The Christie Foundation Trust Annual Report and Accounts 2021-22

Consolidated Accounts of The Christie NHS Foundation Trust 2021-2022

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 2022

Level 1

Level 2

Level 3

Total £000

£000

£000

£000

Financial assets Investments listed on the Stock Exchange - note 11.3

515

0

515

0 0

Investments in Joint Ventures - note 11.1

0 0

22,692

22,692

Other financial assets - note 13.4

0

0

0

As at 31 March 2021

Level 1

Level 2

Level 3

Total £000

£000

£000

£000

Financial assets Investments listed on the Stock Exchange - note 11.3

0 0

510

0

510

Investments in Joint Ventures - note 11.1

0 0

17,796

17,796

Other financial assets - note 13.4

0

8

8

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.

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