Camden and Islington NHS Foundation Trust. Annual accounts for the year ended 31 March 2016

Transcription

1 Camden and Islington NHS Foundation Trust Annual accounts for the year ended 31 March 2016

2 Foreword to the accounts Camden and Islington NHS Foundation Trust These accounts, for the year ended 31 March 2016, have been prepared by Camden and Islington NHS Foundation Trust in accordance with paragraphs 24 & 25 of Schedule 7 within the National Health Service Act Signed Name Angela McNab Job title Chief Executive Date 25 May

3 Statement of Comprehensive Income 2015/ /15 Note Operating income from patient care activities 3 107, ,001 Other operating income 4 30,672 32,150 Total operating income from continuing operations 138, ,151 Operating expenses 5, 7 (136,131) (135,766) Operating surplus/(deficit) from continuing operations 2,022 5,385 Finance income Finance expenses 11 (7) (4) PDC dividends payable (3,867) (3,640) Net finance costs (3,700) (3,460) Share of profit / (loss) Gains/ (losses) arising from transfers by absorption Movement in the fair value of investment property and other investments Corporation tax expense Surplus/(deficit) for the year from continuing operations (1,678) 1,925 Surplus/(deficit) on discontinued operations and the gain/(loss) on disposal of discontinued operations Surplus/(deficit) for the year (1,678) 1,925 Other comprehensive income Will not be reclassified to income and expenditure: Impairments 6 (14,372) (402) Revaluations 15, 17 6,942 7,558 Share of comprehensive income from associates and joint ventures Other recognised gains and losses - - Remeasurements of the net defined benefit pension scheme liability/asset Other reserve movements - - May be reclassified to income and expenditure when certain conditions are met: Fair value gains/(losses) on available-for-sale financial investments Recycling gains/(losses) on available-for-sale financial investments Total comprehensive income/(expense) for the year (9,108) 9,081 2

4 Statement of Financial Position Non-current assets 31 March March 2015 Note Intangible assets Property, plant and equipment , ,706 Investment property Investments in associates (and joint ventures) Other investments Trade and other receivables Other financial assets Other assets Total non-current assets 123, ,706 Current assets Inventories Trade and other receivables 21 13,933 10,073 Other financial assets Non-current assets for sale and assets in disposal groups Cash and cash equivalents 26 41,139 50,987 Total current assets 55,072 61,060 Current liabilities Trade and other payables 27 (23,684) (25,017) Other liabilities 29 - (1,013) Borrowings Other financial liabilities Provisions 32 (868) (795) Liabilities in disposal groups Total current liabilities (24,552) (26,825) Total assets less current liabilities 153, ,941 Non-current liabilities Trade and other payables Other liabilities Borrowings Other financial liabilities Provisions 32 (49) (60) Total non-current liabilities (49) (60) Total assets employed 153, ,881 Financed by Public dividend capital 60,348 59,533 Revaluation reserve 52,191 59,621 Available for sale investments reserve - - Other reserves - - Merger reserve - - Income and expenditure reserve 41,049 42,727 Total taxpayers' equity 153, ,881 The notes on pages 17 to 51 form part of these accounts. Approved by and signed on behalf of the Board by: Signed Name Angela McNab Position Chief Executive Date 25 May

5 Statement of Changes in Equity for the year ended 31 March 2016 Public dividend capital Revaluation reserve Available for sale investment reserve Other reserves Merger reserve Income and expenditure reserve Total 000 Taxpayers' and others' equity at 1 April brought forward 59,533 59, , ,881 At start of period for new FTs Surplus/(deficit) for the year (1,678) (1,678) Transfers by absorption: transfers between reserves Transfer from revaluation reserve to income and expenditure reserve for impairments arising from consumption of economic benefits Other transfers between reserves Impairments - (14,372) (14,372) Revaluations - 6, ,942 Transfer to retained earnings on disposal of assets Share of comprehensive income from associates and joint ventures Fair value gains/(losses) on available-for-sale financial investments Recycling gains/(losses) on available-for-sale financial investments Other recognised gains and losses Remeasurements of the defined net benefit pension scheme liability/asset Public dividend capital received Public dividend capital repaid Public dividend capital written off Other movements in public dividend capital in year Other reserve movements Taxpayers' and others' equity at 31 March ,348 52, , ,588 4

