Umsobomvu Youth Fund Annual Report 2006 - Nyda

notes to thefinancialstatementsfor the year endedincome31 March 2006statementsfor the year ended31 March 2006Umsobomvu Youth Fund 2006 Financial Statementscommitted until investments and loan debtors are convertedinto cash. Uncommitted unrestricted funds are funds that areavailable to commit to projects.1.12 ProvisionsProvisions are recognised where the Fund has a present legalor constructive obligation as a result of a past event, wherea reliable estimate of the obligation can be made and it isprobable that an outflow of resources embodying economicbenefits will be required to settle the obligation.1.13 Revenue recognitionRevenue is recognised in the financial statements on thefollowing basis:• Interest is recognised on a time proportion basis which takesinto account the effective yield on the asset over the periodit is expected to be held;• Voucher income, when services are rendered on a stage ofcompletion basis;• Administration, fees for services and management fees arerecognised as services rendered on a stage of completionbasis; and• Grant utilised – see note 1.11.1.14 Project disbursementsDisbursements to projects are categorised and disclosed asfollows:• External project disbursements are approved grant fundingmade to third party service providers who plan, implementand manage youth development projects.• Internal project disbursements are payments relating to youthdevelopment projects that are planned, implemented andmanaged internally by the Fund using its own capacity.• Project-related operating expenses:– Direct project support costs are costs incurred by the Fund,directly related to a project that is planned, implementedand managed by a third party service provider; but do notform part of the main project disbursements.– Indirect project support costs are costs related to aprogramme, business unit or division which cannot beallocated to a specific project.– Share of overhead costs relates to costs incurred by theFund to support its activities and cannot be allocatedto any specific division. These costs are apportioned toprogrammes based on headcount.1.15 Operating leasesOperating lease payments are recognised as an expense in theincome statement on a straight line basis over the lease term.1.16 Financial instrumentsFinancial instruments are recognised when the Fund becomesparty to the contractual provisions of the instrument. Allfinancial instruments are initially recorded at fair value plus, inthe case of the financial asset or financial liability not at fairvalue through profit or loss, transaction costs that are directlyattributable to the acquisition or issue of the financial asset orfinancial liability.Subsequent measurementSubsequent measurement of financial instruments carried onthe balance sheet is on the following basis:• Investments in equity instruments, other than groupcompanies, are classified as either available for sale or fairvalue through profit and loss depending on the intention atthe date of acquiring the investment. All changes in fair valueare recognised directly in the income statement.• Loans and receivables are non-derivative financial assetswith fixed or determinable payments that are not quotedin an active market. Such assets are carried at amortisedcost using the effective interest rate method. Gains andlosses are recognised in profit and loss when the loans andreceivables are derecognised or impaired, as well as throughthe amortisation process.• Trade and other short-term loan receivables and payablesare classified as loans and receivables originated by theenterprise. These financial instruments are subsequentlymeasured at amortised cost using the effective interest ratemethod or at cost when no maturity date is established.Trade receivables and trade payables, where the effect ofimputing interest is considered to be insignificant, arerecognised and carried at original invoice amount.• Cash and cash equivalents comprise demand depositsand short-term, highly liquid investments that are readilyconvertible into known amounts of cash.• Derivatives, including separated embedded derivatives, areclassified as at fair value through profit and loss unlessdesignated as hedging instruments. Embedded derivativesare separated from their host contracts and accounted forseparately when:– The economic characteristics of the derivative are notclosely related to the host contract;– The separated embedded derivative meets the definitionof a derivative; and– The hybrid instrument is not carried at fair value.When designated as at fair value through profit and loss,derivatives are carried at fair value, with all changes in fairvalue being recognised in the income statement.Where objective evidence of impairment exists, and the carryingvalue of a financial asset is above its estimated recoverableamount, an impairment of the financial asset to its estimatedrecoverable amount is recognised. The estimated recoverableamount of financial assets carried at amortised cost is thepresent value of future expected cash flows at the effectiveinterest rate of the instrument.52