Afghan refugees, such as this child in Kandahar, face an uncertain future.

Finances

Note 2. Summary of significant accounting principles

Assets
Whereas the Federation’s worldwide operations are conduc-ted in many foreign currencies, the Federation’s Financial Regulations, adopted by the General Assembly, require that the accounts be maintained in Swiss francs. Monetary assets and liabilities denominated in foreign currencies at 31 December 2002 and 2001 have been translated to Swiss francs (CHF) at the market rates ruling at those dates.

All marketable securities are revalued to market value. Securities purchased in currencies other than Swiss francs are translated to Swiss francs at exchange rates ruling at the time of purchase.

The fixed assets recorded on the balance sheet comprise the cost of computer hardware and related software installed at the Federation’s Geneva headquarters and motor vehicles under the Federation’s vehicle leasing fleet. PC computers and software are depreciated over an expected useful life of three years. Other equipment and furniture required for the Geneva headquarters is expensed at the time of purchase.

With the exception of lease vehicles, capital equipment purchased for programmes is expensed at the time of purchase or issuance from inventory.

The vehicles which are managed by the vehicle leasing programme are depreciated over an expected useful life of four years.

Liabilities
Statutory contributions that are received prior to the year in which they are payable, are recorded as a liability until the year in which they fall due, when they are taken to income.

Accrued expenses for operations and programmes are recorded as current liabilities.

A provision for programme deficits is maintained to cover the assessed exposure on project deficits where future funding is deemed to be improbable.

Third-party vehicle insurance is contracted locally and supplemented in Switzerland where necessary. The Federation self-insures for vehicle damage. The provision for vehicle damage is based on an assessment of the risk exposure.

Provision is made for the estimated cost of known redundancies to be paid out in future accounting periods.

Reserves
Exchange gains and losses arising on secretariat transactions in foreign currencies, mainly from investments, are transferred to the Reserve for Loss on Investments and Foreign Exchange. Differences arising from operational transactions are charged to the individual project.

Realized and unrealized gains or losses from the sale of securities are transferred to the Reserve for Loss on Investments and Foreign Exchange.

The surplus or deficit of statutory income versus expenditure for each financial period is transferred to the Unrestricted Reserve. Allocations may be made from this Reserve upon request by the secretary general and upon approval by the Governing Board.

Income
The financial statements of the Federation take into account only contributions and other income that are received in cash by the Federation. Non-cash contributions donated in the form of goods or services (in-kind donations) are not included in the financial statements.

Voluntary contributions to operational income are taken to income on the cash-received basis. Statutory contributions are recorded as income in the year of receipt except for payments received in advance which are held on the balance sheet until the year for which they fall due.

>Cash resources not needed for immediate requirements, whether owned by the Federation or administered by the Federation on behalf of the various funds earmarked for programmes, are pooled together and invested in the Federation’s name. In accordance with the Federation’s Financial Regulations, all interest or dividend income derived from investments is credited to Federation income unless otherwise decided by the General Assembly or the Governing Board.

Foreign currency transactions included in the statement of income and expenditure have been translated to Swiss francs at the rates ruling at the time of the transactions.

Investment income is taken to income in the period in which it is earned and is recorded net of interest paid on overdrafts and short-term bank loans and commission fees.

Legacies and bequests in cash are recorded at the earlier of receipt or at the date legal title has passed where the amount to be received is known.

Expenditure
Expenditure is recorded on the accruals basis.

Purchased relief supplies and equipment not yet issued to operations are recorded as inventory in the balance sheet at cost. Relief supplies and equipment on hand issued to opera-tions at balance sheet date, whether purchased by the Federation or donated in kind, are recorded as programme expenditure.

The financial statements record under operational expenditure the contributions (cash transfers) made to National Societies to assist their relief and development programmes. The financial statements do not include the accounts of such programmes undertaken by National Societies or the balance of any unexpended funds that may be held by them as at 31 December 2002.

Costs for employee redundancy, including notice period and termination indemnity, are recorded in the year in which the decision to make the employee redundant has been taken.