23. Other financial assets, including investments

Accounting policy

Loans, receivables, and deposits are recognised by the Group on the date they arise. All other financial assets are recognised on the transaction date. The Group does not recognise a financial asset in the balance sheet if the contractual rights to the cash flows from the asset have expired. If the Group transfers the contractual rights to receive the cash flows from the financial asset through a transaction in which substantially all the risks and rewards of ownership of the asset are transferred or retained, and control of the transferred asset is not retained, the Group derecognises the financial asset.If the Group retains or creates an interest in the transferred financial assets, this interest is recognised separately as an asset or liability.

The Group no longer recognises a financial liability in the balance sheet if the contractual obligations are forgiven, canceled, or expire.

Financial assets and liabilities are offset, and the resulting net amount is presented in the balance sheet, if the Group has a legally enforceable right to offset them and intends 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 shares, 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. The amortised cost is reduced by any impairment losses. Interest income, foreign exchange gains and losses, and impairment losses are recognised in the income statement. Any gain or loss resulting from derecognition is recognised in the income statement.

Fair value recognised through 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 comprehensive income and are never reclassified to the income statement.

Impairment of financial assets

At each reporting date, a financial asset is assessed for impairment based on 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. Expected credit losses are based on the difference between the contractual cash flows under the contract and all cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate.

Significant financial assets are individually assessed for impairment. The remaining financial assets are grouped together with similar credit risk characteristics and assessed collectively.

Fair value

The interest in Transport UK Group Ltd and the receivables from Transport UK Group Ltd are measured at fair value, using valuation techniques that rely on unobservable market inputs (Level 3). The accounting is based on the expected cash flows from the settlement of the franchises and related claims discounted at the interest rate equal to that of the loans to Transport UK Group Ltd.

The interest in Eurofima is in principle valued at fair value. The net asset value of this interest has been used as the best approximation of fair value.

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