CARA OCLUSAL DE LOS MOLARES

In accordance with the FReM, Intangible assets are accounted for in line with the requirements of IAS 38 Intangible

Assets, and SIC 32 Intangible Assets- Web Site Costs, and are valued initially at cost and subsequently at fair value

using the revaluation model.

Where an active market does not exist, income generating assets are valued at the lower of depreciated replacement cost and value in use. Non income generating assets are carried at depreciated replacement cost. These valuation methods are considered to be a proxy for fair value.

Future economic benefit has been used as the criteria in assessing whether an intangible asset meets the definition and recognition criteria of IAS 38 Intangible Assets for assets that do not generate income. IAS 38 defines future economic benefit as, ‘revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity.’

Intangible assets under development are not amortised. 1.7 Financial Instruments

The Scottish Government measures and presents financial instruments in accordance with IAS 32 and 39, and IFRS 7 as interpreted by the FReM. IFRS 7 requires the classification of financial instruments into separate categories for which the accounting treatment is different. The Scottish Government has classified its financial instruments as follows:

Financial Assets:

• Cash and cash equivalents, trade receivables, short term loans, accrued income relating to EU funding, amounts receivable and shares and will be reported in the ‘Loans and Receivables’ category. This will also include investment funds managed by third parties which will be reported separately.

• Shared equity loans advanced to private individuals will be reported in the ‘At fair value through profit & loss’ category.

Financial Liabilities:

• Borrowings, trade payables, accruals, payables, bank overdrafts and financial guarantee contracts are classified as ‘Other Liabilities’.

Financial instruments are initially measured at fair value with the exception of ‘Shares held in and loans advanced to public sector bodies’ which are held at historic cost, in the absence of an active market. The fair value of financial assets and liabilities is determined as follows:

• The fair value of cash and cash equivalents and current non-interest bearing monetary financial assets and financial liabilities approximate their carrying value, and

• The fair value of other non-current monetary financial assets and financial liabilities is based on market prices where a market exists, use of appropriate indices or has been determined by discounting expected cash flows by the current interest rate for financial assets and liabilities with similar risk profiles.

Financial instruments subsequent measurement depends on their classification:

• Fair value through the profit and loss is held at fair value with any changes going through the outturn statement.

• Loans and receivables and other liabilities are held at amortised cost and not revalued unless included in a fair value hedge accounting relationship. Any impairment losses go through the outturn statement.

• Shares which are held in public sector bodies do not have a quoted market price in an active market, and the fair value cannot be reliably measured and reported at historic cost less impairment with any impairment losses going through the outturn statement.

Financial assets

Financial assets include shares in nationalised industries and limited companies, loans issued to public bodies not consolidated in departmental accounts; loans made under the terms of the student loans scheme, repayment and deferred loans relating to housing associations and investment funds. Such investments are generally reported as non-current assets. If an investment is held on a short-term basis, or a loan is due to be repaid within one year, it will be treated as a current asset.

Student Loans

Student loans are classified as ‘Loans and Receivables’, and are initially valued at fair value. They are subsequently recorded in the accounts at amortised cost.

As there is currently no active market for student loans, the Scottish Government values the loans by using a valuation technique. This technique involves the gross value of the loans being reduced by an amount based on:

• Interest subsidy: This is the difference between the interest paid by students (lower of RPI and Bank of England Base Rate + 1% point) and the cost of capital on loans (currently 2.2%). The interest subsidy is estimated to meet the cost of the interest over the life of the loan and is offset by the annual interest capitalised.

• Write off impairment: This is estimated to meet the future cost of loans that are not likely to be recovered mainly due to the death of the student, their income not reaching the income threshold, or not being able to trace the student. Each year, the future cost of bad debt is estimated based on a percentage of new loans issued during the financial year. This is offset by the actual debts written off by the Student Loan Company. The estimates underpinning these adjustments are based on a model which holds data on the demographic and behavioural characteristics of students in order to predict their borrowing behaviour and estimate the likely repayments of student loans. Given the long term nature of both adjustments, the time value of money is significant, and they are discounted using the current HM Treasury discount rate of 2.2% in real terms.

There are significant uncertainties in assessing the actual likely costs and the impairment will be affected by the assumptions used. These are formally reviewed by the Scottish Government each year and the amounts impaired reflect the Scottish Government’s current best estimate.

Further details of the movements in the loan valuation can be found in note 8, while disclosures relating to risk, required by IFRS 7, can be found in note 21.

Embedded Derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not

measured at fair value with changes in fair value recognised in profit and loss. Financial Guarantee Contracts

Financial guarantee contract liabilities are measured initially at their fair value and subsequently at the higher of: • The amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions,

Contingent Liabilities and Contingent Assets; and

• The amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue.

Financial Transactions are a capital funding source from HM Treasury which can only be used to fund loans and equity investments that cross the public/private sector boundary. These have to be repaid to HM Treasury in the future through adjustments to baseline funding. A repayment profile has been agreed with HM Treasury which aligns

receipts by the Scottish Government with repayment to HM Treasury. This is reviewed annually.