IFRS Foundation

ANNUAL REPORT

For the year ended

31 December 2016

Management Commentary

The IFRS Foundation is a not-for-profit, public interest organisation with oversight by a geographically and professionally diverse body of trustees, accountable to a Monitoring Board of public capital market authorities. The organisation’s structure, governance and due process are designed to keep standard-setting independent from special interests while ensuring accountability to stakeholders around the world.

The IFRS Foundation is the oversight and support body of the International Accounting Standards Board (the Board), the standard-setting body responsible for developing and promoting the use and rigorous application of IFRS Standards. The Board currently has up to 14 members, selected on the basis of their professional competence and practical experience and drawn from a variety of backgrounds, including users, preparers, standard setters and auditors.

2016 Financial Results

The IFRS Foundation’s financial statements are prepared in accordance with IFRS Standards. Financial highlights of the accompanying financial statements are as follows.

The Foundation is reporting £ 3.2 million in comprehensive income for 2016, up from £ 2.7 million in 2015.
Total income from all activities increased by £3.2 million to £ 30.6 million.
Total operating expenses decreased slightly to £ 24.2 million from 24.5 million.
As of 31 December 2016 the IFRS Foundation’s net assets increased to £ 22.8 million. The increase is in line with the IFRS Foundation Trustees’ strategic decision to accumulate reserves greater than one year of operating expenditure.

Contributions

The majority of the IFRS Foundation’s funding is based on voluntary contributions from jurisdictions that have put in place national financing regimes. Contribution levels are targeted for each jurisdiction at amounts proportional to their gross domestic product (GDP). While funding mechanisms differ, most jurisdictions have established either a levy on companies or an element of publicly supported financing. The organisation’s other main sources of income are from publications, intellectual property licensing and contributions from international accounting firms.

An appropriate financing regime for the IFRS Foundation is vital for ensuring the independence of the organisation and its standard-setting. The financing regime must enable Board members and staff to engage interested parties around the world in shaping financial reporting standards, and to undertake all other related activities necessary to achieve the organisation’s objectives.

The Trustees are continuing their work towards a global funding system with the following features which provide:

a long-term commitment by jurisdictions;
public sponsorship, through either direct or implicit governmental or regulatory support;
flexibility;
funding allocated proportionally, based primarily on GDP; and
public accountability in the budget process.

In 2016 contributions were £ 24.1 million, an increase of £2.8 million from 2015. The year-on-year increase in contributions resulted primarily from favourable exchange rates for euros and US dollars compared with UK pounds. The IFRS Foundation received £18.3 million in US dollars and euros, or 76 per cent of all contributions. However, these gains were offset in part by realised exchange losses of £1.3 million from maturing forward foreign exchange contracts and cash holdings. In addition, there were £2.5 million in unrealised fair value losses on forward foreign exchange contracts included in finance costs as disclosed in Note 9 of the financial statements. As a result of the United Kingdom’s decision to leave the European Union, currency exchange rates have experienced volatility which is expected to continue. For more information on how the IFRS Foundation manages its currency risk refer to Note 7.

Publications and related activities

The IFRS Foundation’s mission is also dependent on the development, distribution and protection of its intellectual property—IFRS Standards and supporting materials. The IFRS Foundation’s commercial efforts are focused on both generating income and serving the public interest by ensuring that reliable and up-to-date content is widely available. Sales revenues consist of publications, subscriptions to eIFRS (electronic and app-based products), commercial licences, copyright licenses for jurisdictions adopting IFRS Standards and conference income.

Overall publications revenue increased 5.7 per cent, or £333,000 from 2015. Staff continued successful efforts in negotiating new agreements for licensing fees and revenue amounted to £2.6 million, a 16.3 per cent, or £360,000, increase from 2015. Subscriptions totalled £ 1.8 million; book sales amounted to £ 1.5 million. Price increases during the year led to a 1.9 per cent increase in subscription revenue. Book sales decreased 6.1 per cent, continuing the general shift to digital media.

