Financial Statements For the year ended
Financial risk management (continued)
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| 3 Financial risk management (continued) Market risk (continued)) Currency risk relates to the risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in foreign exchange risk. ACCA operates internationally and is exposed to foreign currency exchange risk arising from the transfer of foreign currency to its national offices as well as geopolitical uncertainty. Where possible, ACCA will allow the national offices to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. However, many national offices have insufficient reserves of their functional currency and rely on transfers of foreign currency from ACCA. ACCA mitigates the risk with regards to income because the vast majority of fees and subscriptions charged by ACCA are in sterling. In addition, ACCA uses forward currency contracts to mitigate the risk of currency fluctuations. At the balance sheet date 68% of ACCA’s cash and cash equivalents were held in sterling (2021: 74%). Other price risk relates to the risk of changes in market prices of the non-current and current financial assets and the investments held by the defined benefit pension schemes. ACCA invests in a variety of funds operated by different investment managers and in doing so exposes itself to the fluctuations in price that are inherent in such a market. The effect of a 10% increase in the value of the non-current financial assets held at the balance sheet date would have resulted in an increase in the fair value gains of mm) net of deferred tax. A 10% decrease in their value would, on the same basis, have resulted in the increase in the fair value losses by mm. Other risks in relation to the impact of Covid-19 Covid-19 has had a major impact on the global economy. It has impacted ACCA with regards to all the above-mentioned risks in the following ways Credit risk – due to lockdowns in various countries there was a risk that members and future members would be unable to pay subscriptions, exam fees etc. ACCA therefore allowed more time to pay during the year and revised its retention targets. By the year-end all key markets, apart from China, exceeded the retention targets. ACCA has reviewed its expected credit losses for the year-end in light of Covid-19 and provided for further unpaid debts Liquidity risk – in the previous year ACCA experienced reduced revenue and reduced cash flow due to cancelled exam sessions. Covid-19 continued to impact the world during the year ended 31 March 2022 and exam sessions in some individual cities in China had to be cancelled during the year. This again led to reduced revenue and reduced cashflow however there was no requirement to dispose of investments to maintain liquidity as had been done the previous year. ACCA has continued to look at various scenarios, prepared a revised budget and maintained the loan facilities of up tom with its main banker, Barclays Bank plc (see above. Due to positive retention and successful concerted efforts to reduce costs, ACCA has not required to draw down on the facility Market risk – during March 2020 the stock markets were very volatile and fell dramatically. ACCA’s investments suffered unrealised losses in the year ended 31 March 2020 and in the year ended 31 March 2021, ACCA revised its investment strategy to reduce volatility. The markets rebounded during that year and as part of the revised strategy, some investments were disposed to realise significant gains. During the current year, markets continued to be volatile and ACCA continued to review its investment strategy. The portfolio suffered losses of around m during the year. ACCA invests in a diversified portfolio of investment funds to reduce volatility and to mitigate risk. Association of Chartered Certified Accountants Notes to the Financial Statements for the year ended 31 March 2022 Download 0.68 Mb. Share with your friends:
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