Affordable housing provider

Transcription

1 Affordable housing provider Report and financial statements For the year ended 31 March 2016 FRS102 Housing Properties carried at Valuation Registered housing provider Company (limited by guarantee) or Co-operative and Community Benefit Society

2 Foreword Jenny Brown Head of Housing Welcome to the Grant Thornton model accounts for the social housing sector for the first year under Financial Reporting Standard 102 The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland ( FRS 102 ). These will be applicable to housing associations for year ends from 31 December 2015 onwards for many of you this will be 31 March 2016 and that is the year end modelled in these accounts. We know many of you use these accounts to identify key reporting disclosures and as always, we have endeavoured to reflect these in Affordable Housing Provider. However, we acknowledge that the application of FRS 102 is constantly developing and there may be detail in the disclosures that we have not covered in this model. This year, we have updated the model for the requirements of the Accounting Direction Janette Randerson Editor Jenny Brown Contributor Sally Hewish Contributor Omadevi Jani Contributor I hope you find the information included useful as you prepare for the first year of reporting under FRS 102. Jenny Brown Head of Housing E jenny.m.brown@uk.gt.com Guidance when using this document These model accounts are intended as a guide for housing providers preparing financial statements for the first time in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102), the Statement of Recommended Practice (SORP) for social housing providers 2014 and the Accounting Direction Their preparation involved striking a balance between helpful guidance and burdensome detail. The disclosures illustrated, therefore, do not include all possible disclosures as this would clearly make any guidance too unwieldy to be of wide, practical use. For this reason they should not be used as a substitute for completing a disclosure checklist. Whilst every care has been taken in their preparation, users are advised to use these financial statements as a guide in conjunction with the actual text of the standard and implementation guidance issued, together with relevant legislation, and to consult their professional advisers before concluding on accounting treatments and disclosures for their own transactions and circumstances. In this model document: text in black provides example disclosures text in red indicates the source of reference material text in boxes provides a description of information required, or to be omitted, as relevant. This is not designed to be a standard template to follow, merely an example of some of the areas you may wish to comment on in your own report. We have assumed that Affordable Housing provider does not have any listed debt or hedged financial instruments. Organisations with such instruments should consult directly with their auditors prior to preparing their financial statements.

3 Affordable Housing Provider Index to the financial statements Narrative reporting Consolidated statement of comprehensive income Association statement of comprehensive income Consolidated statement of changes in reserves Association statement of changes in reserves Group and association statement of financial position Consolidated statement of cash flows Notes to the financial statements

4 Affordable Housing Provider Narrative reporting The requirements for narrative reporting derive from a number of sources including relevant legislation, financial reporting standards and regulation. The notes below aim to highlight the key elements of the narrative reporting including any best practice, where relevant. Under the Housing SORP 2014 paragraph 4.2, the narrative reporting should include the following three items: 1. Report of the Board, including a strategic report 2. Statement of responsibilities of the Board 3. Independent auditors' report Report of the Board The majority of the requirements for the Board's Report have not changed under the new reporting standard, however, there are a number of areas to highlight. The SORP 2014 paragraph 3.4 states that the entity must make a clear statement that it is a public benefit entity. In accordance with the Accounting Direction 2015, it should also state the legislative provisions for the entity, and any subsidiaries, and a statement to confirm that they have complied with United Kingdom Generally Accepted Accounting Practice (UK GAAP), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Strategic report SORP 2014 "requires the boards of social landlords with over 5,000 homes in management to publish a strategic report as part of the report from the Board. A strategic report helps stakeholders to assess the performance of a business, providing a balanced and neutral assessment of the development and performance of the business during the financial year and setting out future plans, including risks and uncertainties to be faced". The SORP 2014 and the Accounting Direction 2015 provide detail on the content of the Strategic Report. A social landlord which is incorporated under the Companies Act 2006 is also bound by the requirements of that Act and must produce a strategic report if it is a medium or large company as defined by the Act. The required contents of the Strategic Report is set out in Section 414C of the Companies Act 2006, this statement must be shown as authorised and signed by the Board. Under the Accounting Direction, a social landlord with more than 5,000 homes that is a subsidiary within a group is exempt from including a strategic report within its own financial statements provided that it is consolidated into the financial statements of a parent social landlord and a strategic report is prepared for the group and accompanies the consolidated financial statements. However, all companies are required to prepare a strategic report, irrespective of whether it is part of a larger group, unless it meets the criteria of a small company in accordance with Part 15 of the Companies Act 2006 Chapter 1 Section 382.

5 Affordable Housing Provider Narrative reporting SORP 4.6 The strategic report should include an assessment of the following: - the association's objectives, and its strategy for achieving those objectives - the association's business model - its development and performance throughout the year and its position at the year end - its future prospects - the principal risks and uncertainties facing the association - its financial and non-financial key performance indicators - the association's governance The Accounting Direction 2015 paragraph 7 has the following requirements in addition to those listed above: - effects of any material estimates and judgements on the financial performance or position - main trends and factors underlying development, performance and position and which are likely to affect it in the future. Value for money The Accounting Direction 2015 paragraph 2.8 states: "The board of the RP should undertake and publish its narrative reporting an assessment of the performance of the PRP for the year which set out to stakeholders how it is achieving value for money in delivering its purpose and objectives, in accordance with the regulator's standard on value for money. Where providers have published a separate, more detailed self-assessment than that included in the narrative report, this should be clearly signposted in order to ensure transparency for stakeholders." This statement should demonstrate how the provider is complying with the Regulator's standard on Value for Money, and in particular, compliance with the transparency requirements of the standard. The published statement needs to explain what has been done and future plans, and why. The statement must address each of the specific expectations set out in the Regulatory framework. The statement should be a self-assessment that is individual to each Provider, and therefore, we have not attempted to provide example wording in these model accounts. The statement should set out the context and objectives of the provider's strategy on value for money. In accordance with the Regulatory Framework, providers shall: have a robust approach to making decisions on the use of resources to deliver the provider s objectives, including an understanding of the trade-offs and opportunity costs of its decisions understand the return on its assets, and have a strategy for optimising the future returns on assets, including rigorous appraisal of all potential options for improving value for money including the potential benefits in alternative delivery models, measured against the organisation s purpose and objectives have performance management and scrutiny functions which are effective at driving and delivering improved value for money performance

6 Affordable Housing Provider Narrative reporting understand the costs and outcomes of delivering specific services and which underlying factors influence these costs and how they do so. The statement should then include a self-assessment of the organisation's value for money performance and achievements, covering financial, social and environmental returns. In accordance with the Regulatory Framework, the assessment shall: enable stakeholders to understand the return on assets measured against the organisation's objectives the statement should demonstrate how the individual assets contribute to the business aims and objectives, encompassing financial, social and environmental returns set out the absolute and comparative costs of delivering specific services the statement should demonstrate the key performance indicators such as: o average of cost of management per unit of housing o cost of maintenance per unit o costs of individual departments as % of turnover, compared to benchmarking data factors that influence these costs and how evidence the value for money gains that have been and will be made and how these have and will be realised over time actions taken in the year that have achieved gains and when the benefit from the savings will be received consider financial, social and environmental gains aims for the next financial year, including estimated savings and actions to be taken. Feedback from the Regulator is that the statements should be a robust self-assessment and be sufficiently detailed to demonstrate how responsibilities have been discharged. Some providers may elect to publish the full detail in a separate format to the financial statements. If this option is taken, the financial statements should clearly reference the separate publication, including for example the website address where it can be accessed. The statement must be available at the same time as the financial statements are published. Internal controls assurance SORP In line with previous requirements, the new SORP 2014 requires boards of social landlords to conduct an annual review of the effectiveness of their system of internal control. However, whilst the SORP does not require a statement of internal control to be included within the annual report, it is considered best practice to make reference to the internal control processes in operation during the year within the report. Statement of compliance The Accounting Direction 2015 has introduced a new requirement for providers to certify that they have complied with the HCA s Governance and Financial Viability Standard within the narrative reporting. In addition to this certification, any areas of non-compliance should be disclosed and explained.

7 Affordable Housing Provider Narrative reporting Code of Governance Accounting Direction 2015 states " The code of governance that has been adopted by the Private Registered Provider (PRP) should also be disclosed." For most providers, this will be in reference to the NHF's Code of Governance Some providers may wish to state compliance with the UK Code of Governance, but should be aware of the implications on the enhanced auditor's report in accordance with International Standard of Auditing 700 (revised), even if the Code is adopted voluntarily. Both Codes of Governance adopt a comply or explain approach. We believe that it is best practice to adopt the most recent update to the chosen Code, and therefore providers should be aware of the recent changes under both Codes of Governance as summarised below. NHF's Code of Governance was updated in 2015 and includes a number of changes to strengthen the governance procedures, including for example the length of service for board members and new provisions about the role of the parent. The NHF has issued a compliance checklist to help associations identify areas for improvement and those of non-compliance. The UK Code of Governance was updated in September 2014 and the key areas of change relate to going concern, risk management and internal control. However there are other changes relating to executive remuneration and shareholder engagement. As a result of the changes, there is a new disclosure requirement to include a Viability Statement. This is a statement containing the directors' assessment of the future prospects of the company.