6 Statement of Changes in Equity for the year ended 31 March 2015 Public dividend capital Revaluation reserve Available for sale investment reserve Other reserves Merger reserve Income and expenditure reserve Total 000 Taxpayers' and others' equity at 1 April brought forward 59,341 52, , ,608 Prior period adjustment Taxpayers' and others' equity at 1 April restated 59,341 52, , ,608 At start of period for new FTs Surplus/(deficit) for the year ,925 1,925 Transfers by absorption: transfers between reserves Transfer from revaluation reserve to income and expenditure reserve for impairments arising from consumption of economic benefits Other transfers between reserves Impairments - (402) (402) Revaluations - 7, ,558 Transfer to retained earnings on disposal of assets Share of comprehensive income from associates and joint ventures Fair value gains/(losses) on available-for-sale financial investments Recycling gains/(losses) on available-for-sale financial investments Other recognised gains and losses Remeasurements of the defined net benefit pension scheme liability/asset Public dividend capital received Public dividend capital repaid Public dividend capital written off Other movements in public dividend capital in year Other reserve movements Taxpayers' and others' equity at 31 March ,533 59, , ,881 5

7 Information on reserves: Public dividend capital reserve Public dividend capital (PDC) is a type of public sector equity finance based on the excess of assets over liabilities at the time of establishment of the predecessor NHS trust. Additional PDC may also be issued to NHS foundation trusts by the Department of Health. A charge, reflecting the cost of capital utilised by the NHS foundation trust, is payable to the Department of Health as the public dividend capital dividend. Revaluation reserve Increases in asset values arising from revaluations are recognised in the revaluation reserve, except where, and to the extent that, they reverse impairments previously recognised in operating expenses, in which case they are recognised in operating income. Subsequent downward movements in asset valuations are charged to the revaluation reserve to the extent that a previous gain was recognised unless the downward movement represents a clear consumption of economic benefit or a reduction in service potential. Available-for-sale investment reserve This reserve comprises changes in the fair value of available-for-sale financial instruments. When these instruments are derecognised, cumulative gains or losses previously recognised as other comprehensive income or expenditure are recycled to income or expenditure. Merger reserve This reserve reflects balances formed on merger of NHS bodies. Income and expenditure reserve The balance of this reserve is the accumulated surpluses and deficits of the NHS foundation trust. 6

8 Statement of Cash Flows Cash flows from operating activities 2015/ /15 Note Operating surplus/(deficit) 2,022 5,385 Non-cash income and expense: Depreciation and amortisation 5.1 4,363 3,904 Impairments and reversals of impairments 6 2, (Gain)/loss on disposal of non-current assets Income recognised in respect of capital donations Amortisation of PFI deferred credit Non-cash movements in on-sofp pension liability - - (Increase)/decrease in receivables and other assets (3,723) (2,276) (Increase)/decrease in inventories - - Increase/(decrease) in payables and other liabilities (2,285) 5,821 Increase/(decrease) in provisions Tax (paid)/received - - Operating cash flows movement of discontinued operations - - Other movements in operating cash flows - - Net cash generated from/(used in) operating activities 2,830 13,180 Cash flows from investing activities Interest received Purchase and sale of financial assets - - Purchase of intangible assets - - Sales of intangible assets - - Purchase of property, plant, equipment and investment property (9,542) (8,299) Sales of property, plant, equipment and investment property - - Receipt of cash donations to purchase capital assets - - PFI lifecycle prepayments - - Investing cash flows of discontinued operations - - Net cash generated from/(used in) investing activities (9,364) (8,107) Cash flows from financing activities Public dividend capital received Public dividend capital repaid - - Movement on loans from the Department of Health - - Movement on other loans - - Capital element of finance lease rental payments - - Other capital receipts - - Other interest paid (1) - PDC dividend paid (4,128) (3,493) Financing cash flows of discontinued operations - - Cash flows from (used in) other financing activities - - Net cash generated from/(used in) financing activities (3,314) (3,301) Increase/(decrease) in cash and cash equivalents (9,848) 1,772 Cash and cash equivalents at 1 April 50,987 49,215 Cash and cash equivalents at start of period for new FTs - - Cash and cash equivalents transferred under absorption accounting Cash and cash equivalents at 31 March 26 41,139 50,987 7