The cost of publications and related expenses decreased 6.3 per cent, or £201,000, to £3.0 million. Net income from publications and related activities increased 20.6 per cent, or £534,000, from 2015, amounting to £3.1 million. Additional revenue and expense information for publications and related activities is provided in Note 6 of the financial statements.

Expenses

Total operating expenses were £ 24.2 million, which is relatively unchanged from £ 24.5 million in 2015. The main costs associated with developing IFRS Standards are salaries and related costs for the Board, technical staff and support staff. In both 2016 and 2015 these costs amounted to 79 per cent of operating costs excluding publications. As set out in Note 1 of the financial statements, the Trustees amended the IFRS Foundation Constitution in 2016 following the completion of their Review of Structure and Effectiveness. The amendments included the reduction of Board members from 16 to 14.

There was a small temporary decrease in head count in 2016 owing to the timing gaps between leavers and their replacements on the Board and in the technical staff.

IFRS Standards are developed through international consultation—the due process— which involves interested individuals and organisations from around the world. The IFRS Foundation’s operational staff and technical staff coordinate a comprehensive programme of support and outreach designed to enable others to better understand and comment on accounting principles the Board proposes. The IFRS Foundation’s Trustees and senior management closely monitor operating expenses while funding the costs for travel, meetings and technology upgrades to enhance external relations.

Reserves

As of 31 December 2016 the IFRS Foundation’s reserves were £ 22.8 million (2015: £ 19.6 million). This level of reserves is 94.5 per cent of 2016 operating expenses (2015: 80 per cent), an increase of 14.5 percentage points from 2015. The IFRS Foundation’s goal is to continue to maintain and build future operating reserves of cash and working capital. The operating reserve is an unrestricted fund balance set aside to stabilise the IFRS Foundation’s finances by providing a ‘cushion’ against unexpected events or losses of income. The Trustees have included within the IFRS Foundation’s 2017 plan a proposal to increase reserves to a level greater than one year’s operating expenditure.

2017 Outlook

In 2017 the IFRS Foundation will continue to manage its operating expenditure prudently and effectively and will actively pursue further initiatives to enhance the organisation’s income. The 2017 plan does not envisage significant increases in the organisation’s operating requirements.

The IFRS Foundation and its financial statements

The IFRS Foundation (the Foundation) is an independent, not-for-profit, public interest organisation incorporated in the State of Delaware, USA, on 6 February 2001. Its primary operations are based in London.

Its mission is to develop IFRS Standards that bring transparency, accountability and efficiency to financial markets around the world. The Foundation’s work serves the public interest by fostering trust, growth and long-term financial stability in the global economy.

IFRS Standards are developed and issued by the International Accounting Standards Board (the Board), the standard-setting arm of the Foundation, working with related bodies that include the IFRS Interpretations Committee, IFRS Advisory Council and the Accounting Standards Advisory Forum.

The governance and key management responsibilities of the Foundation rest primarily with its Trustees, who provide oversight. A Monitoring Board, consisting of capital market authorities with responsibilities for financial reporting, provides a formal public accountability link between the Trustees and public authorities. The Foundation’s governance and due process are designed to keep the Foundation’s standard-setting independent from special interests while ensuring accountability to its stakeholders around the world.

These financial statements cover the year ended 31 December 2016. They have been prepared in compliance with IFRS Standards, including Interpretations, that were effective or applied early on 1 January 2016.

The financial statements were approved and authorised for issue by the Trustees of the Foundation on 12 April 2017. At that date there had been no events since 31 December 2016 that required disclosure in, or an adjustment, to the financial statements.

Michel Prada

Chair of the Trustees

Independent auditor's report to the Trustees of the IFRS Foundation

Opinion

We have audited the financial statements of IFRS Foundation (the ‘Foundation’), which comprise the statement of financial position as at 31 December 2016, and the statement of comprehensive income, statement of changes in equity andstatement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Foundation as at 31 December 2016, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Foundation in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

This report is made solely to the Foundation’s Trustees, as a body, in accordance with Section 13 of the Foundation’s Constitution. Our audit work has been undertaken so that we might state to the Foundation’s Trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Foundation and the Foundation’s Trustees as a body, for our audit work, for this report, or for the opinions we have formed.

