BHRUT annual report 2009 - Barking Havering and Redbridge ...

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Annual Report & Accounts 2009-2010 41 support such services, and the income expectations for services delivered at the agreed activity levels. During the year, the board entered into a 10 year agreement to provide certain services to a private healthcare provider. This has resulted in a long term lease arrangement and a contractual commitment to provide a range of clinical services. The management believe they have sufficent capacity to support such services. 1.5.2 Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year Non-current building and land assets are valued at at market values. The property market has continued to demonstrate volatility during the period, and continues to be subject to uncertainty in the medium term. The Trust has a number operating leases and a Private Finance Initiative (PFI) Agreement where the Trust is the lessee. The PFI assets are held on-balance sheet, and are valued at current values, either by obtaining market valuations from appropriately qualified independent valuers, or on a depreciated replacement cost basis (see note 1.9). Valuations are therefore subject to market fluctuation, which could result in unforeseeable increases or decreases in valuation in future periods. Any known impairments which are not likely to be reversed in the near term, in excess of any revaluation reserve, are accounted for in the period in which they arise. Operating leases are expensed in accordance with IAS 17 on a straight-line line basis over the term of the lease. Provisions are reviewed by management on a regular basis using a combination of information provided by appropriate third party sources. Any change in circumstances related to these provisions is reflected in the period in which it is identified. The NHS Pensions Scheme provides cover for past and present employees, and is subject to a full actuarial valuation every five years (see note 11). The Trust carries provisions in certain instances relating to early retirement, based on latest actuarial information provided by the NHS Pensions Agency. This is therefore subject to change which is recognised in the period to which it arises. The Trust maintains insurance against potential legal claims, which are managed by the NHS Litigation Authority. The Trust makes provisions for the estimated excess liabilties due under this policy, in line with information provided by the NHS Litigation Authority. Uncertainty in estimation may relate to the timing of potential settlements, although the liability to the Trust will be limited to the level of the excess. PFI assets include buildings and medical equipment. PFI buildings are treated in accordance with noncurrent building and land assets, which are valued at fair value on a modern equivalent asset basis, either by a periodic professional valuation, or where this is not done on an annual basis, by an estimate adjusting the latest valuation reflecting changes in market conditions. The Trust may determine when to professionally revalue its land and buildings, but the interval between profesional valuations will be no more than five years. Equipment procured under the Managed Equipment Service is valued as per the contractor's financial model, including periodic lifecycle refreshes. A PFI liability is recognised at the same time as the PFI assets are recognised. It is measured initially at the same amount as the fair value of the PFI assets and is subsequently treated similar to a finance lease liability in accordance with IAS 17. The implicit rate of interest is derived from the PFI provider's financial model and, for the building, is taken as the implied project rate of return. The liability is written down over the term of the PFI Project Agreement with each unitary payment. The liability is only increased if the Trust requests further capital expenditure directly financed by the PFI provider. For equipment within the PFI Managed Equipment Service (MES), a liability is recognised at the modelled asset replacement year and is measured at the implied cost to the Trust according to the MES provider's financial model. The implied rate of interest used is taken directly from the MES provider's financial model. Annual Accounts
42 Barking, Havering & Redbridge University Hospitals NHS Trust 1.6 Revenue Revenue in respect of services provided is recognised when, and to the extent that, performance occurs, and is measured at the fair value of the consideration receivable. The main source of revenue for the trust is from commissioners for healthcare services. Revenue relating to patient care spells that are part-completed at the year end are apportioned across the financial years on the basis of length of stay at the end of the reporting period compared to expected total length of stay/costs incurred to date compared to total expected costs. Where income is received for a specific activity that is to be delivered in the following year, that income is deferred. The Trust receives income under the NHS Injury Cost Recovery Scheme, designed to reclaim the cost of treating injured individuals to whom personal injury compensation has subsequently been paid e.g. by an insurer. The Trust recognises the income when it receives notification from the Department of Work and Pension's Compensation Recovery Unit that the individual has lodged a compensation claim. The income is measured at the agreed tariff for the treatments provided to the injured individual, less a provision for unsuccessful compensation claims and doubtful debts. 1.7 Employee Benefits Short-term employee benefits Salaries, wages and employment-related payments are recognised in the period in which the service is received from employees. The cost of leave earned but not taken by employees at the end of the period is recognised in the financial statements to the extent that employees are permitted to carry forward leave into the following period. Retirement benefit costs Past and present employees are covered by the provisions of the NHS Pensions Scheme. The scheme is an unfunded, defined benefit scheme that covers NHS employers, General Practices and other bodies, allowed under the direction of the Secretary of State, in England and Wales. The scheme is not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme assets and liabilities. Therefore, the scheme is accounted for as if it were a defined contribution scheme: the cost to the NHS body of participating in the scheme is taken as equal to the contributions payable to the scheme for the accounting period. For early retirements other than those due to ill health the additional pension liabilities are not funded by the scheme. The full amount of the liability for the additional costs is charged to expenditure at the time the Trust commits itself to the retirement, regardless of the method of payment. Some employees are members of the Local Government Superannuation Scheme, which is a defined benefit pension scheme. The scheme assets and liabilities attributable to those employees can be identified and are recognised in the trust’s accounts. The assets are measured at fair value and the liabilities at the present value of the future obligations. The increase in the liability arising from pensionable service earned during the year is recognised within operating expenses. The expected gain during the year from scheme assets is recognised within finance income. The interest cost during the year arising from the unwinding of the discount on the scheme liabilities is recognised within finance costs. Actuarial gains and losses during the year are recognised in the pensions reserve and reported as an item of other comprehensive income. 1.8 Other expenses Other operating expenses are recognised when, and to the extent that, the goods or services have been received. They are measured at the fair value of the consideration payable. Annual Accounts
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BHRUT annual report 2009 - Barking Havering and Redbridge ...

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