9 Notes to the Accounts Note 1 Accounting policies and conventions Monitor is responsible for issuing an accounts direction to NHS foundation trusts under the NHS Act Monitor has directed that the financial statements of NHS foundation trusts shall meet the accounting requirements of the FT ARM which shall be agreed with the Secretary of State. Consequently, the following financial statements have been prepared in accordance with the FT ARM 2015/16 issued by Monitor. The accounting policies contained in that manual follow IFRS and HM Treasury s FReM to the extent that they are meaningful and appropriate to NHS foundation trusts. The accounting policies have been applied consistently in dealing with items considered material in relation to the accounts. These accounts have been prepared under the historical cost convention modified to account for the revaluation of land and buildings. The Board of Directors is required to make a quarterly declaration to NHS Improvement (previously Monitor) concerning the Trust s ability to continue to operate at a financially sound level for the subsequent 12 months. After making enquiries, the directors have a reasonable expectation that the Trust has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts. 1.1 Consolidation Subsidiaries Subsidiary entities are those over which the foundation trust has the power to exercise control or a dominant influence so as to gain economic or other benefits. The income, expenses, assets, liabilities, equity and reserves of subsidiaries are consolidated in full into the appropriate financial statement lines. The amounts consolidated are drawn from the published financial statements of the subsidiaries for the year (except where a subsidiary s financial year end is before 1 January or after 1 July in which case the actual amounts for each month of the foundation trust s financial year are obtained from the subsidiary and consolidated). Where subsidiaries accounting policies are not aligned with those of the foundation trust (including where they report under UK GAAP) then amounts are adjusted during consolidation where the differences are material. Subsidiaries which are classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell Associates Associate entities are those over which the foundation trust has the power to exercise a significant influence. Associate entities are recognised in the foundation trust s financial statements using the equity method. The investment is initially recognised at cost. It is increased or decreased subsequently to reflect the foundation trust s share of the entity s profit or loss or other gains and losses (e.g. revaluation gains on the entity s property, plant and equipment) following acquisition. It is also reduced when any distribution e.g. share dividends are received by the foundation trust from the associate. Associates which are classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell Joint ventures Joint ventures are separate entities over which the Trust has joint control with one or more other parties. The meaning of control is the same as that for subsidiaries. Joint ventures are accounted for by consolidating the Trust s share of the transactions, assets, liabilities, equity and reserves of the entity Joint operations Joint operations are activities which are carried on with one or more other parties but which are not performed through a separate entity. The foundation trust includes within its financial statements its share of the activities, assets and liabilities. 1.2 Income Recognition Income in respect of services provided is recognised when performance occurs and is measured at the fair value of the consideration receivable. The main source of income for the trust is by way of block contracts with commissioners in respect of healthcare services. Where income is received for a specific activity which is to be delivered in the following financial year, that income is deferred. 8

10 Income from the sale of non-current assets is recognised only when all material conditions of sale have been met, and is measured as the sums due under the sale contract. 1.3 Expenditure on Employee Benefits Short-term Employee Benefits Salaries, wages and employment-related payments are recognised in the period in which the service is received from employees. The cost of annual leave entitlement earned but not taken by employees at the end of the period is recognised in the financial statements to the extent that employees are permitted to carry-forward leave into the following period Pension costs NHS Pension Scheme Past and present employees are covered by the provisions of the NHS Pension Scheme. The scheme is an unfunded, defined benefit scheme that covers NHS employers, general practices and other bodies, allowed under the direction of Secretary of State, in England and Wales. It is not possible for the NHS foundation trust to identify its share of the underlying scheme liabilities. Therefore, the scheme is accounted for as a defined contribution scheme. Employer's pension cost contributions are charged to operating expenses as and when they become due. Additional pension liabilities arising from early retirements are not funded by the scheme except where the retirement is due to illhealth. The full amount of the liability for the additional costs is charged to the operating expenses at the time the trust commits itself to the retirement, regardless of the method of payment. The Scheme is subject to a full actuarial investigation every four years. The main purpose of which is to assess the level of liability in respect of the benefits due under the scheme (taking into account its recent demographic experience), and to recommend the contribution rates to be paid by employers and scheme members. The latest assessment of the liabilities of the Scheme is contained in the Scheme Actuary report, which forms part of the NHS Pension Scheme (England and Wales) Resource Account, published annually. These accounts can be viewed on the Business Service Authority - Pensions Division website at Local Government Superannuation Scheme Superannuation Scheme which is a defined benefit pension scheme. The foundation trust has agreed to be guided by the actuarial advice given to the London Borough with regard to the appropriate level of contribution it makes to the pension fund and accounts for this in year. 1.4 Expenditure on other goods and services Expenditure on goods and services is recognised when, and to the extent that they have been received, and is measured at the fair value of those goods and services. Expenditure is recognised in operating expenses except where it results in the creation of a noncurrent asset such as property, plant and equipment. 1.5 Property, Plant and Equipment Recognition Property, Plant and Equipment is capitalised where they are capable of being used for a period which exceeds one year and they: -Individually have a cost of at least 5,000; or -form a group of assets which individually have a cost of more than 250, collectively have a cost of at least 5,000, where the assets are functionally interdependent, they had broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single control; or -form part of the initial setting-up cost of a new building or refurbishment of a ward or unit; their individual or collective cost; -are held for use in delivering services or for administrative purposes; -have probable future economic benefits which will flow to, or they have potential to provide service to, the Trust; and -the cost of the item can be measured reliably 9