Other Information

The Trustees are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Trustees for the Financial Statements

The Trustees are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs, and for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Trustees are responsible for assessing the Foundation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Foundation or to cease operations, or have no realistic alternative but to do so.

The Trustees are responsible for overseeing the Foundation’s financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control;
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the entity to cease to continue as a going concern.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
United Kingdom
Date: 12 April 2017

Statement of comprehensive income

Year ended 31 December 2016

		2016	2015
	Note	£'000	£'000
Income
Contributions	5	24,078	21,302
Revenue from publications and related activities	6	6,139	5,806
Other income	5	380	324
		30,597	27,432
Operating expenses
Technical and operational activities
- IASB member and staff costs	1	16,632	16,780
- Other technical and operating costs	1	1,856	1,664
- IFRS Advisory Council, IFRS Interpretations Committee and other Advisory bodies	1	302	374
Publications and related activities expenses	6	3,015	3,216
Trustee oversight	2	878	972
Premises, occupancy and related expenses	3	1,478	1,521
		24,161	24,527
Net operating income		6,436	2,905
Finance income	9	614	1,057
Finance costs	9	3,828	1,283
		( 3,214 )	( 226 )
Income before tax		3,222	2,679
Income tax expense	4	-	-
Comprehensive income for the year		3,222	2,679

Statement of changes in equity

Year ended 31 December 2016

Retained surplus at beginning of year	19,615	16,936
Comprehensive income for the year	3,222	2,679
Retained income at end of year	22,837	19,615

Statement of financial position

As at 31 December 2016

		2016	2015
	Note	£'000	£'000
Assets
Current assets
Cash and cash equivalents		9,931	10,495
Contributions receivable	5	2,863	1,479
Trade and other receivables		1,199	1,039
Prepaid expenses		644	676
Inventories		37	141
Bonds at fair value, including accrued interest	8	944	3,360
Forward currency contracts at fair value	7	-	311
		15,618	17,501
Non-current assets
Bonds at fair value, including accrued interest	8	14,511	8,910
Forward currency contracts at fair value	7	183	-
Leasehold improvements, furniture and equipment	3	466	507
		15,160	9,417
Total assets		30,778	26,918
Liabilities
Current liabilities
Trade and other payables		341	399
Payroll taxes payable		484	578
Accrued expenses		943	1,003
Contributions received in advance	5	534	1,859
Rent incentive	3	82	82
Publications revenue received in advance	6	1,248	1,225
Forward currency contracts at fair value	7	2,786	949
		6,418	6,095
Non-current liabilities
Forward currency contracts at fair value	7	853	492
Lease reinstatement obligation	3	607	571
Rent incentive	3	63	145
		1,523	1,208
Total liabilities		7,941	7,303
Net assets		22,837	19,615

Statement of cash flows

Year ended 31 December 2016

		2016	2015
	Note	£'000	£'000
Operating activities
Cash received
Contributions		21,356	23,434
Publications and related activities		5,934	5,899
Funding for Asia-Oceania office	5	315	220
Interest		340	327
Foreign exchange settlements		41	496
Other receipts		41	18
Cash paid
Salaries, wages and benefits		( 16,850 )	( 16,660 )
Publications and related activities expenses		( 2,950 )	( 3,208 )
Trustees' fees		( 627 )	( 649 )
Other operating expenses		( 3,585 )	( 3,615 )
Net cash from operating activities		4,015	6,262
Investing activities
Matured bonds receipts		3,225	-
New bond purchases		( 6,346 )	( 3,834 )
Purchase of leasehold improvements, furniture and equipment		( 138 )	( 170 )
Net cash from investing activities		( 3,259 )	( 4,004 )
Effects of exchange rate changes on cash and cash equivalents		(1,320)	163
Net increase (decrease) in cash and cash equivalents		( 564 )	2,421
Cash and cash equivalents at the beginning of the year		10,495	8,074
Cash and cash equivalents at the end of the year		9,931	10,495

The accompanying notes form part of these financial statements.