8 Affordable Housing Provider 7 Consolidated Statement of Comprehensive Income The layout of the statement below is in accordance with the Appendix of the SORP The SORP includes additional headings not covered in these model accounts, for example movements in hedged items. Associations may also include additional lines where necessary to show a true and fair view. The SORP is specific in requiring that this information be presented as one, not two statements (which is an option under FRS 102). Please refer to the relevant notes to the accounts for further detail on each line item. Note 2016 ' '000 Turnover Operating expenditure 3 Operating costs Impairment loss * Other income 3 * include as operating expenditure, but show separately if material Operating surplus/(deficit) 5 Gain/(loss) on disposal of property, plant and equipment (fixed assets) 6 Interest receivable 7 Interest and financing costs 8 Movement in fair value of financial instruments 33 Decrease in valuation of housing properties 12 Reversal of previous decrease in valuation of housing properties 12 Surplus/(deficit) before tax Taxation 11 Surplus/(deficit) for the year see notes Unrealised surplus/(deficit) on revaluation of housing properties 12 Actuarial (loss)/gain in respect of pension schemes 24 Total comprehensive income for the year The financial statements were approved by the Board on 1 July 2016 Richard Giles Chairman see notes The consolidated results relate wholly to continuing activities. The accompanying notes form part of these financial statements. Notes: If the entity is a Registered Charity, the statement of Comprehensive Income (SOCI) account should be signed on behalf of the board by a trustee of the charity. If the entity is registered under the Co-operative and Community Benefit Society Act 2014 (CCBS Act) two signatories are required on the SOCI Items below surplus/deficit for the year are 'other comprehensive income'.

9 Affordable Housing Provider 8 Association Statement of Comprehensive Income Note, providers registered under the Companies Act are able to take an exemption under section 408 from publishing a separate SOCI for the Association. However under CCBS Act 2014, all registered providers must publish a separate SOCI for the Association. The layout of the statement below is in accordance with the Appendix of the SORP The SORP includes additional headings not covered in these model accounts. Associations may include additional lines where necessary to show a true and fair view. The SORP is specific in requiring that this information be presented as one, not two statements (which is an option under FRS 102). Please refer to the relevant notes to the accounts for further detail on each line item. Note 2016 ' '000 Turnover Operating expenditure 3 Operating costs Impairment loss * Other income 3 * include as operating expenditure, but show separately if material Operating surplus/(deficit) 5 Gain/(loss) on disposal of property, plant and equipment (fixed assets) 6 Interest receivable 7 Interest and financing costs 8 Movement in fair value of financial instruments 33 Decrease in valuation of housing properties 12 Reversal of previous decrease in valuation of housing properties 12 Surplus/(deficit) before tax Taxation 11 Surplus/(deficit) for the year Unrealised surplus/(deficit) on revaluation of housing properties 12 Actuarial (loss)/gain in respect of pension schemes 24 Total comprehensive income for the year The financial statements were approved by the Board on 1 July 2016 Richard Giles Chairman see notes The association's results relate wholly to continuing activities. The accompanying notes form part of these financial statements. Notes: If the entity is a Registered Charity, the statement of Comprehensive Income (SOCI) account should be signed on behalf of the board by a trustee of the charity. If the entity is registered under the Co-operative and Community Benefit Society Act 2014 (CCBS Act) two signatories are required on the SOCI Items below surplus/deficit for the year are 'other comprehensive income'.

10 Affordable Housing Provider 9 Consolidated Statement of Changes in Equity Income and expenditure reserve Restricted reserve Revaluation reserve Balance as at 1 April 2014 Total comprehensive income for the year Transfer from revaluation reserve to income and expenditure reserves Transfer of restricted expenditure from unrestricted reserve Balance at 31 March 2015 Total comprehensive income for the year Transfer from revaluation reserve to income and expenditure reserves Transfer of restricted expenditure from unrestricted reserve Balance at 31 March 2016 Total

11 Affordable Housing Provider 10 Association Statement of Changes in Equity Income and expenditure reserve Restricted reserve Revaluation reserve Balance as at 1 April 2014 Total comprehensive income for the year Transfer from revaluation reserve to income and expenditure reserves Transfer of restricted expenditure from unrestricted reserve Balance at 31 March 2015 Total comprehensive income for the year Transfer from revaluation reserve to income and expenditure reserves Transfer of restricted expenditure from unrestricted reserve Balance at 31 March 2016 Total

12 Affordable Housing Provider 11 Group and Association Statement of Financial Position The layout of the statement below is in accordance with Appendix of the SORP Not all headings have been included. Associations may include additional lines where necessary to show a true and fair view. The terminology used is in line with SORP 2014 and Company Law, and although differs in some places from FRS 102, is acceptable under the flexibilities allowed within the Financial Reporting Standard. Please refer to the relevant notes to the accounts for further detail on each line item. Group Association Note Fixed assets 12,13 Tangible fixed assets 14 Investment properties 15 Homebuy loans receivable 16 Investment in subsidiaries Current assets Properties held for sale 17 Trade and other debtors 18 Cash and cash equivalents Creditors: amounts falling due within one year 19 Net current assets / liabilities Total assets less current liabilities Creditors: amounts falling due after more than one year 20 Provisions for liabilities - Pension provision MCCPF - Other provisions Total net assets Reserves Income and expenditure reserve Revaluation reserve Restricted reserve Total reserves The accompanying notes form part of these financial statements. The financial statements were approved by the Board on 1 July Richard Giles Chairman Affordable Housing Provider Limited Company number: Note: In the case of a company, the Statement of Financial Position (SOFP) should be signed by a member of the board. Where the company is a Registered Charity the SOFP should be signed by a trustee of the charity. The registered company number should be shown on the Directors' Report, Auditor's Report or SOFP (Companies Act 2006). In the case of a CCBS Act entity two signatories are required to sign the Statement of Financial Position.

13 Affordable Housing Provider 12 Consolidated Statement of Cash Flows The layout of the statement of cash flows below is in accordance with the Appendix of the SORP Associations may include additional lines where necessary to show a true and fair view. Note, 'qualifying entities' are exempt from preparing a cash flow statement if conditions of FRS 102 paragraph 1.11 are met Note '000 '000 Net cash generated from operating activities (see Note 28) Cash flow from investing activities Purchase of tangible fixed assets Proceeds from sale of tangible fixed assets Grants received Interest received Cash flow from financing activities Interest paid Interest element of finance lease rental payments New secured loans Repayments of borrowings Capital element of finance lease rental payments Withdrawal from deposits Net change in cash and cash equivalents * Cash and cash equivalents at beginning of the year * Cash and cash equivalents at end of the year * The accompanying notes form part of these financial statements. * Registered Providers are required to reconcile the components of cash and cash equivalents to the Statement of Financial Position unless the amounts are identical to the amount presented thereon (FRS ).

14 Affordable Housing Provider 13 Notes to the financial statements 1 Legal status Per SORP 5.6 this statement must comment on all entities in the group Accounting Direction Part 2.1 Registered under the Companies Act 2006 The association is registered under the Companies Act 2006 and is a registered housing provider. OR Registered under the Cooperative and Community Benefit Society Act 2014 The association is registered under the Cooperative and Community Benefit Society Act 2014 and is a registered housing association. [Disclosure of an entity's principal activities and nature of operations is required (despite no longer being a disclosure requirement in the directors' report following changes to company law). If, however, an entity does disclose this information elsewhere in their Report to the Board, then it need not be repeated here. ] 2 Accounting policies Accounting Direction Part 2.2 Basis of accounting The financial statements of the group and association are prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP) including Financial Reporting Standard 102 (FRS 102) and the Housing SORP 2014:Statement of Recommended Practice for Registered Social Housing Providers and comply with the Accounting Direction for Private Registered Providers of Social Housing 2015 * FRS requires an entity whose financial statements comply with FRS 102 to make an explicit and unreserved statement of such compliance in the notes to the financial statements. The Accounting Direction requires any material departures from those standards to be disclosed.

