NOTES TO THE FINANCIAL STATEMENTS CONTINUED S S 2 ACCOUNTING POLICIES CONTINUED designated as hedging instruments in hedging relationships is detailed in TR2 ACCOUNTING POLICIES CONTINUED calculation results in a potential asset for the Group, the recognised asset TR Impairment of assets continued the hedge accounting policies. A financial asset or liability is derecognised AHedge accounting continued is limited to the present value of economic benefits available in the form A Where the carrying amount of an asset exceeds its recoverable amount, when the contract that gives rise to it is settled, sold, cancelled or expires. TEDerivative financial instruments of any future refunds from the plan or reductions in future contributions TE G G I I the asset is considered impaired and is written down to its recoverable CThe effective portion of the gain or loss on the hedging instrument is to the plan. When the calculation results in a deficit for the Group, the C amount. In assessing value-in-use, the estimated future cash flows are Financial assets and liabilities Rrecognised in Other Comprehensive Income in the cash flow hedge recognised liability is adjusted for the discounted value of future deficit R Financial assets are cash or a contractual right to receive cash or another E E discounted to their present value using a pre-tax discount rate that Preserve, while any ineffective portion is recognised immediately in the reduction contributions in excess of the calculated deficit. P financial asset from another entity or to exchange financial assets or O O reflects current market assessments of the time value of money and the RIncome Statement. The Group designates only the spot element of R risks specific to the asset. Impairment losses on continuing operations are liabilities with another entity under conditions that are potentially Tforward contracts as a hedging instrument. The forward element is Remeasurements of the net Defined Benefit asset or liability, which T recognised in the Income Statement. favourable to the entity. In addition, contracts that result in another recognised in Other Comprehensive Income and accumulated in a comprise actuarial gains and losses, the interest on plan assets, and the entity delivering a variable number of its own equity instruments are effect of the asset ceiling or minimum funding requirements, are G separate component of equity under cost of hedging reserve. G For goodwill, brands and other intangible assets that have an indefinite financial assets. O recognised immediately in Other Comprehensive Income. The Group O life, the recoverable amount is estimated annually or more frequently VEFinancial liability as a hedge determines the net interest expense (income) on the net Defined Benefit VE when there is an indication that the asset is impaired. Derivative financial instruments, including equity options, are held at fair RForeign currency differences arising on the retranslation of a financial asset or liability, considering any changes in the net defined asset or R value. All other financial instruments are held at amortised cost. NANliability designated as a cash flow hedge are recognised directly in Other liability during the period as a result of contributions and benefit NAN For intangible assets, property, plant and equipment, and right-of-use Trade and other receivables CComprehensive Income to the extent that the hedge is effective. To the payments. Net interest expense and other expenses related to Defined C lease assets that have a finite life, the recoverable amount is estimated Trade and other receivables are carried at the lower of their original Eextent that the hedge is ineffective, such differences are recognised in the Benefit plans are recognised in the Income Statement. E when there is an indication that the asset is impaired. invoiced value and recoverable amount. A trade receivable loss Income Statement. When the benefits of the plan are changed or when a plan is curtailed, the Where an impairment loss subsequently reverses, the carrying amount of allowance is measured at an amount equal to the lifetime expected credit F F I Subsequent accounting resulting change in benefit that relates to past service cost or the gain or I the asset (or cash-generating unit) is increased to the revised estimate of loss at initial recognition and throughout the life of the receivable. NANThe amounts accumulated in both the cash flow hedge reserve and the cost loss on curtailment is recognised immediately in the Income Statement. NAN the recoverable amount, but such that the increased carrying amount Receivables are not discounted, as the time value of money is not Cof hedging reserve are accounted for depending on the nature of the The Group recognises gains and losses on the settlement of a Defined C does not exceed the carrying amount that would have been determined considered to be material. IALunderlying hedged transaction. If the hedged transaction subsequently Benefit plan when the settlement occurs. IAL had no impairment loss been recognised for the asset in prior periods. Trade and other payables Sresults in the recognition of a non-financial item, the amount accumulated S A reversal of an impairment loss is recognised in the Income Statement T Share-based payment transactions T A in the hedge reserve is removed and included in the initial cost of the hedge A Trade and other payables are recognised and carried at their original T T as income immediately. E The fair value of equity-classified share-based awards with both market E invoiced value. Trade payables are not discounted to consider the time Mitem. For any other cash flow hedges, the amount accumulated in the and non-market-based performance conditions is recognised as an M E E Inventories value of money as the impact is immaterial. Nhedge reserve is reclassified to the Income Statement as a reclassification N T expense within administrative and other expenses in the Income T Inventories are stated at the lower of cost and net realisable value. For Refundable and non-refundable customer deposits are held as contract Sadjustment in the same period or periods during which the hedged cash Statement, with a corresponding increase in equity over the period that S service and restoration projects, net realisable value is the price at which liabilities within current trade and other payables. flow affects profit or loss. the employees become unconditionally entitled to the shares. the project can be invoiced in the normal course of business after F If hedge accounting