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Rothschild & Co | Annual Report 2017
129
1. Overview
4. Financial statements
3.
Management report
2. Business review
DEFERRED TAX
Deferred tax assets, including those in relation to tax losses carried forward, are only recognised where it is probable that future taxable profits will be
available against which the temporary differences can be utilised. Further details are provided in note 16.
GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE LIVES
Goodwill and intangible assets with indefinite lives are assessed at each balance sheet date to determine whether they are impaired. The assessment
includes management assumptions on future income flows and judgements on appropriate discount rates. Management performs sensitivity analysis
of these assumptions as part of this assessment. Further details of management’s assessment are contained in notes 9 and 10.
PROVISIONS
From time to time the Group is involved in legal proceedings or receives claims arising from the conduct of its business. Based upon available information
and, where appropriate, legal advice, provisions are made where it is probable that an outflow of resources will be required and the amount can be reliably
estimated.
CONSOLIDATION OF STRUCTURED ENTITIES
The Group manages some structured entities in the form of funds in which the Group’s own money is also invested. In these situations, a judgement must
be made whether there is a need to consolidate these funds or not. The judgement is explained in note 17.
2 Foreign currency transactions
The consolidated financial statements are presented in euro, which is the Company’s functional currency and the Group’s reporting currency. Items
included in the financial statements of each of the Group’s subsidiaries and associates are measured using their functional currency. The functional
currency is the currency of the primary economic environment in which the entity operates.
Income statements and cash flows of foreign entities are translated into the Group’s reporting currency at average exchange rates for each month, where
this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Their balance sheets are translated at the exchange rate at the
end of the period. Exchange differences arising from the translation of the net investment in foreign entities are taken to shareholders’ equity. On disposal
of a foreign entity, these translation differences are recognised in the income statement as part of the gain or loss on sale.
Translation differences on equities classified as FVTPL are reported as part of the fair value gain or loss in the income statement. In the absence of hedge
accounting, translation differences on equities classified as available for sale are included in the available-for-sale reserve in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated
at the closing rate.
The table below shows at each quarter end the main exchange rates against the euro that were used to prepare the consolidated accounts.
01/04/17
31/12/17
(9 months)
01/04/16
31/03/17
(12 months)
GBP
CHF
USD
GBP
CHF
USD
Opening rate – 1 April
0.8553
1.0706
1.0695
0.7916
1.0931
1.1385
Average rate – June
0.8769
1.0873
1.1236
0.7900
1.0895
1.1231
Average rate – September
0.8938
1.1461
1.1909
0.8522
1.0919
1.1212
Average rate – December
0.8833
1.1688
1.1839
0.8442
1.0749
1.0547
Closing rate – 31 December
0.8877
1.1702
1.2008
Average rate – March
0.8659
1.0708
1.0693
Closing rate – 31 March
0.8553
1.0706
1.0695