15 Affordable Housing Provider 14 Notes to the financial statements This is the first year in which the financial statements have been prepared under FRS 102. Refer to note 34 for an explanation of the transition. The financial statements are presented in Sterling ( ). The individual accounts of Affordable Housing Provider have also adopted the following disclosure exemptions: - the requirement to present a statement of cash flows and related notes financial instrument disclosures, including: categories of financial instruments, items of income, expenses, gains or losses relating to financial instruments, and exposure to and management of financial risks. Going concern The group s business activities, its current financial position and factors likely to affect its future development are set out within the Strategic Report. The group has in place long-term debt facilities which provide adequate resources to finance committed reinvestment and development programmes, along with the group s day to day operations. The group also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders covenants. On this basis, the board has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months after the date on which the report and financial statements are signed. For this reason, it continues to adopt the going concern basis in the financial statements. Significant judgements and estimates Preparation of the financial statements requires management to make significant judgements and estimates. The items in the financial statements where these judgments and estimates have been made include: FRS An entity shall disclose the judgements, apart from those involving estimations that management has made in the process of applying the entity's accounting policies and that have the most significant effect on the amounts recognised in the financial statements. FRS An entity shall disclose in the notes information about the key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, the notes shall include details of: (a) their nature, and (b) their carrying amount as at the end of the reporting period.

16 Affordable Housing Provider 15 Notes to the financial statements The following are examples only. These statements will be very specific to each entity an association may have more or fewer statements than this. Each individual point should state the nature and carrying amount of the item concerned. Significant management judgements The following are the significant management judgements made in applying the accounting policies of the Group that have the most significant effect on the financial statements. Impairment From 1 April 2016, Affordable Housing Provider has reduced social housing rents by one per cent per annum and will continue to do so in each year until 2019/20 in accordance with the Housing and Planning Act Despite cost efficiency savings and other changes to the business, compliance with the new rent regime has resulted in a loss of net income for certain social housing property. This is a trigger for impairment. As a result, we estimated the recoverable amount of its housing properties as follows: (a) determined the level at which recoverable amount is to be assessed (ie, the asset level or cashgenerating unit (CGU) level). The CGU level was determined to be an individual scheme (b) estimated the recoverable amount of the cash-generating unit (c) Calculated the carrying amount of the cash-generating unit and (d) Compared the carrying amount to the recoverable amount to determine if an impairment loss has occurred. Based on this assessment, we calculated the Depreciated Replacement Cost (DRC) of each social housing property scheme, using appropriate construction costs and land prices. Comparing this to the carrying amount of each scheme, we made an impairment charge against its social housing properties. Capitalisation of property development costs Distinguishing the point at which a project is more likely than not to continue, allowing capitalisation of associated development costs requires judgement. After capitalisation management monitors the asset and considers whether changes indicate that impairment is required. The total amount capitalised in the year was relating to the Wexford Road Scheme. Supporting people Management judgement is applied in determining the extent to which the risks and benefits are transferred to the association when considering the Income to be recognised. of supporting people income was recognised in the year.

17 Affordable Housing Provider 16 Notes to the financial statements Estimation uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Valuation of housing properties Management reviews its valuation of housing properties at each reporting date, based on either formal valuation reports or an update to those reports based on market conditions and other changes to assumptions. Uncertainties in these estimates relate to the discount rate, the cost of property maintenance and future cash flows. Valued properties totalled at the year end. Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and IT equipment and changes to decent homes standards which may require more frequent replacement of key components. Accumulated depreciation at 31 March 2016 was. Defined benefit obligation (DBO) Management's estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses (as analysed in Note 24). The liability at 31 March 2016 was. Fair value measurement Management uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices. Fair value measurements were applied to one loan which had options in the year the total value of this instrument was at 31 March Basis of consolidation The group accounts consolidate the accounts of the association and all its subsidiaries at 31 March using the purchase method. Investment in subsidiaries The consolidated financial statements incorporate the financial statements of the association and entities (including special purpose entities) controlled by the group [(and its subsidiaries)]. Control is achieved where the group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in total comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate using accounting policies consistent with those of the parent. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Investments in subsidiaries are accounted for at cost less impairment in the individual association s financial statements.

18 Affordable Housing Provider 17 Notes to the financial statements Turnover and revenue recognition Note, the following policy should be tailored for individual circumstances to ensure all material revenue streams are included. Turnover comprises rental income receivable in the year, income from shared ownership first tranche sales, sales of properties built for sale and other services included at the invoiced value (excluding VAT where recoverable) of goods and services supplied in the year and grants receivable in the year. Rental income is recognised from the point when properties under development reach practical completion or otherwise become available for letting, net of any voids. Income from first tranche sales and sales of properties built for sale is recognised at the point of legal completion of the sale. Charges for support services funded under Supporting People are recognised as they fall due under the contractual arrangements with Administering Authorities. Taxation Current tax is recognised for the amount of income tax payable in respect of the taxable surplus for the current or past reporting periods using the tax rats and laws that have been enacted or substantively enacted by the reporting date. Deferred taxation Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. If and when all conditions for retaining tax allowances for the cost of a fixed asset have been met, the deferred tax is reversed. Deferred tax is recognised when income or expenses from a subsidiary or associate have been recognised, and will be assessed for tax in a future period, except where: - the group is able to control the reversal of the timing difference; and - it is probable that the timing difference will not reverse in the foreseeable future. A deferred tax liability or asset is recognised for the additional tax that will be paid or avoided in respect of assets and liabilities that are recognised in a business combination. The amount attributed to goodwill is adjusted by the amount of deferred tax recognised. Deferred tax relating to investment property that is measured at fair value is measured using the tax rates and allowances that apply to the sale of the asset, except for investment property that has a limited useful life and is held in a business model whose objective is to consume substantially all of the economic benefits embodied in the property over time. Deferred tax is calculated using the tax rates and laws that that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference. With the exception of changes arising on the initial recognition of a business combination, the tax expense (income) is presented either in income and expenditure, other comprehensive income or equity depending on the transaction that resulted in the tax expense (income).

19 Affordable Housing Provider 18 Notes to the financial statements Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. Deferred tax assets and deferred tax liabilities are offset only if: - the group has a legally enforceable right to set off current tax assets against current tax liabilities, and - the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously. Value Added Tax The group charges Value Added Tax (VAT) on some of its income and is able to recover part of the VAT it incurs on expenditure. The financial statements include VAT to the extent that it is suffered by the group and not recoverable from HM Revenue and Customs. The balance of VAT payable or recoverable at the year-end is included as a current liability or asset. Interest payable FRS and glossary A qualifying asset is one which necessarily takes a substantial period of time to get ready for its intended use or sale and includes investment properties. Interest is capitalised on borrowings to finance the development of qualifying assets to the extent that it accrues in respect of the period of development if it represents a) interest on borrowings specifically financing the development programme after deduction of related grants received in advance; or b) a fair amount of interest on borrowings of the association as a whole after deduction of SHG received in advance to the extent that they can be deemed to be financing the development programme. Other interest payable is charged to income and expenditure in the year. SORP HomeBuy Loans HomeBuy loans are treated as concessionary loans. They are initially recognised as a loan at the amount paid to the purchaser and are subsequently updated to reflect accrued interest, and any impairment loss is recognised in income and expenditure as part of operating expenditure to the extent that it cannot be offset against HomeBuy grant. The associated HomeBuy grant is recognised as deferred income until the loan is redeemed.

20 Affordable Housing Provider 19 Notes to the financial statements Financial instruments Financial instruments which meet the criteria of a basic financial instrument as defined in Section 11 of FRS 102 are accounted for under an amortised cost model. SORP 6.3 permits the following accounting policy choices where an instrument in classed as basic: - FRS 102 Section 11 and Section 12 in full - The recognition and measurement requirements of IAS 39, Financial instruments: Recognition and measurement (as adopted by the EU), and the presentation and disclosure requirements of Sections 11 and 12 in FRS 102; or - The recognition and measurement provisions of IFRS 9, Financial Instruments and/or IAS 39 (as amended following the publication of IFRS 9) and the presentation and disclosure requirements of Sections 11 and 12 of FRS 102. These statements assume that FRS &12 are being applied. Non-basic financial instruments include all non-basic debt instruments and derivatives, such as: forwards, swaps, caps or collars. All are recognised on SOFP and measured at fair value through surplus or deficit. The accounting policies should disclose the policy choice adopted by the association. Non-basic financial instruments are recognised at fair value using a valuation technique with any gains or losses being reported in surplus or deficit. At each year end, the instruments are revalued to fair value, with the movements posted to the income and expenditure (unless hedge accounting is applied). The group and association have not adopted hedge accounting for the financial instruments. Debtors Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment. Where deferral of payment terms have been agreed at below market rate, and where material, the balance is shown at the present value, discounted at a market rate. Creditors Short term trade creditors are measured at the transaction price. Other financial liabilities, including bank, local authority and other loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method. Employee Benefits Short-term employee benefits and contributions to defined contribution plans are recognised as an expense in the period in which they are incurred.