11 Where a large asset, for example a building, includes a number of components with significantly different asset lives e.g. plant and equipment, then these components are treated as separate assets and depreciated over their own useful economic lives. The Trust will categorise multi block sites as a single building if the blocks on the site operate as an integrated asset and the Trust strategically views the site as a single asset. If these two criteria are not fulfilled, the Trust will recognise each block as a separate building Measurement Valuation All property, plant and equipment assets are measured initially at cost, representing the costs directly attributable to acquiring or constructing the asset and bringing to the location and condition necessary for it to be capable of operating in the manner intended by management. All assets are measured subsequently at fair value. An item of property, plant and equipment 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. Valuations are carried out by professionally qualified valuers in accordance with the Royal Institution of Chartered Surveyors (RICS) Appraisal and Valuation Manual. The valuations of specialised operational buildings will be based upon a Modern Equivalent Asset. Non-specialised operational property and land for existing use purposes will be based on Existing Use Value. For non-operational properties including surplus land, the valuations are carried out at Market Value. Assets in the course of construction are valued at cost and are valued by professional valuers as part of the five or three-yearly valuation or when they are brought into use. Operational equipment is valued at net current replacement cost. Equipment surplus to requirements is valued at net recoverable amount. Subsequent expenditure Subsequent expenditure relating to an item of property, plant and equipment is recognised as an increase in the carrying amount of the asset when it is probable that additional future economic benefits or service potential deriving from the cost incurred to replace a component of such item will flow to the enterprise and the cost of the item can be determined reliably. Where a component of an asset is replaced, the cost of the replacement is capitalised if it meets the criteria for recognition above. The carrying amount of the part replaced is de-recognised. Other expenditure that does not generate additional future economic benefits or service potential, such as repairs and maintenance, is charged to the Statement of Comprehensive Income in the period in which it is incurred. Depreciation Items of Property, Plant and Equipment are depreciated over their remaining useful economic lives on a straight line basis, and in a manner consistent with the consumption of economic or service delivery benefits. Freehold land is considered to have an infinite life and is not depreciated. Property, Plant and Equipment which has been reclassified as Held for Sale ceases to be depreciated upon the reclassification. Assets in the course of construction and residual interests in off-statement of Financial Position PFI contract assets are not depreciated until the asset is brought into use or reverts to the trust, respectively. Asset lives fall into the following ranges: -Plant and Machinery: 5-15 years -Transport Equipment: 7 years - Information Technology: 3-8years -Furniture and Fittings: 7-10 years Revaluation and impairment Increases in asset values arising from revaluations are recognised in the revaluation reserve, except where, and to the extent that, they reverse an impairment previously recognised in operating expenses, in which case they are recognised in operating income. Decreases in asset values and impairments are charged to the revaluation reserve to the extent that there is an available balance for the asset concerned, and thereafter are charged to operating expenses. Gains and losses recognised in the revaluation reserve are reported in the Statement of Comprehensive Income as an item of other comprehensive income. 10

12 Revaluation losses are charged to the revaluation reserve to the extent that there is an available balance for the asset concerned, and thereafter are charged to operating expenses De-recognition Assets intended for disposal are reclassified as Held for Sale once all of the following criteria are met: -The asset is available for immediate sale in its present condition subject only to terms which are usual and customary for such sales; - the sale must be highly probable i.e: > management are committed to a plan to sell the asset; > an active programme has begun to find a buyer and complete the sale; > the asset is being actively marketed at a reasonable price; > the sale is expected to be completed within 12 months of the date of classification as Held for Sale ; and > the actions needed to complete the plan indicate it is unlikely that the plan will be dropped or significant changes made to it. Following reclassification, the assets are measured at the lower of their existing carrying amount and their fair value less costs to sell. Depreciation ceases to be charged and the assets are not revalued, except where the fair value less costs to sell falls below the carrying amount. Assets are de-recognised when all material sale contract conditions have been met. Property, plant and equipment which is to be scrapped or demolished does not qualify for recognition as Held for Sale and instead is retained as an operational asset and the asset s economic life is adjusted. The asset is de-recognised when scrapping or demolition occurs Donated assets Donated and grant funded fixed assets are capitalised at their current value on receipt and this value is credited to the donated asset reserve. Donated fixed assets are valued and depreciated as described above for purchased assets. The donation is credited to income at the time of receipt, unless there is a defined and specific condition that the future economic benefits are to be consumed in a manner specified, in which case, the donation is deferred within liabilities and is carried forward to future financial years to the extent that the condition has not yet been met. 1.6 Private Finance Initiatives PFI transactions which meet the IFRIC 12 definition of a service concession, as interpreted in HM Treasury s FReM, are accounted for as on-statement 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 finance cost is calculated using the implicit interest rate for the scheme. The service charge is recognised in operating expenses and the finance cost is charged to Finance Costs in the Statement of Comprehensive Income. 1.7 Intangible assets 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 and where the cost of the asset can be measured reliably. Internally generated intangible assets Expenditure on development is capitalised if it meets the following criteria: -There is a clearly defined project; -the Trust can measure reliably the expenses attributable to the asset during development; 11

