AH ANNUAL REPORT 2018

of Financial Position’ by the trust. In accordance
with IAS 17, the underlying assets are recognised
as property, plant and equipment, together with
an equivalent finance lease liability. Subsequently,
the assets are accounted for as property, plant and
equipment and/or intangible assets as appropriate.
The annual contract payments are apportioned
between the repayment of the liability, a finance cost
and the charges for services.
The service charge is recognised in operating expenses
and the finance cost is charged to finance costs in the
Statement of Comprehensive Income.
Components of the asset replaced by the contractor
during the contract (lifecycle replacement) are
capitalised where they meet the trust’s criteria for
capital expenditure. They are capitalised at the
time they are provided by the operator and are
measured initially at cost. The element of the annual
unitary payment allocated to lifecycle replacement
is pre-determined for each year of the contract
from the operator’s planned programme of lifecycle
replacement. Where the lifecycle component is
provided earlier or later than expected, a short-term
accrual or prepayment is recognised respectively.
Where the fair value of the lifecycle component is
less than the amount determined in the contract, the
difference is recognised as an expense when the
replacement is provided. If the fair value is greater than
the amount determined in the contract, the difference
is treated as a ‘free’ asset and a deferred income
balance is recognised. The deferred income is released
to operating income over the shorter of the remaining
contract period or the useful economic life of the
replacement component.
1.7.6 Useful Economic Lives of
Property, Plant and Equipment
Useful economic lives reflect the total life of an asset
and not the remaining life of an asset. The range of
useful economic lives are shown in the table below:
Buildings, Excluding
Dwellings
Minimum
Life
Years
Maximum
Life
Years
- 88
Dwellings 37 37
Plant and Machinery 2 15
Transport Equipment - -
Information Technology 2 10
Furniture and Fittings 10 10
Finance-leased assets (including land) are depreciated
over the shorter of the useful economic life or the lease
term, unless the trust expects to acquire the asset
at the end of the lease term in which case the assets
are depreciated in the same manner as owned assets
above.
1.8 Intangible Assets
1.8.1 Recognition
Intangible assets are non-monetary assets without
physical substance which are capable of being sold
separately from the rest of the trust’s business or
which arise from contractual or other legal rights. They
are recognised only where it is probable that future
economic benefits will flow to, or service potential be
provided to, the trust, where they are capable of being
used in the trust’s activities for more than one year,
where the cost of the asset can be measured reliably
and they have a cost of at least £5,000.
Software which is integral to the operation of hardware,
e.g. an operating system, is capitalised as part of
the relevant item of property, plant and equipment.
Software which is not integral to the operation of
hardware, e.g. application software, is capitalised as an
intangible asset.
Expenditure on research activities is not capitalised, it
is recognised as an operating expense in the period in
which it is incurred.
As it cannot be demonstrated that the IAS38 criteria for
capitalisation can be met, expenditure on development
is not capitalised.
1.8.2 Measurement
Intangible assets are recognised initially at cost,
comprising all directly attributable costs needed to
create, produce and prepare the asset to the point that
it is capable of operating in the manner intended by
management.
Subsequently intangible assets are measured at current
value in existing use. Where no active market exists,
intangible assets are valued at the lower of depreciated
replacement cost and the value in use where the asset
is income generating. Revaluations gains and losses
and impairments are treated in the same manner as
for property, plant and equipment. An intangible asset
which is surplus with no plan to bring it back into use
is valued at fair value under IFRS 13, if it does not meet
the requirements of IAS 40 of IFRS 5.
Intangible assets held for sale are measured at the
lower of their carrying amount or “fair value less costs
to sell”.
Alder Hey Children’s NHS Foundation Trust 166
Annual Report & Accounts 2017/18