Experian 2014 Annual Report Download - page 117

Financial statements • Notes to the Group financial statements 113
(h) Trade receivables (note 23)
Trade receivables are initially recognised at fair value and subsequently measured at this value less any provision for impairment.
Where the time value of money is material, receivables are then carried at amortised cost using the effective interest rate method,
less any provision for impairment.
A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables. Such evidence is based primarily on the pattern of cash received, compared to the
terms upon which the receivable is contracted. The amount of the provision is the difference between the carrying amount and the
value of estimated future cash flows. Any charges or credits in respect of such provisions and irrecoverable trade receivables are
recognised in the Group income statement within other operating charges.
(i) Cash and cash equivalents (note 24)
Cash and cash equivalents include cash in hand, term and call deposits held with banks and other short-term highly liquid
investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities
on the Group balance sheet. For the purposes of the Group cash flow statement, cash and cash equivalents are reported net of
bank overdrafts.
(j) Financial assets (notes 28 and 29)
As required by IFRS 7 ‘Financial instruments: disclosures’, the Group classifies its financial assets in the four categories
set out below.
• Loans and receivables – comprising trade and other receivables and cash and cash equivalents.
• Derivatives used for hedging – including interest rate swaps, cross currency swaps, foreign exchange contracts
and equity swaps.
• Assets at fair value through profit and loss – comprising non-hedging derivative financial instruments.
• Available-for-sale financial assets – being non-derivative financial assets either designated to this category or not
classified in the other financial asset categories.
(k) Derivative financial instruments (note 29)
The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange rates, interest rates
and certain obligations relating to share incentive plans, including social security obligations. Instruments used include interest
rate swaps, cross currency swaps, foreign exchange contracts and equity swaps. These are recognised as assets or liabilities as
appropriate and are classified as non-current unless they mature within one year of the balance sheet date.
Derivatives are initially recognised at their fair value on the date a contract is entered into, and are subsequently remeasured at
their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the hedge relationship.
Hedging derivatives
The Group designates certain derivatives as fair value hedges, being hedges of the fair value of a recognised asset or liability or a firm
commitment. The Group does not currently enter into cash flow or net investment hedges.
The Group documents both the relationship between hedging instruments and hedged items at the hedge inception, and its risk
management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment as to
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values of hedged items.
This effectiveness testing is performed at every reporting date throughout the life of the hedge to confirm that the hedge remains,
and will continue to remain, highly effective. Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated or exercised or no longer qualifies for hedge accounting.
Changes in the fair value of derivatives that are designated and qualify as fair value hedging instruments are recognised in the Group
income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
The ineffective portion of a fair value hedge is recognised in net finance costs in the Group income statement.
Non-hedging derivatives
Changes in the fair value of such derivative instruments are recognised immediately in the Group income statement. Cost and
income amounts in respect of derivatives entered into in connection with social security obligations on employee share incentive
plans, other than amounts of a financing nature, are charged or credited within labour costs. Other costs and changes in the fair
value of such derivatives are charged or credited within financing fair value remeasurements in the Group income statement.