Week 7 Notes Fair Value Accounting Lecture Outcomes We will be looking at how these accounting

It includes both income applied with limit as outlined by the Scottish Budget documents and income not applied. For income categorised as being applied with limit, any excess income over that approved is surrendered to the Scottish Consolidated Fund. The grantor will recognise a liability for the capital value of the contract.

The material uncertainty created by COVID-19 is especially relevant to the valuation of Land and Buildings, and further information is available about the estimated valuations in note 7. There are many indicators of impairment including loss of customers or key personnel or material changes in technology or market conditions. If an entity decides that the goodwill is impaired, it must be written down to its recoverable amount.

3 Property, Plant and Equipment (PPE)

In order to put the necessary administrative structures in place, Scottish Ministers announced plans for the support in March 2020 with schemes, administered by Local Authorities, scheduled to commence from 1 April 2020. On 30 March, the Scottish Government issued guidance to Local Authorities on the eligibility for support, to support the consideration by Local Authorities of applications from businesses. Student Loans Company data – used for borrower characteristics, loan amounts and for derivation of earnings and employment models and income distribution in early career stages. Also used in frictional adjustments, such as part-year employment models. Student loans are valued in accordance with IFRS 9, and are recognised at fair value through the Statement of Comprehensive Net Expenditure . The value at any time is dependent upon macroeconomic conditions, forecast over the long term 30 year repayment profile.

It also has implications across the world of business, because the accounting basis—whether fair value or historical cost—affects investment choices and management decisions. This is because after the financial crisis a lot of companies had massive write downs. Easter Ross – This scheme is a redevelopment of County Hospital, Invergordon into a Primary Care Centre and combines a community hospital and a health centre, integrating primary and community care into one community health resource. The estimated capital value at the commencement of the contract was £9m and the PFI property will revert to the board at the end of the contract.

IAS 16 Property, Plant and Equipment requires impairment testing and, if necessary, recognition for property, plant, and equipment. An item of property, plant, or equipment shall not be carried at more than recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. Introduction- Measurement – important but unresolved by conceptual frameworks – this is a big chapter in conceptual frameworks. At the moment we have historic cost vs. fair value model – it is difficult to choose.

The Board has one contract financed under a Public Finance Initiative and one under the Non Profit Distributing . Indemnity clause in roads contracts to compensate Network Rail for any damage or loss of access. Guarantees for 10 local government pension schemes, as a result of Visit Scotland taking on the staff from the local area tourist boards. The Scottish Government has underwritten the Abellio ScotRail and Serco Caledonian Sleeper pension funds, in line with guarantees provided to other train operators by the Department for Transport. For further details on the Forestry Grant and the Rural Priorities commitments, which arose from the Scottish Rural Development Plans, see the Scottish Forestry annual report and accounts.

Criteria for Held for Sale Accounting

M77 Fenwick to Malletsheugh – This is a joint PPP entered into by the Scottish Government, East Renfrewshire and South Lanarkshire Councils. The project covers the design, construction, financing and operation of 15km of the new Scottish motorway and a new 9km local link road between the new motorway and the A726 trunk road. Whitehills Community Resource Centre – Covers Forfar, Kirriemuir and the surrounding area in conjunction with Angus Council and Lippen Care. The contract commenced 21 March 2005 and will be completed 21 March 2030, when NHS Tayside will become owners of the facility.

That liability does not include the interest charge and service elements, which are expensed annually through the relevant portfolio outturn statement. Downward movements in value are set off against any credit balance held in the revaluation reserve until the credit is exhausted and thereafter charged to the relevant portfolio outturn statement. The preparation of these accounts requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenditure.

For example, an asset has been purchased at $20,000 and has accumulated depreciation of $9,000. Entities with property, plant and equipment stated at revalued amounts are also required to make disclosures under IFRS 13 Fair Value Measurement. Functions under the Energy Act 2016 in relation to decommissioning offshore renewable energy installations in Scottish waters transferred to Scottish Ministers on 1st April 2017. This also means that the Scottish Government is now the funder of last resort in cases where the developers/owners cannot meet their decommissioning obligations.

Provisions for liabilities and charges (continued)

Technical knowledge or intellectual property that is unique to the company. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms are legally separate and independent entities. The depreciable amount should be allocated on a systematic basis over the asset’s useful life [IAS 16.50]. IAS 16 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005.

Inverurie Centres – Service Concession agreements with HUB North of Scotland Ltd for occupancy of the Inverurie Health and Community Care Hub effective 23 July 2018, Fosterhill Health Centre effective 8 May 2018 and the Inverurie Health and Community Care Hub effective 23 July 2018. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs. Woodside Health Centre – Service Concession agreement with HUB North of Scotland Ltd for occupancy of Woodside Health Centre effective 28 June 2014. Forres Health Centre – Service Concession agreement with HUB North of Scotland Ltd for occupancy of Forres Health Centre effective 9 August 2014. Aberdeen Health and Community Care Village – Service Concession agreement with HUB North of Scotland Ltd for occupancy of the Aberdeen Health and Community Care Village effective 14th November 2013. Further details of the individual contracts, including estimated capital value, can be found in the individual accounts of the NHS bodies in Scotland, Scottish Prison Service and Transport Scotland.