Notes to the financial statements

For the year ended 31 December 2016

Significant accounting policies

The functional and presentation currency is sterling.

The IFRS Foundation's (the Foundation) most important intangible asset is the intellectual property embodied in the IFRS Standards. The Foundation does not recognise this asset because the value and future economic benefits cannot be reliably measured. Accordingly, costs related to the development of IFRS Standards are recognised as an expense when they are incurred.

All other accounting policies that are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements.

The Trustees have a reasonable expectation that the Foundation has adequate resources to continue operations for the foreseeable future. The Foundation has therefore adopted the going concern basis in preparing its Financial Statements.

Current period and future changes to the accounting policies (including early application)

All accounting policies have been applied consistently to the two years presented. The financial statements have been drawn up on the basis of IFRS Standards, Interpretations and amendments effective or applied early at 1 January 2016.

In 2009 the Foundation elected to early apply IFRS 9 Financial Instruments (2009); the Foundation has elected not to early apply subsequent amendments to IFRS 9 published in 2010 and 2014, which have an effective date of 1 January 2018. Also in 2014, IFRS 15 Revenue from Contracts with Customers was issued; the Foundation has elected not to early apply it before the effective date of 1 January 2018. In 2016, IFRS 16 Leases was issued. These Standards are not expected to have a material effect on the Foundation’s financial statements.

Explanatory information

The explanatory notes are organised into sections that provide an informative presentation of the financial reporting implications of the Foundation’s core activity—the development of IFRS Standards—how it funds that activity and how it manages the contributions from the several currencies of its funding providers. Each section presents the financial information and any material accounting policies that are relevant to understanding the activities of the Foundation. The organisation of the explanatory information was motivated by feedback about financial report presentation that had come from the technical work of the Board in its major project on disclosure—the Disclosure Initiative.

Activities	Funding	Managment of funds
Technical and operational activities	Contributions	Foreign currency management
Trustee oversight	Publications and related activities	Investments
Premises, occupancy and related operating expenses		Finance income and finance costs
Taxation

Activities

1. Technical and operational activities

IASB member and staff costs

The main costs associated with developing IFRS Standards are the salaries of the full-time IASB members and the staff. The Foundation had an average of 137 employees including IASB members and interns during 2016 (2015: 139 ).

	2016	2015
	£'000	£'000
IASB member salaries and related costs	7,145	7,183
Technical and operational staff salaries and related costs	9,487	9,597
	16,632	16,780

The Trustees’ Human Capital Committee reviews, benchmarks and recommends salary and benefit levels, that are reviewed and approved annually by the Trustees. Following the conclusion of a review of structure and effectiveness, the Trustees announced amendments to the IFRS Foundation Constitution in 2016. These amendments included the reduction of IASB members from 16 to 14 and a reclassification of the geographical distribution of Board members and Trustees. The IASB Vice-Chair elected to retire after his first term ending June 2016 to enable the reforms.

IASB members’ gross salaries covering all compensation and benefits for 2016 were as follows: £ 559,600 for the IASB Chair (2015: 558,200 ); £ 750,600 for the IASB Vice-Chair (2015: £ 492,200 ) which includes a leaving package of £497,200; £80,500 for the newly appointed Vice-Chair effective November 2016, and; an average of £ 458,600 for other full-time IASB members (2015: £ 458,400 ). In addition to the Trustees, IASB Chair and IASB Vice-Chair, the “key management personnel” includes the Executive Director at an annual gross salary of £ 276,000 (2015: £ 265,000 ). The Foundation pays monthly contributions, at rates between 8 % and 10 % of gross salary, into a defined contribution group personal pension scheme for substantially all staff except IASB members.