21 Affordable Housing Provider 20 Notes to the financial statements Pensions The group participates in two funded multi-employer defined benefit schemes, the Social Housing Pension Scheme (SHPS) and the Midshire County Council Pension Fund (MCCPF). SORP 15.9 For the SHPS, it has not been possible to identify the share of underlying assets and liabilities belonging to individual participating employers. The scheme is therefore accounted for as a defined contribution plan. The charge to income and expenditure represents the employer contribution payable to the scheme for the accounting period. SORP Contributions payable from the association to the SHPS under the terms of its funding agreement for past deficits are recognised as a liability in the association's financial statements. FRS For defined benefit schemes Actuarial gains and losses are now termed remeasurements. Note, the expected rate of return on assets is no longer a component of interest. For the MCCPF, scheme assets are measured at fair values. Scheme liabilities are measured on an actuarial basis using the projected unit credit method and are discounted at appropriate high quality corporate bond rates. The net surplus or deficit is presented as a separate provision on the statement of financial position. A net surplus is recognised only to the extent that it is recoverable by the group through reduced contributions or through refunds from the plan. The current service cost and costs from settlements and curtailments are charged against operating surplus. Past service costs are recognised in the current reporting period. Net interest costs are calculated by applying the discount rate to the net defined benefit liability and are recognised in the income and expenditure account as a finance cost. Remeasurements are reported in other comprehensive income. Housing properties Housing properties are properties held for the provision of social housing or to otherwise provide social benefit. Housing properties are principally properties available for rent and are stated at valuation. Completed housing and shared ownership properties are stated at fair value at the date of valuation, less subsequent accumulated depreciation and accumulated impairment losses. Revaluations are made with sufficient regularity to ensure that the carrying amount does not materially differ from the fair value of the properties as at the year end. Housing properties under construction are stated at cost less related social housing and other capital grants. Cost includes the cost of acquiring land and buildings, development costs, interest charges incurred during the development period and expenditure incurred in respect of improvements. Works to existing properties which replace a component that has been treated separately for depreciation purposes, along with those works that result in an increase in net rental income over the lives of the properties, thereby enhancing the economic benefits of the assets, are capitalised as improvements.

22 Affordable Housing Provider 21 Notes to the financial statements SORP 8.31 Expenditure on shared ownership properties is split proportionally between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover, and the remaining element is classed as fixed asset and included in housing properties at cost, less any provisions needed for depreciation or impairment. Donated land and other assets SORP Land and other assets donated by local authorities and other government sources is added to cost at the fair value of the land at the time of the donation. Where the land is not related to a specific development and is donated by a public body an amount equivalent to the increase in value between fair value and consideration paid is treated as a non-monetary government grant and recognised on the statement of financial position as deferred income within liabilities. The terms of the donation are deemed to be performance related conditions. Where the donation is from a non-public source, the value of the donation is included as income. Investment properties Investment properties consist of commercial properties and other properties not held for the social benefit or for use in the business. Investment properties are measured at cost on initial recognition and subsequently at fair value as at the year end, with changes in fair value recognised in income and expenditure. Government grants Government grants include grants receivable from the Homes and Communities Agency (the HCA), local authorities, and other government organisations. A grant which does not impose specified future performance conditions is recognised as revenue when the grant proceeds are received or receivable. A grant that imposes specified future performance-related conditions on the association is recognised only when these conditions are met. A grant received before the revenue recognition criteria are satisfied is recognised as a liability. For Social Housing Grant this means that the grant is recognised as revenue on completion of the property. Grants due from government organisations or received in advance are included as current assets or liabilities. Government grants received for housing properties are subordinated to the repayment of loans by agreement with the HCA. Government grants released on sale of a property may be repayable but are normally available to be recycled and are credited to a Recycled Capital Grant Fund and included in the statement of financial position in creditors. If there is no requirement to recycle or repay the grant on disposal of the asset, any unamortised grant remaining within creditors is released and recognised as income in income and expenditure. Upon disposal of the associated property, the group is required to recycle grant proceeds and recognise them as a liability.

23 Affordable Housing Provider 22 Notes to the financial statements Other grants Grants received from non-government sources are recognised using the performance model. A grant which does not impose specified future performance conditions is recognised as revenue when the grant proceeds are received or receivable. A grant that imposes specified future performance-related conditions on the association is recognised only when these conditions are met. A grant received before the revenue recognition criteria are satisfied is recognised as a liability. Depreciation of housing properties SORP 8.16 The group separately identifies the major components which comprise its housing properties, and charges depreciation, so as to write-down the cost of each component to its estimated residual value, on a straight line basis, over its estimated useful economic life. The group depreciates the major components of its housing properties at the following annual rates: Structure 1% - 2% Roofs 2% Kitchens 5% Bathrooms 3% Windows and doors 4% Mechanical systems (heating, plumbing, ventilation) 3% Freehold land is not depreciated. Leasehold properties are amortised over the life of the lease or their estimated useful economic lives in the business, if shorter. Impairment SORP Associations must determine the level at which an impairment is to be assessed (i.e. at asset or cashgenerating unit level) before performing the impairment review. A cash-generating unit is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The accounting policy below describes an impairment review performed at the asset level. Annually housing properties are assessed for impairment indicators. Where indicators are identified an assessment for impairment is undertaken comparing the asset's carrying amount to its recoverable amount. Where the carrying amount of an asset is deemed to exceed its recoverable amount, the asset is written down to its recoverable amount, this is likely to be the value in use of the asset based on its service potential. The resulting impairment loss is recognised as expenditure in income and expenditure. Where an asset is currently deemed not to be providing service potential to the association, its recoverable amount is its fair value less costs to sell. The SORP permits associations to define recoverable amount as value in use or value in use service potential. Value in use is defined as the present value of future cash flows (including the repayment or recycling of grants). However, the SORP acknowledges that many housing properties are not primarily cash generating units, but are held for their service potential. The recoverable amount of these properties can therefore be based upon their service potential. The accounting policy above describes value in use- service potential as the properties' recoverable amount. Where an asset cannot be let in its current condition, it is no longer providing service potential to the association. Its recoverable amount should therefore be based on fair value less costs to sell, or value in use based on the present value of expected future cash flows.

24 Affordable Housing Provider 23 Notes to the financial statements Other tangible fixed assets Other tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided evenly on the cost of other tangible fixed assets to write them down to their estimated residual values over their expected useful lives. No depreciation is provided on freehold land. The principal annual rates used for other assets are: Freehold buildings 2% Long leasehold property Over life of lease Furniture, fixtures and fittings 10% Computers and office equipment 20% Motor vehicles 20% Gains or losses arising on the disposal of other tangible fixed assets are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised as part of the surplus/deficit for the year. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the group. All other leases are classified as operating leases. Assets held under finance leases are recognised initially at the fair value of the leased asset (or, if lower, the present value of minimum lease payments) at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation using the effective interest method so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are deducted in measuring the surplus or deficit. Assets held under finance leases are included in tangible fixed assets and depreciated and assessed for impairment losses in the same way as owned assets. Rentals payable under operating leases are charged to income and expenditure on a straight-line basis over the lease term, unless the rental payments are structured to increase in line with expected general inflation, in which case the group recognises annual rent expense equal to amounts owed to the lessor. The aggregate benefit of lease incentives are recognised as a reduction to the expense recognised over the lease term on a straight line basis. FRS Under previous UK GAAP, lease incentives were spread over the period until a market rental applies. This is usually the date of the first rent review, and thus shorter than the lease term. There is a transitional relief available for lease incentives, such that where a lease commenced before date of transition, the remaining benefit of the lease incentive may continue to be recognised in accordance with previous UK GAAP. Where a lease includes pre-set increases in the rent payable to reflect expected inflation, then the annual expense is recognised in line with this stepped schedule (rather than spreading the total cost over the period of the lease, as under previous UK GAAP).

