Key accounting judgements and estimates in the application of accounting policies
In preparing the interim consolidated financial statements, the Directors are required under IFRS to select appropriate accounting policies, apply them consistently and make judgements, estimates and assumptions that are reasonable and prudent. Estimates and assumptions are based on historical experience and the Directors’ expectations of future events and are reviewed on an ongoing basis. Actual results may differ from those estimates. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The key accounting judgements and sources of estimation uncertainty that have the most significant effect on the amounts recognised in the interim consolidated financial statements are set out below.
Key accounting judgements
(a) Assessment as an investment entity
Under IFRS 10 Consolidated Financial Statements, entities that meet the definition of an investment entity are required to measure investments in controlled entities, associates and joint ventures at fair value through profit or loss rather than consolidating those entities.
However, an investment entity is required to consolidate a subsidiary that is not itself an investment entity where that subsidiary provides services related to the investment entity’s investment activities. During the period, OCI Financing (Bermuda) Limited, a wholly owned subsidiary of the Company, was liquidated. Control ceased upon completion of the liquidation and the subsidiary was deconsolidated from that date.
The Directors have concluded that the Company meets the definition of an investment entity as its strategic objective is to invest in the Oakley Funds and other Direct Investments on behalf of its investors for the purpose of generating returns in the form of investment income and capital appreciation.
(b) Assessment of significant influence over investments
In accordance with IAS 28 Investments in Associates and Joint Ventures, an investor holding more than 20% of the voting power of an investee is presumed to have significant influence unless that presumption can be clearly demonstrated otherwise.
The Directors have concluded that, notwithstanding ownership interests in excess of 20% in certain investees, the Company does not exercise significant influence over those entities. This presumption has been rebutted as none of the indicators of significant influence set out in IAS 28 are present, including:
- the Company does not have representation on the Board of Directors or any equivalent governing body of the investees, nor does it have the ability to obtain such representation, with the exception of Time Out, where Peter Dubens serves as the Non‑Executive Chairman, and David Till serves as the Non-Executive Director;
- the Company does not participate in policy-making processes, including decisions relating to dividends or other distributions;
- there are no material transactions between the Company and the investees other than those arising from the investment relationship or distributions received; and
- there is no interchange of managerial personnel or provision of essential technical information.
In respect of Time Out, Peter Dubens serves as the Non-Executive Chairman of Time Out, and David Till serves as the Non-Executive Director. As the Company has no right to appoint or remove any director of Time Out, does not have the ability to participate in Time Out's policy decisions including decisions on dividends and distributions, and does not interchange managerial personnel with Time Out, the Company does not have significant influence over Time Out according to the indicators of IAS 28 above.
Key sources of estimation uncertainty
Fair value of investments
The fair values assigned to investments classified as financial assets at fair value through profit and loss are based on information available at the reporting date and do not necessarily represent amounts that may ultimately be realised. Due to the inherent uncertainty involved in valuation, these estimated fair values may differ significantly from values that would have been used had a ready market existed, and such differences could be material.
Investments are valued in accordance with relevant IFRS requirements. Estimation uncertainty arises in determining the appropriate valuation methodologies and in assessing the Net Asset Value (‘NAV’) of the Oakley Funds, as well as in determining key inputs used in valuation models for unquoted debt and equity securities. These inputs include estimates of future cash flows, earnings forecasts and the selection of appropriate discount rates and valuation multiples.