed to supply the goods or service but when the ordered goods or services have been
delivered or rendered. Similarly, trade payables are recognised when the ordered goods or services have been
received.
Financial assets are classified as one of:
• available-for-sale – this category includes;
o Money Market Funds (MMFs) and are initially measured and carried at fair value;
o British Government Stocks which are shown in the Balance Sheet at cost; and
o Investment in CCLA Property Fund carried at fair value.
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