Other technical and operating costs

	2016	2015
	£'000	£'000
Audit, legal and taxation advice	94	72
Communication and technology	380	292
External relations	57	80
Human resource and recruitment activities	283	143
Meeting video conferencing	138	134
Travel and meetings	643	717
Other office related costs	261	226
	1,856	1,664

IFRS Advisory Council, IFRS Interpretations Committee and other advisory bodies

In 2016 and 2015, the Foundation paid remuneration to the Chair of the IFRS Advisory Council £ 75,000 per year. Additionally, the Foundation reimbursed travel and accommodation costs. Other members of the IFRS Advisory Council are not paid remuneration and they meet all of their costs of attending meetings, such as travel and accommodation.

Members of the IFRS Interpretations Committee are not remunerated by the Foundation for their work on this body. However, they are reimbursed for their travel costs for attending the meetings. Members of the Board’s other advisory bodies meet their own costs of attending meetings. No members of these other bodies are remunerated by the Foundation.

The remuneration, travel and meeting costs for these committees and advisory bodies are as follows:

	2016	2015
	£'000	£'000
IFRS Advisory Council – remuneration costs	75	75
IFRS Advisory Council – travel and meeting costs	82	81
IFRS Interpretations Committee – travel and meeting costs	145	218
	302	374

2 Trustee oversight

The Foundation’s management and governance is overseen by 21 Trustees (2015: 21 ). The Trustees meet up to three times a year. The Chair of the Trustees receives £ 200,000 per annum. Other Trustees receive an annual fee of £ 20,000 and are reimbursed for their travel on Foundation business. There are six Trustee committees; committee chairs receive an additional £ 7,000 per annum.

Costs associated with Trustee activities are as follows:

	2016	2015
	£'000	£'000
Remuneration costs	630	637
Travel and meeting costs	248	335
	878	972

3 Premises, occupancy and related expenses

The components of premises, occupancy and related expenses are as follows:

	2016	2015
	£'000	£'000
Rent	772	759
Rates, insurance and energy	454	456
Service charges	287	379
Depreciation	228	205
	1,741	1,799
Less amounts included in publications costs	( 263 )	( 278 )
	1,478	1,521

The Foundation operates from two premises, both of which are leased. The main activities are undertaken at 30 Cannon Street in London, UK. The Foundation also has an Asia-Oceania office located in the Otemachi Financial City South Tower in Tokyo, Japan. The Foundation has commitments for operating leases for the London premises until September 2018, with options to extend for a further 10 years, and for the Tokyo premises until September 2022.

The Foundation received a rent incentive at the commencement of the lease for its London premises, which was recognised as a liability. The aggregate benefit of the incentives is recognised as a reduction of the rental expense evenly over the lease term.

The estimated costs of reinstating the premises when the leases expire are recognised as lease reinstatement obligations and are included in leasehold improvements and expensed evenly over the remaining lease term. The estimated amount of the reinstatement obligation assumes that the London occupancy would end in 2018; however, the option to extend the lease for a further 10 years could affect the timing of any outflow.

All operating lease contracts contain market review clauses. Obligations due on the leases, excluding service charges and property rates, are as follows:

	2016	2015
	£'000	£'000
Within one year	851	838
In two to five years	866	1,594
More than five years	53	100
	1,770	2,532

Leasehold improvements, furniture and equipment

Leasehold improvements, furniture and equipment are initially measured at cost, and then depreciated on a straight-line basis. Leasehold improvements are depreciated over the remaining period of the lease. Furniture and equipment are depreciated over 3 and 5 years. There have been no significant movements in 2016 other than depreciation.