13 -the outcome of the project has been assessed with reasonable certainty as to its technical feasibility and it is resulting in a product or services that will eventually be brought into use; and -adequate resources exist, or are reasonably expected to be available, to enable the project to be completed and to provide any consequential increases in working capital. Expenditure so deferred is limited to the value of future benefits expected and is amortised through the income and expenditure account on a systematic basis over the period expected to benefit from the project. It is revalued on the basis of current cost. Expenditure, which does not meet the criteria for capitalisation, is treated as an operating cost in the year in which it is incurred. Where possible, foundation trusts disclose the total amount of research and development expenditure charged in the income and expenditure account separately. However, where research and development activity cannot be separated from patient care activity it cannot be identified and is therefore not separately disclosed. Fixed assets acquired for use in research and development are amortised over the life of the associated project. Expenditure on research is not capitalised. Internally generated goodwill, brands, customer lists and similar items are not capitalised as intangible assets. Software 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. purchased computer software licences, are capitalised as intangible assets where expenditure of at least 5,000 is incurred and amortised over the shorter of the term of the licence and their useful economic lives. 1.8 Government Grants Government grants are grants from Government bodies other than income from primary care trusts or NHS trusts for the provision of services. Grants from the Department of Health, including those for achieving three star status, are accounted for as Government grants. The grant is credited to income at the time of receipt, unless there is a defined and specific condition that the future economic benefits embodied in the grant are to be consumed in a manner specified, in which case, the grant is deferred within liabilities and is carried forward to future financial years to the extent that the condition has not yet been met. 1.9 Inventories Inventories are valued at the lower of cost and net realisable value Cash, bank and overdrafts Cash, bank and overdraft balances are recorded at the current values of these balances in the NHS foundation trust s cash book. These balances exclude monies held in the foundation trust s bank account belonging to patients (see third party assets below). Account balances are only set off where a formal agreement has been made with the bank to do so. In all other cases overdrafts are disclosed within creditors. Interest earned on bank accounts and interest charged on overdrafts is recorded as, respectively, interest receivable and interest payable in the period to which they relate. Bank charges are recorded as operating expenditure in the periods to which they relate. The Trust manages its cash balances (net of loans and capital expenditure requirements) year on year, in order to maintain liquidity in line with planned levels. As a foundation trust, the Trust has no externally imposed cash or capital requirements Financial instruments and financial liabilities Recognition Financial assets and financial liabilities which arise from contracts for the purchase or sale of non-financial items (such as goods or services), which are entered into in accordance with the Trust s normal purchase, sale or usage requirements, are recognised when, and to the extent which, performance occurs i.e. when receipt or delivery of the goods or services is made. 12

