Financial statements
Strategic report
Governance
116 OCU Group Annual report and financial statements 2026
Notes to the consolidated financial statements continued for the year ended 30 April 2026
1. Accounting policies continued Financial instruments continued Impairment of financial assets Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset's original effective interest rate. The impairment loss is recognised in profit or loss. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party. Classification of financial liabilities Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Basic financial liabilities Basic financial liabilities, including creditors and borrowings, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method. Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Preference shares that contain a contractual obligation to redeem the shares or to pay dividends are classified as financial liabilities. Such liabilities are initially recognised at the transaction price and are subsequently measured in accordance with the Company's accounting policy for financial instruments. Dividends and other returns on these shares are recognised as finance costs in the profit and loss account using the effective interest method. Derecognition of financial liabilities Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.
Non-basic financial instruments Derivatives
Derivatives are non-basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss within interest receivable/payable and other similar income/expense, unless they are included in a hedging arrangement. Net investment hedge accounting The Group applies hedge accounting to certain derivative financial instruments designated as hedges of its net investments in foreign operations. Hedge accounting is applied only where the hedging relationship meets the qualifying criteria set out in FRS 102 and the relationship is formally designated and documented at inception. Foreign exchange gains and losses arising on the effective portion of the hedging instrument are recognised in other comprehensive income and accumulated in the foreign exchange reserve to offset the exchange differences arising on the translation of the net investment in the foreign operation.
Any hedge ineffectiveness is recognised immediately in the profit and loss account.
On disposal of a foreign operation, amounts recognised in equity in respect of both the net investment and the associated hedge remain within equity in accordance with FRS 102.
Equity instruments Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Group.
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