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| ACCOUNTING POLICIES (CONTINUED) |
| for the year ended 31 March |
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| FINANCIAL INSTRUMENTS |
Financial instruments refer to all assets and liabilities, including derivative instruments, but exclude investments in subsidiaries, associated companies
and joint ventures, property and equipment, deferred taxation, taxation payable, intangible assets and goodwill.
Financial assets are initially recorded at cost and are remeasured to fair value at subsequent reporting dates on the group's balance sheet when the
group has become a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or the asset is transferred. |
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Listed investments |
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Listed investments are carried at their fair values, using quoted prices at year-end. Where an active market does not exist for the quoted
investment, estimation techniques are used to determine fair value. Changes in fair value are reflected in the income statement under "other
income". |
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Private equity investments |
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Private equity investments, which include listed and unlisted co-investments and capital participations in Brait's managed funds, as well as
proprietary investments, are valued at their estimated fair value as determined by the board at the reporting date. The resultant increase or
decrease in fair value is recognised as other income in the income statement.
The fair value measurement of unrealised capital participations takes into consideration the attrition effect of the preferred return on the future value
of the capital participation. This adjustment is measured by discounting the future fair value of the capital participation, at Brait's cost of equity, for the
remaining anticipated life of the fund.
In valuing investments, the directors follow the principles recommended in the International Private Equity and Venture Capital Valuation Guidelines.
In cases where fair value cannot be reliably measured, existing book value, less any impairment, is used as the basis of valuation.
Fair value represents the amount for which an asset could be exchanged between knowledgeable, willing parties at an arm's length transaction. In
estimating fair value, the directors use a methodology which is appropriate in light of the nature, facts and circumstances of the investment. Due to
the inherent uncertainties in estimating the value of private equity investments, the directors exercise due caution in applying the various
methodologies.
The principal methodologies applied in valuing unlisted investments include the following: |
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Earnings multiple; |
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Price of recent investment; |
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Net assets; |
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Discounted cash flow or earnings (of the underlying business); |
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Discounted cash flow (from the investment); |
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Industry valuation benchmarks; and |
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Available market prices. |
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In applying the earnings multiple methodology, the directors apply a market-based multiple that is appropriate and reasonable to the
maintainable earnings of the company.
Where a recent investment has been made, this price will be used as the estimate of fair value. An alternative methodology may be used at any
time if this is deemed to provide a better assessment of the fair value of the investment. |
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Specialised funds investments |
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These investments represent the group's share in various specialised funds and are measured at fair value. The underlying investments of these
funds comprise cash and various listed equity, bond and derivative investments. Fair values of the various funds are determined using quoted
market prices of the underlying investments of these funds at year-end. Changes in fair value are reflected in the income statement under "other
income". |
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Trading investments |
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Investments held for trading, which includes unlisted investments, are valued at their estimated fair value as determined by the board at the
reporting date. The resultant increase or decrease in fair value is recognised in the income statement. |
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Securities |
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Investments in securities are recognised on a trade date basis and are initially measured at cost.
At subsequent reporting dates, debt securities that the group has the expressed intention and ability to hold to maturity (held-to-maturity debt
securities) are measured at amortised cost, less any impairment loss recognised to reflect irrecoverable amounts. The annual amortisation of any
discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of the
instrument so that the revenue recognised in each period represents a constant yield on the investment.
Investments, other than held-to-maturity debt securities, are classified as either held for trading or available for sale investments, and are
measured at subsequent reporting dates at fair value, based on quoted market prices at the balance sheet date. Where securities are held for
trading purposes, unrealised gains and losses are included in net profit or loss for the year.
Where securities are classified as available for sale investments, unrealised gains or losses are included in equity until such time as the security
is disposed of. On disposal, the amount carried in equity is recognised in the income statement.
Where there is no formal market, insufficient liquidity in the security, or there is a restriction on the right of sale, the fair value reflects directors'
valuation. |
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Loans and advances |
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Loans and advances are stated at amortised cost using the effective interest rate method net of impairment provisions. Impairment provisions
are made against specifically identified doubtful loans and advances. |
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Account receivables |
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Trade receivables are stated at their nominal value, as reduced by appropriate allowances for estimated irrecoverable amounts. |
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Cash and cash equivalents |
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For the purposes of the cash flow statement, cash and cash equivalents comprise cash and balances with banks, and short-term cash deposited
with the Brait Absolute Fund. |
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Derivative financial instruments |
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Derivative financial instruments are initially recorded at cost and are remeasured to fair value at subsequent reporting dates.
Changes in the fair value of derivative financial instruments that are designated and effective as cash flow hedges are recognised directly in equity.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as
they arise. |
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| Financial liabilities are initially recognised at cost and are re-measured to fair value at subsequent reporting dates on the group's balance sheet when
the group has become a party to the contractual provisions of the instrument. Financial liabilities are de-recognised when the obligation specific in
the contract is discharged, cancelled or expires. |
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Provisions |
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Provisions are recognised when the group has a present, obligation as a result of a past event, which it is probable will result in an outflow of
economic benefits that can be reasonably estimated. |
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Trade payables |
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Trade payables are stated at their nominal value. |
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Liabilities held for trading |
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Liabilities held for trading are stated at fair value at the reporting date. The resultant increase or decrease in value is recognised in the
income statement. |
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Borrowings |
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Interest-bearing bank loans, overdrafts and other borrowings are recorded at the proceeds received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of
the instrument to the extent that they are not settled in the period in which they arise. All borrowing costs are expensed in the period in which
they are incurred. |
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