14 Financial assets or financial liabilities in respect of assets acquired or disposed of through finance leases are recognised and measured in accordance with the accounting policy for leases described below. All other financial assets and financial liabilities are recognised when the Trust becomes a party to the contractual provisions of the instrument De-recognition All financial assets are de-recognised when the rights to receive cash flows from the assets have expired or the Trust has transferred substantially all of the risks and rewards of ownership. Financial liabilities are de-recognised when the obligation is discharged, cancelled or expires Classification and Measurement Financial assets are categorised as Fair Value through Income and Expenditure, loans and receivables or Available-for-sale financial assets. Financial liabilities are classified as Fair value through Income and Expenditure or as Other Financial liabilities Financial assets and financial liabilities at Fair Value through Income and Expenditure Financial assets and financial liabilities at fair value through income and expenditure are financial assets or financial liabilities held for trading. A financial asset or financial liability is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Derivatives which are embedded in other contracts but which are not closely-related to those contracts are separated-out from those contracts and measured in this category. Assets and liabilities in this category are classified as current assets and current liabilities. These financial assets and financial liabilities are recognised initially at fair value, with transaction costs expensed in the income and expenditure account. Subsequent movements in the fair value are recognised as gains or losses in the Statement of Comprehensive Income Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments which are not quoted in an active market. They are included in current assets. The foundation trust s loans and receivables comprise: current investments, cash and cash equivalents, NHS debtors, accrued income, other debtors, NHS creditors, other creditors and provisions. HM Treasury has concluded that PDC is not a financial instrument within the scope of IAS32 and as such the foundation trust continues to present this within Taxpayers Equity in the Statement of Financial Position. Loans and receivables are recognised initially at fair value, net of transactions costs, and are measured subsequently at amortised cost, using the effective interest method. The effective interest rate is the rate that discounts exactly estimated future cash receipts through the expected life of the financial asset or, when appropriate, a shorter period, to the net carrying amount of the financial asset. Interest on loans and receivables is calculated using the effective interest method and credited to the Statement of Comprehensive Income Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets which are either designated in this category or not classified in any of the other categories. They are included in long-term assets unless the Trust intends to dispose of them within 12 months of the Statement of Financial Position date. Available-for-sale financial assets are recognised initially at fair value, including transaction costs, and measured subsequently at fair value, with gains or losses recognised in reserves and reported in the Statement of Comprehensive Income as an item of other comprehensive income. When items classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised are transferred from reserves and recognised in Finance Costs in the Statement of Comprehensive Income Other financial liabilities 13

15 All other financial liabilities are recognised initially at fair value, net of transaction costs incurred, and measured subsequently at amortised cost using the effective interest method. The effective interest rate is the rate that discounts exactly estimated future cash payments through the expected life of the financial liability or, when appropriate, a shorter period, to the net carrying amount of the financial liability. They are included in current liabilities except for amounts payable more than 12 months after the Statement of Financial Position date, which are classified as long-term liabilities. Interest on financial liabilities carried at amortised cost is calculated using the effective interest method and charged to Finance Costs. Interest on financial liabilities taken out to finance property, plant and equipment or intangible assets is not capitalised as part of the cost of those assets Determination of fair value For financial assets and financial liabilities carried at fair value, the carrying amounts are determined from quoted market prices when available, or otherwise from either independent appraisals or discounted cash flows as appropriate Impairment of financial assets At the Statement of Financial Position date, the Trust assesses whether any financial assets, other than those held at fair value through income and expenditure are impaired. Financial assets are impaired and impairment losses are recognised if, and only if, there is objective evidence of impairment as a result of one or more events which occurred after the initial recognition of the asset and which has an impact on the estimated future cash flows of the asset. For financial assets carried at amortised cost, the amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of the revised future cash flows discounted at the asset s original effective interest rate. The loss is recognised in the Statement of Comprehensive Income and the carrying amount of the asset is reduced directly or through use of an allowance account/bad debt provision. The use of an allowance account/bad debt provision is only used to offset the loss when, and only when the allowance account/bad debt provision specifically relates to that financial asset Leases Finance leases Where substantially all risks and rewards of ownership of a leased asset are borne by the foundation trust, the asset is recorded as Property, Plant and Equipment and a corresponding liability is recorded. The value at which both are recognised is the lower of the fair value of the asset or the present value of the minimum lease payments, discounted using the interest rate implicit in the lease. The implicit interest rate is that which produces a constant periodic rate of interest on the outstanding liability. The asset and liability are recognised at the inception of the lease, and are de-recognised when the liability is discharged, cancelled or expires. The annual rental is split between the repayment of the liability and a finance cost. The annual finance cost is calculated by applying the implicit interest rate to the outstanding liability and is charged to Finance Costs in the Statement of Comprehensive Income. The annual rental is split between the repayment of the liability and a finance cost so as to achieve a constant rate of finance over the life of the lease. The annual finance cost is charged to Finance Costs in the Statement of Comprehensive Income. The lease liability, is de-recognised when the liability is discharged, cancelled or expires Operating leases Other leases are regarded as operating leases and the rentals are charged to operating expenses on a straight-line basis over the term of the lease. Operating lease incentives received are added to the lease rentals and charged to operating expenses over the life of the lease Leases of land and buildings Where a lease is for land and buildings, the land component is separated from the building component and the classification for each is assessed separately. Leased land is treated as an operating lease Provisions 14