25 Affordable Housing Provider 24 Notes to the financial statements Properties for sale Shared ownership first tranche sales, completed properties for outright sale and property under construction are valued at the lower of cost and net realisable value. Cost comprises materials, direct labour and direct development overheads. Net realisable value is based on estimated sales price after allowing for all further costs of completion and disposal. Provisions for liabilities Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value using a pre-tax discount rate. The unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises. The group recognises a provision for annual leave accrued by employees as a result of services rendered in the current period, and which employees are entitled to carry forward and use within the next 12 months. The provision is measured at the salary cost payable for the period of absence. Under FRS 102 an accrual for holiday pay is specifically required. The impact of this is likely to be most significant when the association's holiday year is not the same as its financial year, and/or employees are entitled to carry forward holiday balances to future years. Reserves The group establishes restricted reserves for specific purposes where their use is subject to external restrictions. Per paragraph 18.3 of the SORP designated reserves are now deemed an internal matter and should not be disclosed in the primary statements. Commentary in the notes with reference to internal designations is still allowed. Revaluation reserve When housing properties are revalued, the difference between the carry value of the land and structure elements of housing properties is credited to the housing property revaluation reserve. Where a downward movement is taken to the Surplus or deficit a transfer from Income and expenditure reserve is made for the net of the downward movement and the value of any associated grant released to income.

26 Affordable Housing Provider 25 Notes to the financial statements 3 Particulars of turnover, cost of sales, operating costs and operating surplus Accounting Direction Part 1 Other social housing activities should be separated into additional lines where necessary in order to show a true and fair view. The breakdown of non-social housing activities is no longer required, but the total is left in the note to aid reconciliation to the income and expenditure account (now statement of comprehensive income). Group continuing activities 2016 Turnover Cost of sales Operating expenditure Operating surplus Social housing lettings Other social housing activities First tranche low cost home ownership sales Charges for support services Supporting people Other Activities other than Social Housing Turnover Cost of sales 2015 Operating expenditure Operating surplus Social housing lettings Other social housing activities First tranche low cost home ownership sales Charges for support services Supporting people Other Activities other than Social Housing

27 Affordable Housing Provider 26 Notes to the financial statements Particulars of turnover, cost of sales, operating costs and operating surplus Association continuing activities 2016 Turnover Cost of sales Operating expenditure Operating surplus Social housing lettings Other social housing activities First tranche low cost home ownership sales Charges for support services Supporting people Other Activities other than Social Housing Turnover Cost of sales 2015 Operating expenditure Operating surplus Social housing lettings Other social housing activities First tranche low cost home ownership sales Charges for support services Supporting people Other Activities other than Social Housing

28 Affordable Housing Provider 27 Notes to the financial statements Particulars of income and expenditure from social housing lettings Accounting direction Part 1 Note B The note in the AD shows, General needs, Supported housing and housing for older people and Other income categories as a minimum. Additional categories of social housing may be included as shown where appropriate for the RP. Group General needs housing Supported housing and housing for older people Temporary social housing Key worker housing Care homes Low cost home ownership Total Total Rent receivable net of identifiable service charges Service charge income Government grants taken to income Other grants Turnover from social housing lettings Management Service charge costs Routine maintenance Planned maintenance Major repairs expenditure Bad debts Depreciation of housing properties Impairment of housing properties Other costs Operating expenditure on social housing lettings Operating surplus on social housing lettings Void losses

29 Affordable Housing Provider 28 Notes to the financial statements Particulars of income and expenditure from social housing lettings Association General needs housing Supported housing and housing for older people Temporary social housing Key worker housing Care homes Low cost home ownership Total Total Rent receivable net of identifiable service charges Service charge income Government grants taken to income Other grants Turnover from social housing lettings Management Service charge costs Routine maintenance Planned maintenance Major repairs expenditure Bad debts Depreciation of housing properties Impairment of housing properties Other costs Operating expenditure on social housing lettings Operating surplus on social housing lettings Void losses

30 Affordable Housing Provider 29 Notes to the financial statements Particulars of turnover from non-social housing lettings Group Association Student accommodation Registered nursing homes 4 Accommodation in management and development Accounting direction Part RPs must provide a full analysis of the number of units of different types of social housing accommodation for both the start and end of year. If accommodation of the RP is managed on its behalf by another body, the number of units managed by other bodies should also be disclosed. At the end of the year accommodation in management for each class of accommodation was as follows: Group Association No of No of No of properties properties properties No of properties Social housing General housing: - social rent - affordable rent Supported housing Housing for older people Low cost home ownership Temporary social housing Key worker housing Residential care homes Total owned Accommodation managed for others Total managed Non-social housing Registered nursing homes Student accommodation Total owned and managed Accommodation in development at the year end The group manages accommodation for Small Housing Association Limited, a registered social landlord operating in Wimbledon. The group owns supported housing units (2015: ) that are managed on its behalf, under management agreements, by other bodies who contract with Supporting People Administering Authorities and carry the financial risk relating to the supported housing units.

31 Affordable Housing Provider 30 Notes to the financial statements 5 Operating surplus The operating surplus is arrived at after charging/(crediting): Group Association Depreciation of housing properties Impairment of housing properties Depreciation of other tangible fixed assets Surplus on disposal of other tangible fixed assets Operating lease rentals - land and buildings - office equipment and computers Auditors remuneration (excluding VAT) - Fees payable to the Association's auditors for the audit of the financial statements - Fees payable to the Association's auditors for other services: Audit of the accounts of subsidiaries Total audit services - Tax compliance services - All other services Total non-audit services 6 Surplus on sale of fixed assets housing properties Group Association Disposal proceeds Carrying value of fixed assets Capital grant recycled (note 21) Disposal proceeds fund (note 22)

32 Affordable Housing Provider 31 Notes to the financial statements 7 Interest receivable and other income Group Association Interest receivable and similar income Income from listed investments Income from other investments 8 Interest and financing costs FRS A Where a policy of capitalisation of borrowing costs is adopted, an entity shall disclose: (a) the amount of borrowing costs capitalised in the period, and (b) the capitalisation rate used Group Association Finance leases Defined benefit pension charge Loans and bank overdrafts Interest payable capitalised on housing properties under construction Capitalisation rate used to determine the finance costs capitalised during the period If the association has deferred payment agreements in place with tenants in arrears, these will be adjusted to their present value in accordance with FRS The unwinding of the discount will need to be included as a finance cost.

33 Affordable Housing Provider 32 Notes to the financial statements 9 Employees Accounting direction Part 2 20 'The average number of employees employed during the period of account expressed in full time equivalents, to be calculated on a basis disclosed by the RP.' Average monthly number of employees expressed as full time equivalents (calculated based on a standard working week of hrs): Group Association No No No No Administration Development Housing, support and care The full time equivalent number of staff who received remuneration (excluding directors): Accounting Direction Part 2 13 "The full time equivalent number of staff whose remuneration payable in relation to the period of account fell within in each band of 10,000 from 60,000 upwards. Remuneration should also include compensation for loss of office." The Accounting Direction defines remuneration as 'payment receivable for services or employment and includes basic salary and any bonuses.' Note: This disclosure should include the number of staff who receive remuneration > 60k. We recommend that the note makes it clear whether these numbers include directors or not No. No. 60,001 to 70,000 70,001 to 80,000

34 Affordable Housing Provider 33 Notes to the financial statements Employees (continued) Accounting Direction Part 2 17 Aggregate costs should be shown separately for employees and non-executive members of the board of the RP. Employee costs: Group Association Wages and salaries Social security costs Other pension costs Restructuring costs The association s employees are members of the Midshire County Council Pension Fund (MCCPF) or of the Social Housing Pension Scheme (SHPS). The employees of other group members are members of the SHPS. Further information on each scheme is given in note Key management personnel Accounting direction Part 2 10, requires disclosure of: The aggregate amount of emoluments payable to the RP's directors or former directors (including board members) or, where no such emoluments are so payable a statement to that effect. The aggregate amount of emoluments disclosed should be analysed between those paid to directors who are executive staff members and those paid to directors who are not. NB. Emoluments do not include compensation for loss of office. The emoluments payable to the highest paid director excluding pension contributions. Details of the nature of the chief executive's pension arrangements stating; the nature of the scheme and how it is funded, whether they are an ordinary member of the pension scheme, whether any enhanced or special terms apply and whether they have an individual pension arrangement to which the RP or any subsidiary makes contribution. The detailed disclosure of emoluments of individual directors, as shown, below is voluntary and under the Data Protection Act 1998 consent is required from the individual to disclose personal data about them in the accounts. Emoluments are amounts payable by the RP or any of its subsidiaries including: Wages and salaries and Performance related pay fees and dividends expenses allowance pensions contributions estimated monetary value of other benefits

35 Affordable Housing Provider 34 Notes to the financial statements Key management personnel (continued) FRS Requires that the aggregate remuneration for those in the senior management team (or other team members who would be described as key management personnel) be disclosed. NB. Employers NIC should also be included here as it is the total cost to the employer. Executive directors* Basic Benefits Pension Employers salary in kind contributions NIC Total Total '000 '000 Chief Executive Tom Sheraton Director of Finance Peter Small Paula Large Director of Development Ray Taylor Director of Housing Services Alison Blake * The disclosure is a recommendation for transparency only the specific requirements of the Accounting Direction and FRS 102 are both for aggregate disclosure only. The example of which is shown below: The aggregate remuneration for key management personnel charged in the year is: Group Association Basic salary Benefits in kind Pension contributions The Chief Executive is a member of the Social Housing Pension Scheme. He is an ordinary member of the pension scheme and no enhanced or special terms apply. The association does not make any further contribution to an individual pension arrangement for the Chief Executive. Accounting Direction Part 2. 16: During the year, the aggregate compensation for loss of office of key management personnel was (2015: ).

