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"value": "Notes forming part of the consolidated financial statements for the year ended 31 December 2022 1. Accounting policies General information Funding Circle Holdings plc (the \u201cCompany\u201d) is a public company limited by shares, which is listed on the London Stock Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006 and registered in England and Wales. The address of its registered office is given on page 196. The consolidated financial statements of the Group for the year ended 31 December 2022 comprise the Company and its subsidiaries (together referred to as the \u201cGroup\u201d and individually as \u201cGroup entities\u201d). The principal activities of the Group and the nature of the Group\u2019s operations are as a global SME loan platform. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Going concern The Group\u2019s business activities together with the factors likely to affect its future development and position are set out in the Strategic Report. The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future (which has been taken as at least 12 months from the date of approval of the financial statements). The Group made a total comprehensive loss of \u00a31.1 million during the year ended 31 December 2022 (2021: profit of \u00a362.6 million). As at 31 December 2022, the Group had net assets of \u00a3284.0 million (2021: \u00a3288.0 million). This includes \u00a3177.7 million of cash and cash equivalents (2021: \u00a3224.0 million) of which \u00a312.1 million (2021: \u00a324.6 million) is held within the securitisation vehicles or for other specific purposes and is restricted in use. Additionally, within the net assets, the Group holds \u00a396.5 million (2021: \u00a369.7 million) of invested capital, some of which is capable of being monetised if liquidity needs arise. The Group has prepared detailed cash flow forecasts for the next 15 months and has updated the going concern assessment to factor in the potential ongoing impact of inflation and related economic stress. The base case scenario assumes: 5 continued growth in origination of the Group\u2019s commercial lending product until June 2024; 5 there remains macroeconomic stress in 2023 from inflation, and supply chain pressures with a peak in defaults, which gradually de-stress in the following years; 5 no extensions or new government schemes that the Group participated in; 5 the rollout of the new FlexiPay product using the Group\u2019s balance sheet to fund it; and 5 costs and headcount grow modestly with the new product and with investment in technology. Management prepared a severe but plausible downside scenario in which: 5 further macroeconomic volatility continues through the period with increased inflation and interest rates reducing originations and increasing costs; 5 investment returns reduce owing to increased funding costs, widening discount rates and deterioration in loan performance; 5 an operational event occurs requiring a cash outlay; and 5 a downside loss scenario is applied to Funding Circle\u2019s on-balance sheet investment in SME loans resulting in higher initial fair value losses and lower cash flows to the investments it owns. Management has reviewed financial covenants the Group must adhere to in relation to its servicing agreements. These are with institutional investors for which there are unrestricted cash, tangible net worth and debt to tangible net worth ratios. Management has also reviewed regulatory capital requirements. In the downside scenario the risk of covenant or capital requirement breach is considered remote. The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and have, at the time of approving these financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Further detail is contained in the Strategic Report on pages 70 and 71. Basis of preparation The Group presents its annual financial statements in conformity with United Kingdom laws and regulations. The financial statements have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the United Kingdom\u2019s Financial Conduct Authority. 1. Accounting policies continued
Basis of preparation continued
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are carried
at fair value through profit and loss (\u201cFVTPL\u201d).
The preparation of financial statements requires the use of certain accounting estimates. It also requires management to exercise
its judgement in the process of applying the Group\u2019s accounting policies. Changes in assumptions may have a significant impact
on the financial statements in the year the assumptions changed. Management believes that the underlying assumptions are
appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements, are disclosed in note 2.
Significant changes in the current reporting year
The financial position and performance of the Group were affected by the following events and transactions during the year
ended 31 December 2022:
i) Sale of securitised SME loans and unwind of UK and US SPVs (note 16)
In May 2022, Funding Circle exercised the call rights associated with the majority ownership of the unrated junior residual
tranches of Small Business Origination Loan Trust 2019-3\u2019s bonds in the UK. The call option became exercisable as the portfolio
and bond liabilities of the SPV had amortised to below a minimum threshold. Funding Circle and the other junior note holder
purchased the loans from the SPV, in line with their proportional ownership of the note tranches, at fair value. The proceeds,
cash, and other assets of the vehicle were liquidated and used to repay outstanding expenses and interest and principal on the
bond liabilities. As the SPV is consolidated, the net impact on the Group\u2019s financial statements was a sale of 49% of the UK
securitised SME loans to the other junior note holder and repayment of the bond liabilities. The bond liabilities held at FVTPL
were repaid at an amount higher than their previous fair value estimate as the cash flows were delivered sooner and at a higher
amount resulting in a fair value loss as set out in note 15. As a result, there are no unrated bond liabilities remaining for the Group.
