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Clinical Negligence Costs At any time, the Secretary of State can issue new PDC
to, and require repayments of PDC from, the trust. PDC
NHS Resolution operates a risk pooling scheme
is recorded at the value received.
under which the trust pays an annual contribution to
NHS Resolution, which, in return, settles all clinical
A charge, reflecting the cost of capital utilised by the
negligence claims. Although NHS Resolution is
trust, is payable as public dividend capital dividend.
administratively responsible for all clinical negligence
The charge is calculated at the rate set by HM Treasury
cases, the legal liability remains with the trust. The total
(currently 3.5%) on the average relevant net assets of
value of clinical negligence provisions carried by NHS the trust during the financial year. Relevant net assets
resolution on behalf of the trust is disclosed at note 27.3
are calculated as the value of all assets less the value of
but is not recognised in the trust’s accounts.
all liabilities, except for
Non-Clinical Risk Pooling (i) donated assets (including lottery funded assets),

The trust participates in the Property Expenses (ii) average daily cash balances held with the
Scheme and the Liabilities to Third Parties Scheme. Government Banking Services (GBS) and National
Both are risk pooling schemes under which the trust Loans Fund (NLF) deposits, excluding cash balances
pays an annual contribution to NHS Resolution and held in GBS accounts that relate to a short-term
in return receives assistance with the costs of claims working capital facility, and
arising. The annual membership contributions, and any
(iii) any PDC dividend balance receivable or payable.
“excesses” payable in respect of particular claims are
charged to operating expenses when the liability arises.
In accordance with the requirements laid down by the
Department of Health and Social Care (as the issuer
The trust has also taken commercial insurance to cover of PDC), the dividend for the year is calculated on
property damage and business interruption.
the actual average relevant net assets as set out in
1.15 Contingencies the “pre-audit” version of the annual accounts. The
dividend thus calculated is not revised should any
adjustment to net assets occur as a result the audit of
Contingent assets (that is, assets arising from past the annual accounts.
events whose existence will only be confirmed by one
or more future events not wholly within the entity’s 1.17 Value Added Tax
control) are not recognised as assets, but are disclosed
in note 28 where an inflow of economic benefits is
Most of the activities of the trust are outside the scope
probable.
of VAT and, in general, output tax does not apply and
input tax on purchases is not recoverable. Irrecoverable
Contingent liabilities are not recognised, but are
VAT is charged to the relevant expenditure category
disclosed in note 28, unless the probability of a transfer or included in the capitalised purchase cost of fixed
of economic benefits is remote.
assets. Where output tax is charged or input VAT is
recoverable, the amounts are stated net of VAT.
Contingent liabilities are defined as:
1.18 Corporation Tax
• possible obligations arising from past events whose
existence will be confirmed only by the occurrence of
one or more uncertain future events not wholly within The trust has determined that it has no corporation tax
the entity’s control; or liability as it does not carry out significant commercial
activities that are not part of healthcare delivery.
• present obligations arising from past events but for
which it is not probable that a transfer of economic 1.19 Foreign Exchange
benefits will arise or for which the amount of the
obligation cannot be measured with sufficient
The functional and presentational currency of the trust
reliability.
is sterling.
1.16 Public Dividend Capital A transaction which is denominated in a foreign

currency is translated into the functional currency at the
Public dividend capital (PDC) is a type of public
spot exchange rate on the date of the transaction.
sector equity finance based on the excess of assets
over liabilities at the time of establishment of the
Where the trust has assets or liabilities denominated in
predecessor NHS organisation. HM Treasury has
a foreign currency at the Statement of Financial Position
determined that PDC is not a financial instrument within
the meaning of IAS 32. date, monetary items are restated at the rates prevailing
at the Statement of Financial Position date.

Alder Hey Children’s NHS Foundation Trust 169 Annual Report & Accounts 2017/18