23. Other financial assets, including investments

Accounting policy

On initial recognition, loans, receivables and deposits are accounted for by the Group from the date on which they first arose. All other financial assets are initially recognised on the transaction date. The Group derecognises a financial asset in the balance sheet once the contractual rights to the cash flows from the asset have expired. If the Group transfers the contractual rights to the cash flows from the financial asset by means of a transaction in which virtually all risks and rewards of ownership of the asset are transferred or not retained, and control of the asset transferred is not retained either, the Group no longer includes the financial asset in the balance sheet. If the Group retains or creates an interest in the financial assets being transferred, that interest is recognised as a separate asset or liability.

The Group derecognises a financial liability if the contractual obligations have been discharged or cancelled or have expired.

Financial assets and liabilities are offset, and the resulting net amount is recognised in the statement of financial position only if the Group has a legally enforceable right to set off the amounts and if it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group uses the following financial instruments:

Non-derivative financial instruments

Non-derivative financial instruments include investments in equity securities, deposits and bonds, trade and other receivables, cash and cash equivalents. Non-derivative financial instruments are initially recognised at fair value. After initial recognition, non-derivative financial instruments are measured as described below.

Financial assets at fair value through profit or loss 

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in the income statement.

Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective interest method. Amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairments are recognised in the income statement. Any gain or loss arising on derecognition is recognised in the income statement.

Fair value through other comprehensive income – equity investment (interest in Eurofima)

These assets are subsequently measured at fair value. Dividends are recognised as income in the income statement, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in other comprehensive income and are never reclassified to the income statement.

Impairment of financial assets

At each reporting date, financial assets are assessed to determine whether they might be impaired on the basis of expected credit losses.

The Group recognises a provision for expected credit losses for all debt instruments that are not held at fair value through profit or loss. The expected credit losses are based on the difference between the contractual cash flows and all cash flows expected to be received by the Group, discounted at an approximation of the original effective interest rate.

Financial assets that are significant are individually tested for impairment. Other financial assets are assigned to groups with similar credit risk characteristics and are assessed collectively.

Fair value

The interest in Transport UK Group Ltd and the Transport UK Group Ltd receivables have been measured at fair value, in which valuation techniques were used using unobservable market sources (Level 3). The valuation is based on the expected cash flows from the settlement of the concessions and related claims discounted at the interest rate equal to that of the loans to Transport UK Group Ltd.

In principle, the interest in Eurofima is measured at fair value. The net asset value of this interest was used as the best approximation of fair value.

When determining the value of interest swaps, currency derivatives and money market funds, the Group uses measurement methods in which all significant data required are derived from observable market data (Level 2).