	2016	2015
	£'000	£'000
Leasehold improvements
Cost	1,441	1,384
Accumulated depreciation	( 1,209 )	( 1,103 )
Carrying amount	232	281
Furniture and equipment
Cost	1,209	1,111
Accumulated depreciation	( 975 )	( 885 )
Carrying amount	234	226
Total carrying amount	466	507

4 Taxation

For US tax purposes, the Foundation is classified as a not-for-profit, tax-exempt organisation. In 2006 the Foundation reached an agreement with the UK authorities regarding the status of taxation on its publications and related revenues. For 2016 the taxation expense is calculated on that basis, and is estimated to be £ 0 (2015: £ 0 ).

At the end of 2016 the Foundation is carrying forward a loss for UK tax purposes of £ 5,836,000 (2015: £ 5,550,000 ). The Foundation does not recognise this loss as a deferred tax asset because of the uncertainty of being able to utilise these losses to offset future taxable income.

Funding

5 Contributions

Contributions to the Foundation are voluntary and mainly publicly sponsored. Contributions are recognised as income in the year designated by the contributor. Contributions that have been received but are designated for use after the reporting date are deferred and recognised as liabilities. Contributions received after the reporting date, but designated for use in the reporting period are recognised as income and as contributions receivable. All contributions received are for general use by the Foundation except for funding of the Asia-Oceania office as noted below.

The Foundation received separate funding of £ 315,000 / JPY 50,000,000 (2015: £ 220,000 / JPY 50,000,000 ) towards the operations of the Asia-Oceania office located in Tokyo. £ 348,000 (2015: £ 288,000 ) has been recognised in other income to offset the related operating expenses

The Foundation receives contributions in a wide range of currencies, as follows:

	2016	2015
	£'000	£'000
UK Pounds	2,347	1,965
US Dollars	11,606	10,462
Euro	6,749	5,938
Other	3,376	2,937
	24,078	21,302

The year over year increase in contributions resulted primarily from favourable currency exchange rates. However, these gains were offset in part by the exchange losses from maturing foreign exchange contracts that are included in Finance Costs in Note 9. For more information on how the Foundation manages its currency risk refer to Note 7. A full list of contributors can be found in the Foundation’s annual report, which is available on its website www.ifrs.org.

6 Publication and related activities

Revenues are generated from the sales of publications and subscriptions, and, from licensing fees. Publications revenue is recognised when a sale is made, i.e. when publications are shipped. Subscriptions to the Foundation’s comprehensive package and eIFRS products are recognised as revenue on a time-apportioned basis over the period covered by the subscriptions. Licensing fees flow from contracts that grant rights to third parties to use IFRS Standards for various purposes including products and services; revenue is recognised over the term of the contracts. The Foundation does not generally offer credit on publication or subscription sales.

Inventories consist of the Foundation’s publications, which are carried at the lower of the cost of printing, on a first-in-first-out basis, or their net realisable value.

The following table presents the components of the net revenue generated by the Foundation’s publications and related activities.

	2016	2015
	£'000	£'000
Revenue
Sales of publications and subscriptions	3,287	3,353
Licensing fees	2,574	2,214
Other revenue - primarily conferences	278	239
	6,139	5,806
Expenses
Staff salaries and related costs	1,853	1,836
Cost of goods sold	332	390
Depreciation	22	22
Other costs, including occupancy expenses	808	968
	3,015	3,216
Net income from publications and related activities	3,124	2,590

Management of funds

7 Foreign currency management

To manage risks associated with fluctuations in voluntary contribution levels, the Trustees of the Foundation have set a target of having sufficient funds to be able to meet twelve months of its operating costs. The Foundation’s expenses arise largely in sterling, whereas the organisation receives funding and future financing commitments, under various publicly sponsored funding regimes, primarily in US dollars and euros (refer to Note 5). Some expenses are incurred and paid in US dollars and euros after which the net contributions in those currencies are exchanged for sterling. This exposes the organisation to currency risk. This note explains the financial reporting consequences of how the Foundation manages the transfer of funds and the investment of its surplus funds.