16 The NHS foundation trust provides for legal or constructive obligations that are of uncertain timing or amount at the Statement of Financial Position date on the basis of the best estimate of the expenditure required to settle the obligation. Where the effect of the time value of money is significant, the estimated risk-adjusted cash flows are discounted using the discount rates published by HM Treasury Clinical negligence costs The NHS Litigation Authority (NHSLA) operates a risk pooling scheme under which the foundation trust pays an annual contribution to the NHSLA, which, in return, settles all clinical negligence claims. Although the NHSLA is administratively responsible for all clinical negligence cases, the legal liability remains with the foundation trust. The total value of clinical negligence provisions carried by the NHSLA on behalf of the NHS Foundation Trust is disclosed in the notes to the accounts Non-clinical risk pooling The foundation trust participates in the Property Expenses Scheme and the Liabilities to Third Parties Scheme. Both are risk pooling schemes under which the trust pays an annual contribution to the NHS Litigation Authority and in return receives assistance with the costs of claims arising. The annual membership contributions, and any excesses payable in respect of particular claims, are charged to operating expenses when the liability arises Contingencies Contingent assets (that is, assets arising from past events whose existence will only be confirmed by one or more future events not wholly within the entity s control) are not recognised as assets, but are disclosed, in a note to the accounts where an inflow of economic benefits is probable. Contingent liabilities are not recognised, but if applicable are disclosed in the notes to the accounts, unless the probability of a transfer of economic benefits is remote. Contingent liabilities are provided for where a transfer of economic benefits is probable. Otherwise, they are not recognised, but are disclosed in a note to the accounts unless the probability of a transfer of economic benefits is remote. Contingent liabilities are defined as: -possible obligations arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the entity s control; or -present obligations arising from past events but for which it is not probable that a transfer of economic benefits will arise or for which the amount of the obligation cannot be measured with sufficient reliability Public dividend capital Public dividend capital (PDC) is a type of public sector equity finance based on the excess of assets over liabilities at the time of establishment of the predecessor NHS trust. HM Treasury has determined that PDC is not a financial instrument within the meaning of IAS 32. A charge, reflecting the cost of capital utilised by the NHS foundation trust, is payable as public dividend capital dividend. The charge is calculated at the rate set by HM Treasury (currently 3.5%) on the average relevant net assets of the NHS foundation trust during the financial year. Relevant net assets are calculated as the value of all assets less the value of all liabilities, except for (i) donated assets (including lottery funded assets), (ii) average daily cash balances held with the Government Banking Services (GBS) and National Loans Fund (NLF) deposits, excluding cash balances held in GBS accounts that relate to a short-term working capital facility, (iii) for 2013/14 only, net assets and liabilities transferred from bodies which ceased to exist on 1 April 2013, and (iv) any PDC dividend balance receivable or payable. In accordance with the requirements laid down by the Department of Health (as the issuer of PDC), the dividend for the year is calculated on the actual average relevant net assets as set out in the pre-audit version of the annual accounts. The dividend thus calculated is not revised should any adjustment to net assets occur as a result the audit of the annual accounts Value added tax Most of the activities of the NHS foundation trust are outside the scope of VAT and, in general, output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of fixed assets. Where output tax is charged or input VAT is recoverable, the amounts are stated net of VAT Foreign exchange The functional and presentational currencies of the Trust are sterling. 15