Losses in value reflected in valuations are accounted for in accordance with IAS 36, Impairment of Assets as adapted by the FReM which states that impairment losses that arise from a clear consumption of economic benefit should be taken to the outturn statement. The balance on any revaluation reserve to which the impairment would have been charged under IAS 36 should be transferred to the general fund. Vessels and aircraft saitama inu chart are valued at depreciated replacement cost, and other plant and equipment assets are reported at depreciated historic cost. Accounting standards require discontinued operations to be presented separately in the financial statements. This allows a realistic and fair assessment of the company’s future financial results. The post-tax profit/loss of the discontinued operations is added to any post-tax gain/loss on disposal.

SIC-14 — Property, Plant and Equipment – Compensation for the Impairment or Loss of Items

Ayrshire and Arran Woodland View – sharing a site in Irvine with the Ayrshire Central Hospital. The building is a NPD model and reached practical completion and handover on the 1st April 2016. The building provides a Mental Health and Frail Elderly inpatient facility for Ayrshire. The 25 year contract period commenced on the 1st April 2016 and will be completed on the 31st March 2041. At the end of the contract period the building will revert to NHS ownership. There are a number of areas where the Scottish Government is exposed to potential market risk.

Claims against former independent Conveyancing and Executory Practitioners in Scotland. This is a contingent liability relating to an agreement to meet any valid claims arising from the acts or omissions of past independent conveyancing and executory practitioners, as defined by the Law Reform Scotland Act 1990. The amount of the obligation cannot be measured with sufficient reliability. Aberdeen Western Peripheral Road/Balmedie and Tipperty – The project involves the construction of a new dual carriageway around the City of Aberdeen and upgrades the road between Balmedie and Tipperty to dual carriageway. The NPD contract also incorporates the management, operation and maintenance of these roads for the next 30 years. The unitary charge payments become committed in phases from Autumn 2016 and will cease in 2048.

Objective of IAS 16

If the non-controlling interest is held at the proportionate method, then the entire impairment is allocated to the group due to the fact that no goodwill has been attributed to the non-controlling interest. The subsidiary must hold any inventory at the lower of cost and net realisable value, but this inventory must be reflected in the consolidated statement of financial position at fair value. This will result in an increase to inventory value and a decrease in goodwill. One of the simplest methods of calculating goodwill is by subtracting the fair market value of a company’s net identifiable assets from the price paid for the acquired business. If company X is worth €350,000 in net assets or open market value but is purchased for €400,000, the difference (€50,000) would be recorded on the balance sheet as goodwill.

• As described above, there are a number of variables used in the model, and adjusting any of these variables will have an impact on the overall valuation.
• This is the accounting policy of Vodaphone in their annual report which is freely available.Accounting policies – P. 211Business combinationsAcquisitions of subsidiaries are accounted for using the acquisition method.
• Guarantees for 10 local government pension schemes, as a result of Visit Scotland taking on the staff from the local area tourist boards.
• Subsequent revaluations are accounted for in the revaluation reserve, and impairments may be charged to the outturn statement.
• The acquiree’s identifiable assets and liabilities are recognised at their fair values at the acquisition date.

Here the valuer has based their assessment on the cost of replacing the service potential of the assets and the uncertainty relates to the estimated costs of, rather than the extent of, service potential to be replaced. Further details of the impact of this material uncertainty can be found in the individual NHS Trust accounts and the Scottish Prison Service accounts. Additional pension liabilities arising from early retirements are not funded by the scheme except where the retirement is due to ill health. The full amount of the liability for the additional costs is charged to the outturn statement at the time the Board commits itself to the retirement, regardless of the method of payment. NPD/PPP/PFI transactions are accounted for in accordance with IFRIC 12, Service Concession Arrangements which sets out how NPD/PPP/PFI transactions are to be accounted for in the private sector.

23 Cash and Cash Equivalents

The Scottish Government have some properties where the rent at review is calculated by reference to the Retail Prices Index or some other index . As described above, there are a number of variables used in the model, and adjusting any of these variables will have an impact on the overall valuation. Each of these variables can be adjusted https://cryptolisting.org/ independently of the others, resulting in a large number of combinations, so the choice of alternative scenarios is extensive. We have chosen the parameters carefully to reflect what we believe to be the most accurate position at the reporting date, but we recognise that adjusting these variables will have an impact on the valuation.

[But accounting standards haven’t really come down on a decision – they give you a choice which causes confusion – lack of comparability! ] This not only creates powerful incentives for bonus-hungry bosses to push for an aggressive view; it is also very rule-bound — and the enemy of the prudent approach. Yet a change in the IFRS accounting standard the following day lopped £1 off net assets and meant all of its cash belonged to clients. Capita survived the shock — but at the cost of a £700m rescue rights issue. The hospital and services are provided under a contract between Lanarkshire Health Board and Summit Healthcare Limited, with hard and soft facilities management services being supplied under a subcontract to SERCO health Limited.

A note to the accounts provides an analysis of total Programme income between income applied and income not applied . Operating income is income that relates directly to the operating activities of the Scottish Government. It includes fees and charges for services provided, on a full cost basis, to external customers, public repayment work and income from investments.