36 Affordable Housing Provider 35 Notes to the financial statements Board members None of the board members received emoluments. The emoluments of the highest paid director, the Chief Executive, excluding pension contributions, were (2015: ). 11 Tax on surplus on ordinary activities FRS (b) the reconciliation between: (i) the tax expense included in surplus or deficit; and (ii) the surplus or deficit on ordinary activities before tax multiplied by the applicable tax rate (d) an explanation of changes in the applicable tax rate(s) compared with the previous reporting period. Group Association Current tax UK corporation tax on surplus for the year Adjustments in respect of prior years Total current tax Deferred tax Net origination and reversal of timing differences Total deferred tax Total tax on results on ordinary activities

37 Affordable Housing Provider 36 Notes to the financial statements Tax on surplus on ordinary activities (continued) The tax assessed for the year is lower than the standard rate of corporation tax in the United Kingdom at xx% (2014: xx%). The differences are explained as follows: Group Association Total tax reconciliation Surplus on ordinary activities before tax Theoretical tax at UK corporation tax rate % (2015: %) - depreciation of non-qualifying assets - non-taxable gains on asset sales - other non-deductible expenditure - utilisation of tax losses - adjustments to tax charge in respect of prior periods Total tax charge* * Note: Reconcile to total tax, ie including deferred tax The aggregate current and deferred tax relating to items that are recognised as items of other comprehensive income is xxxx (2014: xxxx). During the year the UK corporation tax rate was decreased. Following Budget 20 announcements, there will be a further reduction in the main rate of corporation tax to % from 1 April 20.

38 Affordable Housing Provider 37 Notes to the report and financial statements 12 Fixed assets housing properties Group - housing properties Social housing properties held for letting Housing properties for letting under construction Completed shared ownership housing properties Shared ownership housing properties under construction Total housing properties '000 Valuation At 1 April 2015 Additions Properties acquired Works to existing properties Interest capitalised Schemes completed Revaluation Disposals At 31 March 2016 Depreciation and impairment At 1 April 2015 Depreciation charged in year Impairment charged in year Revaluation Released on disposal At 31 March 2016 Net book value At 31 March 2016 At 31 March 2015

39 Affordable Housing Provider 38 Notes to the report and financial statements Fixed assets properties (continued) Association - housing properties Social housing properties held for letting Housing properties for letting under construction Completed shared ownership housing properties Shared ownership housing properties under construction Total housing properties '000 Valuation At 1 April 2015 Additions Properties acquired Works to existing properties Interest capitalised Schemes completed Revaluation Disposals At 31 March 2016 Depreciation and impairment At 1 April 2015 Depreciation charged in year Impairment charged in year Revaluation Released on disposal At 31 March 2016 Net book value At 31 March 2016 At 31 March 2015 Valuation Completed housing properties are stated at Existing Use Value for Social Housing (EUV-SH), including notional directly attributable acquisition costs, as at 31 March 2015 The group's housing properties have been valued by WRH Churchill Chartered Surveyors, professional external valuers. The full valuation of properties was undertaken in accordance with the Appraisal and Valuation Manual of the Royal Institute of Chartered Surveyors as follows: Completed properties at valuation Affordable Housing Provider Limited New Housing Limited Friends Housing Association Limited Housing properties under construction Affordable Housing Provider Limited New Housing Limited Friends Housing Association Limited '000

40 Affordable Housing Provider 39 Notes to the report and financial statements Fixed assets housing properties (continued) In valuing housing properties, discounted cash flow methodology was adopted with key assumptions: Discount rate % Annual inflation rate, after first two years % Level of long-term annual rent increase % The carrying value of housing properties that would have been included in the financial statements had the assets been carried at historical cost less capital grants and depreciation is as follows: Group Association Housing properties at historical cost Depreciation and impairment Social housing grant Other capital grant Expenditure on works to existing properties Group Association Improvement works capitalised Components capitalised Amounts charged to income and expenditure Social housing assistance Accounting direction Part 2 22 RPs should disclose the total accumulated capital grant or other financial assistance receivable at the reporting date. This includes social housing grant. Group Association Total accumulated social housing grant received or receivable at 31 March: Recognised in the Statement of Comprehensive Income Held as deferred income

41 Affordable Housing Provider 40 Notes to the report and financial statements Fixed assets housing properties (continued) Finance costs Group Association Aggregate amount of finance costs included in the cost of housing properties Housing properties book value net of depreciation Group Association Freehold land and buildings Long leasehold land and buildings Short leasehold land and buildings Impairment SORP Associations must determine the level at which an impairment is to be assessed (i.e. at asset or cashgenerating unit level) before performing the impairment review. A cash-generating unit is defined as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The group considers individual schemes to be separate Cash Generating Units (CGU's) when assessing for impairment, in accordance with the requirements of Financial Reporting 102 and SORP During the year, as a result of the reduction in income enforced by the Welfare Reform and Work Act 2016, social housing properties with a net book value of were impaired by 564,000. This is separately disclosed in note 5.

42 Affordable Housing Provider 41 Notes to the report and financial statements 13 Tangible fixed assets other Group and association Long Computers Furniture, Freehold leasehold and office fixtures and Motor offices property equipment fittings vehicles Total '000 Cost At 1 April 2015 Additions Disposals At 31 March 2016 Depreciation At 1 April 2015 Charged in the year Released on disposal At 31 March 2016 Net book value At 31 March 2016 At 31 March 2015 The net book value of other tangible fixed assets includes (2015: ) in respect of assets under finance leases. 14 Investment properties non-social housing properties held for letting FRS An entity shall disclose the following for all investment property accounted for at fair value: (a) methods and significant assumptions applied in determining the fair value of the investment property (b) the extent to which the fair value..is based on a valuation by a professional valuer. (e) a reconciliation between the carrying amounts of investment property at the beginning and end of the period. Group and association 2016 '000 At 1 April Additions Increase in value At 31 March

43 Affordable Housing Provider 42 Notes to the report and financial statements Investment properties non-social housing properties held for letting (continued) Investment properties were valued as at 31 March The group's investment properties have been valued by WRH Churchill Chartered Surveyors, professional external valuers. The full valuation of properties was undertaken in accordance with the Appraisal and Valuation Manual of the Royal Institute of Chartered Surveyors as follows: In valuing investment properties, a discounted cash flow methodology was adopted with key assumptions: Discount rate 6.0% Annual inflation rate, after first two years 2.5% Level of long-term annual rent increase 2.0% 15 Homebuy loans Group and association '000 '000 At 1 April New loans issued Interest receivable Loans provided against () () At 31 March 16 Investments in subsidiaries SORP 5.6 and Accounting Direction Part As required by statute, the financial statements consolidate the results of New Housing Limited, Friends Housing Association Limited and AHP Limited, which were subsidiaries of the association at the end of the year. The association has the right to appoint members to the boards of the three subsidiaries and thereby exercises control over them. All of the subsidiaries, New Housing Limited and Friends Housing Association are Registered Providers, and the third, AHP Limited, is a non-regulated company. Affordable Housing Provider is the ultimate parent undertaking. During the year the association had recharged amounts to AHP Limited, an unregistered entity: Accounting direction Part PRPs must include an analysis of intra group transactions to demonstrate a transparency in the flow of funds, allocation of overheads and transactions between registered and unregistered entities within a group. Disclosure should include: description of any significant apportionment, recharge or allocation of turnover, costs, assets and liabilities the aggregate turnover, costs, assets or liabilities which have been apportioned or allocated specifying which associates, subsidiaries or other group members have been involved in the apportionment or allocation.

44 Affordable Housing Provider 43 Notes to the report and financial statements Investments in subsidiaries (continued) Allocation basis Management services Percentage of payroll costs Recharge of rent on property Square footage 17 Properties for sale Group Association Shared ownership properties: Completed properties Work in progress Properties developed for outright sale 18 Debtors Group Association Due within one year Rent and service charges receivable * Less: provision for bad and doubtful debts Social housing grant receivable Other capital grant receivable Revenue grant receivable Other debtors Prepayments and accrued income Due after more than one year Prepayments and accrued income * Accounting direction Part The note should include disclosure of any NPV adjustment to rental arrears where a repayment schedule is in place and the adjustment is material. Note, the unwinding of the discount is recognised as a finance cost.