17 A transaction which is denominated in a foreign currency is translated into the functional currency at the spot exchange rate on the date of the transaction. Where the Trust has assets or liabilities denominated in a foreign currency at the Statement of Financial Position date: -Monetary items (other than financial instruments measured at fair value through income and expenditure ) are translated at the spot exchange rate on 31 March; -non-monetary assets and liabilities measured at historical cost are translated using the spot exchange rate at the date of the transaction; and -non-monetary assets and liabilities measured at fair value are translated using the spot exchange rate at the date the fair value was determined. Exchange gains or losses on monetary items (arising on settlement of the transaction or on re-translation at the Statement of Financial Position date) are recognised in income or expense in the period in which they arise. Exchange gains or losses on non-monetary assets and liabilities are recognised in the same manner as other gains and losses on these items Third party assets Assets belonging to third parties (such as money held on behalf of patients) are not recognised in the accounts since the Foundation Trust has no beneficial interest in them. However, they are disclosed in a separate note to the accounts, in accordance with the requirements of HM Treasury s Financial Reporting Manual Losses and Special Payments Losses and special payments are items that Parliament would not have contemplated when it agreed funds for the health service or passed legislation. By their nature they are items that ideally should not arise. They are therefore subject to special control procedures compared with the generality of payments. They are divided into different categories, which govern the way that individual cases are handled. Losses and special payments are charged to the relevant functional headings in expenditure on an accruals basis, including losses which would have been made good through insurance cover had NHS foundation trusts not been bearing their own risks (with insurance premiums then being included as normal revenue expenditure). However the losses and special payments note is compiled directly from the losses and compensations register which reports on an accrual basis with the exception of provisions for future losses New standards or conventions not adopted The following changes to standards issued by the IASB have not been implemented in Monitor s reporting manual or these accounts. The Trust does not expect these changes to have a significant impact in the period of initial application. Change published Published by IASB Financial year for which the change first applies IFRS 11 (amendment) acquisition of an interest in a May-14 Not yet EU adopted. Expected to be effective joint operation from 2016/17. IAS 16 (amendment) and IAS 38 (amendment) depreciation and amortisation May-14 Not yet EU adopted. Expected to be effective from 2016/17. IAS 16 (amendment) and IAS 41 (amendment) bearer plants Jun-14 Not yet EU adopted. Expected to be effective from 2016/17. IAS 27 (amendment) equity method in separate financial statements Aug-14 Not yet EU adopted. Expected to be effective from 2016/17. IFRS 10 (amendment) and IAS 28 (amendment) sale or contribution of assets Sep-14 Not yet EU adopted. Expected to be effective from 2016/17. IFRS 10 (amendment) and IAS 28 (amendment) investment entities applying the consolidation exception Dec-14 Not yet EU adopted. Expected to be effective from 2016/17. IAS 1 (amendment) disclosure initiative Dec-14 Not yet EU adopted. Expected to be effective from 2016/17. IFRS 15 Revenue from contracts with customers May-14 Not yet EU adopted. Expected to be effective from 2017/18. Annual improvements to IFRS: cycle Sep-14 Not yet EU adopted. Expected to be effective from 2017/18. IFRS 9 Financial Instruments Jul-14 Not yet EU adopted. Expected to be effective from 2018/19. 16

18 Note 2 Operating Segments The Trust considers its' activities constitute a single segment since they are provided wholly in the UK, are subject to similar risks and rewards and all the assets are managed as one central pot. The Trust threfore has no distinct and separate operating segments. 17

19 Note 3 Operating income from patient care activities Note 3.1 Income from patient care activities (by nature) 2015/ /15 Cost and volume contract income 3,704 3,968 Block contract income 90,151 85,751 Clinical partnerships providing mandatory services (including S75 agreements) 13,626 15,878 Clinical income for the secondary commissioning of mandatory services - 3,404 Other clinical income from mandatory services - - Total income from activities 107, ,001 Note 3.2 Income from patient care activities (by source) Income from patient care activities received from: 2015/ /15 CCGs and NHS England 89,717 90,336 Local authorities 13,626 15,879 Department of Health - - Other NHS foundation trusts 1,870 1,331 NHS trusts 1,469 1,124 NHS other - - Non-NHS: private patients - - Non-NHS: overseas patients (chargeable to patient) - - NHS injury scheme (was RTA) - - Non NHS: other Additional income for delivery of healthcare services - - Total income from activities 107, ,001 Of which: Related to continuing operations 107, ,001 Related to discontinued operations

20 3 Note 3.3 Overseas visitors (relating to patients charged directly by the NHS foundation trust) 2015/ /15 Income recognised this year - - Cash payments received in-year - - Amounts added to provision for impairment of receivables - - Amounts written off in-year Note 4 Other operating income 2015/ /15 Research and development 2,925 3,224 Education and training 19,485 19,181 Receipt of capital grants and donations - - Charitable and other contributions to expenditure - - Non-patient care services to other bodies - - Support from the Department of Health for mergers - - Profit on disposal of non-current assets - - Reversal of impairments - - Rental revenue from operating leases 1,969 1,776 Rental revenue from finance leases - - Amortisation of PFI deferred credits - - Income in respect of staff costs where accounted on gross basis Other income* 5,625 7,588 Total other operating income 30,672 32,150 Of which: Related to continuing operations 30,672 32,150 Related to discontinued operations - - *Included in Other Income above are property rental income earned and estates recharges of 4,577k. These predominantly related to the St Pancras site. 4 Note 4.1 Income from activities arising from commissioner requested services Under the terms of its provider license, the trust is required to analyse the level of income from activities that has arisen from commissioner requested and non-commissioner requested services. Commissioner requested services are defined in the provider license and are services that commissioners believe would need to be protected in the event of provider failure. This information is provided in the table below: Income from services designated (or grandfathered) as commissioner requested services 2015/ /15 86,800 85,613 Income from services not designated as commissioner requested services 20,681 23,388 Total 107, ,001 4 Note 4.2 Profits and losses on disposal of property, plant and equipment The Trust has not made any disposals during 2015/16 (no disposals during 2014/15) 19