Docusign Envelope ID: 7C50003C-051D-4E0C-907A-F452AD5C4EA2
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS
Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to the Scheme such as fees, commissions, stamp duty and other fees. Other investment management expenses are accounted for on an accruals basis. Valuation and classification of investments Investment assets and liabilities are included in the financial statements at fair value. Where separate bid and offer prices only are available, the bid price is used for investment assets and the offer price for investment liabilities. Otherwise, the closing single price, dealing price or most recent transaction price is used.
Where quoted or other unit prices are not available, the Trustee adopts valuation techniques appropriate to the class of investment.
The methods of determining fair value for the principle classes of investments are:
Bonds which are traded on an active market are included at the quoted price, which is normally the bid price. Unitised pooled investment vehicles which are not traded on an active market but where the manager is able to demonstrate that they are priced daily, weekly or at each month end, and are actually traded on substantially all pricing days are included at the last price provided by the manager at or before the year end. Secure income pooled investment funds that are valued quarterly and where new investments are only unitised on the first business day of the following quarter are valued using the manager valuation at the quarter end plus the cash value of un-unitised purchases. Exchange traded futures are valued at the difference between exchange settlement prices and inception prices. Forward exchange contracts are valued at the gain or loss that would arise from closing out the contract at the reporting date by entering into an equal and opposite contract at that date. Swaps are valued at the net present value of future cash flows arising therefrom. With profits insurance policies (including those held as AVC investments) are reported at the policy value provided by the insurer based on cumulative reversionary bonuses declared and the current terminal bonus. Unitised insurance policies are valued on the same basis as pooled investment vehicles with similar characteristics. The Asset Backed Funding arrangement has been stated at an estimated fair value as provided by an independent expert at the year end date. The fair value is based on the net present value of the future expected cash flows from the arrangement with due allowance for credit and liquidity risk and the funding level of the Scheme. AVC investments are valued at the market value provided by the AVC provider at the year end date. Accrued interest is excluded from the market value of bonds but is included in investment income receivable. The Scheme continues to recognise assets that are delivered out under repurchase contracts and includes them in the financial statements. The cash received is recognised as an asset and the obligation to pay it back is recognised as a payable amount. Pending trade settlements are included in other net investment balances. Critical accounting judgements and estimation uncertainty Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Trustee makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. For the Scheme, the Trustee believes the only estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are related to the valuation of the Scheme investments and, in particular, those classified in Level 3 of the fair-value hierarchy. Explanation of the key assumptions underpinning the valuation of investments are included above and notes 13 and 18.
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