45 Affordable Housing Provider 44 Notes to the report and financial statements 19 Creditors: amounts falling due within one year Group Association Debt (note 23) Trade creditors Rent and service charges received in advance Social housing grant received in advance Other capital grants received in advance Amounts owed to group undertakings Recycled capital grant fund (note 21) Corporation tax Other taxation and social security Unpaid contributions for retirement benefits Other creditors Accruals and deferred income Obligations under finance leases Other grants received in advance will be utilised against capital expenditure in Creditors: amounts falling due after more than one year Group Association Debt (note 23) Recycled capital grant fund (note 21) Disposal proceeds fund (note 22) Obligations under finance leases

46 Affordable Housing Provider 45 Notes to the report and financial statements 21 Recycled capital grant fund Accounting Direction Part 2 28 a) a reconciliation between the balance held at the beginning of the period of account and the balance at the end of the period of account, showing amounts added into and taken out of the RCGF (b) the source and use or allocation of funds should be disclosed (c) the amounts which are outstanding for three or more years or otherwise potentially due for repayment to the Homes and Communities Agency or the Greater London Authority Group Association At 1 April Grants recycled Interest accrued Transfers from other group members Withdrawals Repayment of grant At 31 March Amount of grant due for repayment Withdrawals from the recycled capital grant fund were used for the purchase and development of new housing schemes for letting and for approved works to existing properties. 22 Disposal proceeds fund Accounting Direction Part 2 29 'In respect of the disposal proceeds fund: (a) a reconciliation between the balance held at the beginning of the period of account and the balance at the end of the period of account, showing amounts added into and taken out of the DPF (b) the source of funds (c) the use or allocation of funds, separately identifying transfers to other PRPs (d) the amounts in respect of which the PRP has paid from the Disposal Proceeds Fund either to the HCA or GLA (e) the amounts in respect of which the regulator may require repayment of sums in accordance with the Disposal Proceeds Fund Requirements Group Association At 1 April Net sales proceeds recycled Interest accrued Transfers to other providers Withdrawals At 31 March

47 Affordable Housing Provider 46 Notes to the report and financial statements Withdrawals from the disposal proceeds fund were used for approved works to existing housing properties. As at 31 March 2016, there are no amounts due for repayment and x has been paid in the year.

48 Affordable Housing Provider 47 Notes to the report and financial statements 23 Debt analysis Borrowings Group Association Due within one year Bank overdraft Bank loans Local authority loans Other loans Due after more than one year Bank loans Local authority loans Other loans Less: issue costs Total loans Security Accounting Direction Part and 31 Local authority and other loans are secured by fixed charges on individual properties. The bank loans are secured by a floating charge over the assets of the association and by fixed charges on individual properties. Terms of repayment and interest rates Accounting Direction Part The loans from local authorities are repaid in half-yearly instalments, over the estimated life of the scheme on which the loan is secured, at fixed rates of interest ranging from % to %. The final instalments fall to be repaid in the period 2016 to 2050 The bank and other loans are repaid in half-yearly instalments at fixed rates of interest ranging from % to %. The final instalments fall to be repaid in the period 2016 to At 31 March 2016 the group had undrawn loan facilities of m (2015: m). The aggregate of adjustments made to carrying value in respect of finance costs, discounts and premia is (2015: ).

49 Affordable Housing Provider 48 Notes to the report and financial statements Debt analysis (continued) Based on the lender's earliest repayment date, borrowings are repayable as follows: Group Association Within one year or on demand One year or more but less than two years Two years or more but less than five years Five years or more Obligations under finance leases Group Association Due within one year Due after more than one year The obligations under finance leases are repayable by equal instalments in less than five years. Finance leases relate to vehicles used by the Association. A purchase option is available at the end of each three year lease. FRS (c) A general description of the lessee's significant leasing arrangements including, for example, information about contingent rent, renewal or purchase options and escalation clauses, sub leases and restrictions.

50 Affordable Housing Provider 49 Notes to the report and financial statements 24 Pensions Social Housing Pension Scheme (Group and Association) FRS A The following must be disclosed for SHPS and any other multi-employer defined benefit schemes accounted for as defined contribution: (a) disclose the fact that it is a defined benefit plan and the reason why it is being accounted for as a defined contribution plan, along with any available information about the plan's surplus or deficit and the implications, if any, for the entity. (b) include a description of the extent to which the entity can be liable to the plan for other entities' obligations under the terms and conditions of the multi-employer plan; and (c) disclose how any liability recognised in accordance with paragraph 28.11A has been determined. Note: The SHPS disclosure is updated each year and the current versions are expected to be available on the Pension's Trust website, under SHPS/Employer literature, in May 2015 hence we have not include the specific wording here. The Association has agreed to make additional deficit payments to SHPS at the rate of per year for 10 years. Using the discount rate based on an AA corporate rate bond for the same period a liability with a net present value of is recognised within provisions for the contractual obligation. At 1 April 2015 Increase in provision due to new deficit agreement Payments made in the year Unwinding of discount included in finance costs At 31 March 2016 '000 ()

51 Affordable Housing Provider 50 Notes to the report and financial statements Pensions (continued) Midshire County Council Pension Fund (Association) FRS This section sets out the disclosure requirements for defined benefit pension schemes. The MCCPF is a multi-employer scheme, administered by Midshire County Council under the regulations governing the Local Government Pension Scheme, a defined benefit scheme. The most recent formal actuarial valuation was completed as at 31 March 20 and rolled forward, allowing for the different financial assumptions required under FRS 102, to 31 March 2016 by a qualified independent actuary. The employer's contributions to the MCCPF by the association for the year ended 31 March 2016 were (2015: ) at a contribution rate of 13.3% of pensionable salaries. The employer's contribution rate for the year ending 31 March 2017 has been set at 14.5%. Estimated employer's contributions to the MCCPF during the accounting period commencing 1 April 2016 are. Principal actuarial assumptions Financial assumptions 31 March 2016 % per annum 31 March 2015 % per annum Discount rate Future salary increases Future pension increases Inflation assumption Mortality assumptions The post-retirement mortality assumptions adopted to value the benefit obligation at March 2016 and March 2015 are based on the PA92 series. The assumed life expectations on retirement at age 65 are: 2016 No. of years 2015 No. of years Retiring today: Males Females Retiring in 20 years: Males Females

52 Affordable Housing Provider 51 Notes to the report and financial statements Pensions (continued) Amounts recognised in surplus or deficit '000 '000 Current service cost Loss on settlements Amounts charged to operating costs '000 '000 Net interest Amounts charged to other finance costs Reconciliation of opening and closing balances of the present value of scheme liabilities 2016 '000 Opening scheme liabilities Current service cost Interest cost Remeasurements Benefits paid Closing scheme liabilities Reconciliation of opening and closing balances of the fair value of plan assets 2016 '000 Opening fair value of plan assets Interest income Return on plan assets (in excess of interest) Contributions by employer Benefits paid Closing fair value of plan assets '000 '000 Actual return on scheme assets

53 Affordable Housing Provider 52 Notes to the report and financial statements Pensions (continued) Major categories of plan assets as a percentage of total plan assets % % Equities Gilts Bonds Properties Cash Sensitivity analysis Note: The sensitivity analysis is not required disclosure under FRS102 28, however, is considered to be best practice. Adjustment to mortality age rating assumption + 1 year None - 1 year '000 '000 '000 Present value of total obligation Aggregate of current service cost and interest cost Increase to None Decrease to Discount rate Increase/(decrease) in the defined benefit liability

54 Affordable Housing Provider 53 Notes to the report and financial statements 25 Provisions for liabilities other provision FRS The provision for the opening and closing position must be shown with any movements shown in the table. Disclosure must also be made to state the nature of the provision if not disclosed already within the accounting policies. Comment must also be included about any uncertainties about the amount or timing and any expected reimbursement. The Group SHPS Deferred Obligation taxation (note 26) Leave pay Total At 1 April 2015 Additions Utilised Reversals Origination and reversal of timing differences Changes in tax rates At 31 March 2016 The Association SHPS Deferred Obligation taxation (note 26) Leave pay Total At 1 April 2015 Additions Utilised Reversals Origination and reversal of timing differences Changes in tax rates At 31 March 2016 The leave pay provision represents holiday balances accrued as a result of services rendered in the current period and which employees are entitled to carry forward. The provision is measured as the salary cost payable for the period of absence. The SHPS obligation is referred to in note 25. The provision is based on the net present value of payments agreed at the year end. The provision will be adjusted following the triennial valuations in the pension scheme, either increasing or decreasing the provision with the opposite entry being shown as operating costs within income and expenditure. The unwinding of the discount is shown as a finance cost.