The Trustees have implemented a strategy to mitigate the foreign exchange fluctuation risks connected with these expected future net contributions. The Foundation generally forward sells approximately 90 per cent of its expected net US dollar contributions and 70 per cent of its expected net euro contributions to fix a sterling equivalent. Foreign currency is sold forward on a two year rolling basis.

The forward foreign exchange contracts used by the Foundation to mitigate foreign exchange risk are recognised at fair value and subsequently measured at fair value through profit or loss.

The following table presents the fair value and notional value of these contracts by currency:

	2016			2015
Forward foreign exchange contracts by currency:	Fair value	Notional value	Weighted average rate	Fair value	Notional value	Weighted average rate
	'000	'000		'000	'000
Financial assets
EUR (Level 2)	£ 183	€ 5,000	1.098	£ 311	€ 4,500	1.231

Financial liabilities
USD (Level 2)	£( 2,905 )	$ 24,100	1.376	£( 1,283 )	$ 28,200	1.592
EUR (Level 2)	£( 734 )	€ 5,200	1.383	£( 158 )	€ 5,200	1.382

The fair value of forward foreign exchange contracts is bank-provided and based on price models using observable exchange rates, described as Level 2 in IFRS 13 Fair Value Measurement. All non-current forward contracts expire in 2018. The effect of these forward contracts is that the Foundation is exposed to the currency risk associated with the expected remaining 10 per cent of projected net US dollar contributions and 30 per cent of projected net euro contributions that are not covered by the forward contracts.

A potential 10 per cent increase in average exchange rates for sterling would have produced estimated losses on the remaining actual net US dollar contributions received during the year of £ 65,000 and on the remaining actual net euro contributions received during the year of £ 222,000 . To the extent that projected contributions in either currency change, the Foundation actively manages the amount of each currency forward sold.

Liquidity and interest rate risk

The Foundation manages its working capital to ensure sufficient cash resources are maintained to meet short-term liabilities. The Foundation has no borrowings.

The Foundation has a target of keeping an amount in cash equal to or exceeding the upcoming quarter’s expenditure. Cash is held either as current or as short-term deposits at floating rates of interest. Part of the cash at bank is held in euro, Japanese yen and US dollar accounts to meet expenditure obligations. Surplus funds are invested in sterling-denominated, fixed rate bonds of governments, governmental agencies, or international organisations, with AAA ratings at the time of purchase. These funds are reserves for continuing operations.

The Foundation manages and receives information on its investments in bonds on a fair value basis that includes value changes attributable to interest rate risk. Financial results are provided on that basis to the Trustees and key management personnel. Bonds can be converted into cash if necessary.

8 Investments

Bonds are recognised at fair value and subsequently measured at fair value through profit or loss. The values of these bonds are quoted on active markets, described as Level 1 in IFRS 13.

Fair values and notional values of current and non-current bonds are presented in the following table.

	2016	2016	2015	2015
	Fair value	Notional value	Fair value	Notional value
	£'000	£'000	£'000	£'000
Current including acccrued interest	944	927	3,360	3,266
Non-current including accrued interest	14,511	14,264	8,910	8,870
	15,455	15,191	12,270	12,136

The Foundation measures all other financial instruments at amortised cost. The carrying amount of these instruments is a reasonable approximation of their fair value. These financial instruments include cash and cash equivalents, contributions receivable, publication-related receivables, and trade and other payables.

9 Finance income and finance costs

	2016	2015
	£'000	£'000
Finance income:
Interest income	200	184
Fair value gains on forward foreign exchange contracts	183	220
Fair value gains on bonds	203	-
Exchange gains on forward foreign exchange contracts and cash holdings	28	653
	614	1,057

Finance costs
Fair value losses on forward foreign exchange contracts	( 2,508 )	( 1,198 )
Fair value losses on bonds	-	( 85 )
Exchange losses on forward foreign exchange contracts and cash holdings	( 1,320 )	-
	( 3,828 )	( 1,283 )
	( 3,214 )	( 226 )

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IFRS Foundation

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9 Finance income and finance costs