is discontinued, the amount that has been F allowing for the costs of completion. Inventory sale and repurchase arrangements, which are in substance UThe amount recognised as an expense is adjusted to reflect both non- U R accumulated in the hedge reserve must remain in equity if the hedged R financing transactions, are included in other payables. The difference T market-based conditions, such as continued employment and profit- T Cost includes all costs incurred in bringing each product to its present Hfuture cash flows are still expected to occur. Otherwise, the amount will H between the sale and repurchase value is accounted for as part of the E related metrics, in addition to market-based conditions driven by an E location and condition, as follows: Rbe immediately reclassified to the Income Statement as a reclassification R effective interest calculation. The effective interest is charged to the INFadjustment. After discontinuation, once the hedged cash flow occurs, any estimation of the quantum of awards expected to vest at the date INF – Raw materials, service parts and spare parts – purchase cost on a first-Income Statement over the period from sale to repayment. of grant. in, first-out basis. ORamount remaining in the hedge reserve is accounted for depending OR Hedge accounting Mon the nature of the underlying transaction. Where the Group obtains goods or services in exchange for the issuance M – Work in progress and finished vehicles – cost of direct materials and A A The Group uses derivative financial instruments in the form of forward T of shares, these are accounted for as equity-settled share-based T labour plus attributable overheads based on a normalised level of IBorrowings I activity, excluding borrowing costs. currency contracts, and certain US dollar denominated borrowings, to ONBorrowings are recognised initially at fair value less attributable payments in accordance with IFRS 2. Where the fair value of the goods or ON hedge the foreign currency risk of sales (including inter-Group sales) transaction costs. Subsequent to initial recognition, borrowings are services can be estimated reliably, these are recorded at fair value with a Provisions are made, on a specific basis, for obsolete, slow-moving and of finished vehicles and external purchases of component parts. For the stated at amortised cost with any difference between the amount corresponding increase in equity. defective stocks and if the cost of the service or restoration project purpose of hedge accounting, hedges are classified as cash flow hedges initially recorded and redemption value being recognised in the Income In the instance of a scheme modification, the number of shares comprised cannot be fully recovered. Inventories held under financing arrangements when hedging the exposure to variability in cash flows either attributable Statement as a finance expense over the period of the borrowings on an in an award is adjusted to reflect equity changes in the Group and will are recognised when control is transferred to the Group. to a particular risk associated with a recognised asset or liability, or a effective interest basis. therefore not impact underlying charges. Cash and cash equivalents highly probable forecast transaction, or the foreign currency risk of an Cash and cash equivalent in the Statement of Financial Position comprise: unrecognised firm commitment. Pensions Provisions At the inception of the hedge relationship, the Group formally designates The Group operates a Defined Contribution pension plan under which the The Group provides product warranties on all new vehicle sales. Warranty – cash, being cash at banks and in hand as well as demand deposits. and documents the hedge relationship and the risk management Group pays fixed contributions into a separate entity and has no legal or provisions are recognised when vehicles are sold or when new warranty – cash equivalents, being short-term deposits with an original maturity objectives and strategy for undertaking the hedge. The documentation constructive obligation to pay further amounts. Obligations for programmes are initiated. Based on historical warranty claim experience, of three months or less, subject to insignificant changes in value, includes identification of the hedging instrument, the hedged item, the contributions to Defined Contribution pension plans are recognised as an assumptions are made on the type and extent of future warranty claims, which are readily convertible to known amounts and held to meet nature of the risk being hedged and how the Group will assess hedge expense in the Income Statement in the periods during which services are including non-contractual warranty claims as well as on possible recall short-term commitments. effectiveness. A hedging relationship qualifies for hedge accounting if rendered by employees. campaigns. These assessments are based on the frequency and extent Derivative financial instruments it meets all the following effectiveness requirements: The Group operates a Defined Benefit pension plan, which is contracted of vehicle faults and defects in the past. In addition, the estimates include Derivative financial assets and liabilities are recognised in the Statement out of the state scheme. The Group’s net obligation in respect of Defined assumptions on the potential repair costs per vehicle and the effects of of Financial Position at fair value when the Group becomes a party to the – There is an economic relationship between the hedged item and the Benefit plans is calculated for the plan by estimating the amount of the possible time or mileage limits. The provisions are regularly adjusted to contractual provisions of the instrument. The Group uses derivative hedging instrument. future benefit that employees have earned in the current and prior reflect new information. instruments to manage its exposure to foreign exchange risk arising from – The effect of credit risk does not dominate the value changes resulting periods, discounting that amount and deducting the fair value of any operating activities. Movements in the fair value of foreign exchange from that economic relationship. plan assets. derivatives not qualifying for hedge accounting are recognised in finance – The theoretical hedge ratio of the hedging relationship is the same income or expense. The accounting policy on derivatives that are as practically occurs. The calculation of Defined Benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the ASTON MARTIN LAGONDA ANNUAL REPORT AND ACCOUNTS 2023 153