The Christie NHS FT Annual Report & Accounts 2019-20
Consolidated Accounts of The Christie NHS Foundation Trust 2019-2020
23. Financial instruments
IFRS 9 requires disclosure of the role that financial instruments have had during the year in creating or changing the risks an entity faces in undertaking its activities. Under the NHS financial regime the service provider relationship that the Trust has with its commissioners and the way they are funded, the Trust is not exposed to the degree of financial risk faced by business entities. Also financial instruments play a much more limited role in creating or changing risk than would be typical of the listed companies to which IFRS 9 mainly applies. The Trust has limited powers to borrow or invest surplus funds and financial assets and liabilities are generated by day-to-day operational activities rather than being held to change the risks facing the Trust in undertaking its activities.
Market risk
Market risk is the possibility that financial loss might arise as a result of changes in such measures as interest rates and stock market movements. The Trust's transactions are almost all undertaken in sterling and so it is not exposed to foreign exchange risk. It holds no significant investments other than short term bank deposits. Other than cash balance, the Trust's financial assets and liabilities carry nil or fixed rates of interest and the Trust's income and operating cash-flows are substantially independent of changes in market interest rates.
Liquidity risk
Liquidity risk is the possibility that the Trust might not have the funds available to meet it's commitments to make payments. Prudent liquidity risk management includes maintaining sufficient cash and the availability of funding from an adequate amount of committed credit facilities.
The Trust's net operating costs were incurred under annual service agreements primarily with NHS England, which are financed from resources voted annually by Parliament. The Trust has achieved a risk ratio for liquidity of 1 (lowest risk) as defined by NHS Improvement's compliance framework. This illustrates the liquidity risk to the Trust is low.
Interest-Rate Risk
All of the Trust's financial assets and financial liabilities carry nil or fixed rates of interest, the Trust is not, therefore, exposed to significant interest-rate risk.
Foreign Currency Risk The Trust has negligible foreign currency income or expenditure.
23.1 Fair value measurement of financial assets
Financial assets and financial liabilities measured at fair value in the Statement of Financial Position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: unobservable inputs for the asset of liability
The following table shows the levels within the hierarchy of financial assets measured at fair value on a recurring basis:
As at 31 March 2020
Level 1
Level 2
Level 3
Total £000
£000
£000
£000
Financial assets Investments listed on the Stock Exchange - note 11.3
403
0
403
0 0
Investments in Joint Ventures - note 11.1 Other financial assets - note 13.4
0 0
20,747
20,747
0
19
19
Level 1
Level 2
Level 3
Total £000
As at 31 March 2019
£000
£000
£000
Financial assets Investments listed on the Stock Exchange - note 11.3
0 0
470
0
470
Investments in Joint Ventures - note 11.1 Other financial assets - note 13.4
0 0
25,362
25,362
0
60
60
The level 3 valuation for investments in joint ventures is recognised at cost the carrying amount increased or decreased to recognise The Christie's share of its profit or loss. The level 3 valuation for other financial assets is based on the Administrator's assessment of potential recovery.
23.2 Fair value measurement of non financial assets
The following table shows the levels within the hierarchy of non-financial assets measured as detailed in note 1.4.2:
As at 31 March 2020
Level 1
Level 2
Level 3
Total £000
£000
£000
£000
Investment property - note 11.4
0
0
0
0
Level 1
Level 2
Level 3
Total £000
As at 31 March 2019
£000
£000
£000
Investment property - note 11.4
0
0
0
0
41 203
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