may change the utilisation of certain software and IT equipment and changes to Decent Homes Standards which may require more frequent replacement of key components. Accumulated depreciation at 31 March 2024 was £1,445,049,000 (2023: £1,382,725,000). Property development cost allocation Where schemes under construction are mixed tenure, costs are split using a suitable method such as floor area or rental yield. The allocation of the cost of shared ownership schemes under construction between stock and housing properties is determined by looking at the predicted amount to be sold as a first tranche sale based on the scheme and the likely demand. Impairment of housing properties Housing properties are reviewed for impairment if an impairment trigger is deemed to have occurred. Where there is evidence of impairment, fixed assets are written down to their recoverable amount. Any such write down is charged to operating profit. For housing assets, impairment is assessed by comparing the carrying value to the recoverable amount which is the higher of value in use, fair value less costs to sell as represented by EUV-SH; value in use; and value in use service potential. If the carrying value is greater than the recoverable amount then an impairment provision is made. This requires management estimates of the timing of cash flows and discount rates. Impairment of investments in subsidiaries Investments in subsidiaries are reviewed for impairment at each reporting date. Where there is evidence of impairment, investments in subisidiaries are written down to their recoverable amount. Any such write down is charged to operating profit. Impairment is assessed by comparing the carrying value to the recoverable amount which is as an estimate of the net present value of the future expected cash flows from the subsidiary entity to which the investment relates. Assets held for sale Stock includes properties for sale under market sale and shared ownership programmes. In addition the Group holds work in progress on schemes where properties are being developed for sale. The value of each asset is assessed for impairment by review against its selling price less costs to complete and sell, and each scheme in progress against expected proceeds less costs to be incurred. Provision for bad and doubtful debts Provisions for bad and doubtful debts are calculated based on banding of arrears and a provision rate that reflect the risk of non-recovery of the arrears. The arrears banding and the provision rates require management’s judgement. Hedge accounting effectiveness A prospective test is performed at hedge inception and at each reporting date, under the critical terms method, and using a hypothetical derivative set up so that it matches the Hedging Instrument, but in the opposite direction. The strength of the statistical relationship between the hedging instrument and hedged item is measured by comparing the mark-to-market movement of the hedging instrument to that of the hypothetical derivative under specific sensitivities of the interest rate curve. As the market value represents the present value of all future
72 Anchor Hanover Group Annual Report & Financial Statements 2024 Management reviews its estimate of the useful lives of depreciable assets at each reporting date based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that goodwill has arisen. Accumulated amortisation at 31 March 2024 was £12,051,000 (2023: 3,544,000). Fair value of acquired assets and liabilities On acquisition management estimates the fair value of the assets and liabilities acquired. Fair value is determined by reference to market prices, where available; by reference to the current price at which the business could acquire similar assets or enter into similar obligations; or by discounting to present value. Useful lives of depreciable assets Determining whether a debt instrument satisfies the requirement to be treated as basic Judgement is required to determine whether a debt instrument satisfies the requirements in FRS 102 Paragraph 11.9 to be treated as basic. For debt instruments to be classified as basic financial instruments the interest must be a positive amount or positive rate, at market rates. They should not be index-linked (excluding RPI) and the lender cannot unilaterally amend interest rates. Debt instruments are utilised to provide long term funding for the Group’s operations and not for speculative trading. Facilities with two-way break clauses are judged to be basic. Determining the fair value of other debt instruments Financial instruments that do not meet the definition of being basic under FRS 102 have to be measured at fair value using a hierarchy of estimates which prioritises quoted prices in an active market, then recent transactions of identical assets and finally the use of valuation techniques. In applying this hierarchy, management have to apply a significant amount of judgement and where available deem the best estimate of fair value of any one debt instrument to be the exit prices quoted by the respective counterparty. Finance leases The initial finance lease liability is calculated as the lower of the fair value of the asset being financed and the present value of the minimum future lease payments. When calculating the present value of the minimum future lease payments a discount rate equivalent to the interest rate implicit in the lease is used. Where this is not known management uses the interest rate that would have applied had Anchor borrowed to buy the assets over an equivalent term to the leases on the date of the lease inception. This is done by reference to the indicative rate for a private placement for a similar amount over a similar term to the lease. • Key Accounting Estimates and Assumptions Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Useful life of goodwill Management reviews its estimate of the useful lives of each goodwill asset at each reporting date based on the expected remaining benefit of the goodwill. Uncertainties in these estimates relate to management's assessment of future performance of the business units from which the
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