55 Affordable Housing Provider 54 Notes to the report and financial statements 26 Deferred taxation Group Association Accelerated capital allowance Defined benefit pension scheme FRS (e) and (f) The amount of the net reversal of deferred tax expected to occur next year is (2015: ), relating to the reversal of existing timing differences on tangible fixed assets. Unused tax losses totalled (2015: ), the expiry date on these losses is. 27 Share capital Accounting Direction Part 2.25 The association is limited by guarantee and therefore has no share capital. Each member (see numbers below) agrees to contribute 1 in the event of the association winding up No 2015 No Number of members At 1 April Joining during the year Leaving during the year At 31 March

56 Affordable Housing Provider 55 Notes to the report and financial statements 28 Cash flow from operating activities '000 '000 Surplus for the year Adjustments for non-cash items: Depreciation of tangible fixed assets Amortisation of intangible assets Decrease / (increase) in stock Decrease / (increase) in trade and other debtors Increase / (decrease) in trade and other creditors Increase / (decrease) in provisions Receipt of donated land / assets Pension costs less contributions payable Surplus/deficit on sale of tangible fixed assets Share of operating surplus / (deficit) in joint venture Share of operating surplus / (deficit) in associate Adjustments for investing or financing activities: Government grants utilised in the year Interest payable Interest received Net cash generated from operating activities 29 Capital commitments Accounting Direction Part 2 32 Capital funding and commitments disclosure should include (a) the aggregate amount of contracts for capital expenditure, so far as not provided for (b) the aggregate amount of capital expenditure approved by the directors which has not been contracted for (c) an indication of the proposed financing of such expenditure, showing the amount of grant, agreed loans, loans under negotiation, property sales and any other sources. Group Association Capital expenditure Expenditure contracted for but not provided in the accounts Expenditure authorised by the board, but not contracted The above commitments will be financed primarily through borrowings ( m), which are available for draw-down under existing loan arrangements, with the balance ( m) funded through social housing grant and property sales ( m). 30 Contingent assets/liabilities The group and association had no contingent assets at 31 March 2016 (2015: nil).

57 Affordable Housing Provider 56 Notes to the report and financial statements The group receives capital grant from the Homes and Communities Agency, which is used to fund the acquisition and development of housing properties and their components. In certain circumstances upon disposal of grant funded properties the group is required to recycle this grant by crediting the Recycled Capital Grant Fund. At 31 March 2016, the group has disposed of components, which had received (2015: ) of grant funding. Although the disposal of these components has not given rise to a relevant event for the purposes of recycling the grant (as the group retains the property asset) it does have a future obligation to recycle this grant once the property is disposed of. As the timing of any future disposal is uncertain, no provision has been recognised in these financial statements. [Each Association to consider if this disclosure is required.] The group and association had no other contingent liabilities at 31 March 2016 (2015 nil). 31 Leasing commitments FRS and SORP 10.4 The future minimum lease payments of leases are as set out below. Leases relate to shared office space in three locations and computers. The association and group's future minimum operating lease payments are as follows: '000 '000 Within one year Between one and five years The association and group's future minimum finance lease payments are as follows: '000 '000 Within one year Between one and five years The association's future minimum finance lease payments are as follows: '000 '000 Within one year Between one and five years

58 Affordable Housing Provider 57 Notes to the report and financial statements 32 Related parties Accounting Direction Part 2 36 (see also FRS102 33) The direction requires disclosure of relationships of parents and subsidiaries and registered and unregistered group or associated bodies, irrespective of whether there have been transactions between those related parties. Disclosures are also required under FRS including: names and relationships of the related parties description of the transaction amounts involved in the transaction amounts due to or from at the reporting date any amounts provided for or written off in relation to the related party. Transactions may be aggregated unless individual disclosure is necessary for an understanding of the impact of the transactions on the reporting entity. Linda Carter, a member of the board, is a trustee of Friendly Charity. The charity manages the group s Supported Hostels providing special care services. During the year the group paid management fees totalling (2013: ) to Friendly Charity. There are two tenant members of the board, Michael Shore and Caroline Drake. Their tenancies are on normal commercial terms and they are not able to use their position to their advantage. One member of the board, David Lyles, is a councillor with Shires District Council, a local authority having nomination rights over tenancies for certain group properties. All transactions with the council are on normal commercial terms and David Lyles is not able to use his position to his advantage. Total arrears were. Total amounts payable were. Disclosures in relation to key management personnel are included in note 10.

59 Affordable Housing Provider 58 Notes to the report and financial statements 33 Financial assets and liabilities The board policy on financial instruments is explained in the Board Report as are references to financial risks. FRS An entity shall disclose the carrying amounts of categories of financial assets and financial liabilities at the reporting date in total. The categories are as follows: Financial assets measured at fair value through surplus or deficit Financial assets that are debt instruments measured at amortised cost Financial assets that are equity instruments measured at cost less impairment Financial liabilities measured at fair value through surplus or deficit Financial liabilities measured at amortised cost Loan Commitments measured at cost less impairment Categories of financial assets and financial liabilities '000 '000 Financial assets that are debt instruments measured at amortised cost Financial liabilities measured at fair value through surplus or deficit Financial liabilities measured at amortised cost Loan Commitments measured at cost less impairment Total FRS A Certain disclosures are required for financial instruments at fair value through surplus or deficit that are not held as part of a trading portfolio and are not derivatives. This should include information on the nature and extent of the relevant risks arising. The following disclosures would be repeated for each relevant item '000 '000 The amount of change during the period attributable to changes in the credit risk* The difference between the financial liability's carrying amount and the amount the entity would be contractually obliged to pay at maturity *calculated as the amount of change in fair value not attributable to changes in market conditions that give rise to market risk. The method used to calculate the amount of change attributable to changes in own credit risks is.

60 Affordable Housing Provider 59 Notes to the report and financial statements Financial assets and liabilities (continued) Financial assets Other than short-term debtors, financial assets held are equity instruments in other entities, cash deposits placed on money markets at call, seven-day and monthly rates and cash at bank. They are sterling denominated and the interest rate profile at 31 March was: '000 '000 Floating rate on money market deposits Financial assets on which no interest is earned Total The financial assets on which no interest is earned comprise trade investments that have no fixed maturity. The remaining financial assets are floating rate, attracting interest at rates that vary with bank rates. Financial liabilities excluding trade creditors interest rate risk profile The group s financial liabilities are sterling denominated. The interest rate profile of the group s financial liabilities at 31 March was: '000 '000 Fixed rate The fixed rate financial liabilities have a weighted average interest rate of % (2015: %) and the weighted average period for which it is fixed is years (2015: years). The debt maturity profile is shown in note 23. Borrowing facilities The group has undrawn committed borrowing facilities. The facilities available at 31 March in respect of which all conditions precedent had been met were as follows: '000 '000 Expiring in one year or less Expiring in more than one year but not more than two years Expiring in more than two years

61 Affordable Housing Provider 60 Notes to the report and financial statements 34 Transition to FRS 102 The association has adopted FRS 102 from 1 April 2014 and has restated the comparative prior year amounts. FRS Must include a description of the nature of each change in accounting policy EAMPLE ONLY must include all areas which have changed SHPS pension Under section 238 the group is now required to recognise the net present value of any contractual agreements to make additional payments for a past deficit. Using a discount rate of this has resulted in a liability of being recognised as a liability in the opening reserves. Explanations Corrections of prior period errors 1. This will be specific to the entity and is not expected in most cases disclosures do not reflect this Changes for FRS 102 adoption 2. SHPS Pension Under section 28 the group is now required to recognise the net present value of any contractual agreements to make additional payments for a past deficit. Using a discount rate of. This has resulted in a liability of being recognised as a liability in the opening reserves. 3. Holiday pay provision A provision is now made for entitlement to holiday at the year-end which has not been taken by employees. This has been calculated based on payroll records and totalled as a liability in opening reserves. 4. Financial instruments One of the bank loans with Bloggs Bank was previously reported at amortised cost. The loan includes an option for the bank to cancel the fixed aspect of the loan and to move to a rate of the bank's choosing in a way that causes the loan to be classified as non-basic. The fair value of the loan has been calculated at the year-end by the Group's treasury consultants based on market information relating to similar instruments. 5. Defined benefit pension scheme The net pension finance cost recognised in the Income and Expenditure account for the year ended 31st July 2015 under the previous UK GAAP was the net of the expected return on pension plan assets and the interest on pension liabilities. FRS 102 requires the recognition in