Subsequently the Group owned 51% of the securitised SME loans, directly through the subsidiary Funding Circle Ltd. The majority
of the retained loans were sold to a third party with an economic cut off of 30 June 2022 and cash settlement in September 2022
for their fair value, with no gain or loss on sale, and as a result only a smaller portfolio of delinquent and defaulted loans was
retained by the Group.
In October 2022, Funding Circle exercised the call rights associated with the ownership of the unrated junior residual tranches of
Small Business Lending Trust 2019-A\u2019s bonds in the US. The call option became exercisable as the portfolio and bond liabilities
of the SPV had amortised to below the minimum threshold. Funding Circle purchased the loans from the SPV at fair value.
The proceeds, cash and other assets of the vehicle were liquidated and used to repay outstanding expenses, and interest and
principal on the bond liabilities. As the SPV is consolidated, the net impact on the Group\u2019s financial statements was the repayment
of the bond liabilities of the vehicle. The Group continues to consolidate 100% of the securitised SME loans, now owned directly
by the subsidiary FC Marketplace LLC.
The Group continues to consolidate both the SPVs, which subsequently began a liquidation process, and holds an immaterial
amount of cash and accruals, through exposure to the majority of the variability in any excess cash flows available after the
liquidation is completed.
The loans retained continue to be held at fair value through profit and loss, within SME Loans (securitised), as the Group
continues to hold these with the intention of selling them if, and when, an attractive price can be realised.
ii) Scaling up of new products
The Group has continued to invest in the scaling up lending through lines of credit in its FlexiPay product.
Through FlexiPay, borrowers are provided with a facility which can be drawn to pay invoices and expenses, and are subsequently
repaid over three months. A fee of 3% was charged in the year on the drawn amount which is recognised over the three-month
life of the drawdown in interest income under the effective interest rate method. The accounting policy regarding FlexiPay is
outlined later in this note.
As outlined later, the loans are measured at amortised cost. As FlexiPay will continue to become a larger part of the Group\u2019s
business, this has been disclosed as a separate segment within note 3. As a result the Group has presented FlexiPay under
\u201clines of credit\u201d on the balance sheet and reclassified the comparative which was previously presented in \u201cinvestment in SME
loans (other)\u201d and cash flows have been re-presented within \u201corigination of/cash receipts from lines of credit\u201d within cash flows
from operating activities and were previously presented within \u201corigination of/ cash receipts from SME loans (other)\u201d in cash
flows from investing activities in the year ended 31 December 2021.
iii) Redemption of investment in associate
In July 2022 an agreement was signed by Funding Circle European Private Fund DAC I to sell the loans held by the fund as part of
its strategy to return capital to shareholders in a cost effective manner. The Group received \u00a32.6 million in cash in August 2022 as
a final capital distribution and the corresponding investment in associate held by the Group was reduced by this distribution to nil.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
1. Accounting policies continued
Changes in accounting policy and disclosures
The Group has adopted the following new and amended IFRSs and interpretations from 1 January 2022 on a full retrospective basis.
Standard/interpretation Content
Applicable for financial
years beginning on/after
Amendments to IFRS 3 \u2013 Reference to the Conceptual
Framework
Business combinations 1 January 2022
Amendments to IAS 16 \u2013 Property, Plant and Equipment:
Proceeds before Intended Use
Property, plant and equipment 1 January 2022
Amendments to IAS 37 \u2013 Onerous Contracts \u2013 Costs of
Fulfilling a Contract
Provisions \u2013 onerous contracts 1 January 2022
The amendments and interpretations listed above did not materially affect the current year and are not expected to materially
affect future years.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022
reporting years and have not been early adopted by the Group as follows:
Standard/interpretation Content
Applicable for financial
years beginning on/after
Amendments to IAS 1 \u2013 Classification of Liabilities as Current
or Non-current
Presentation of financial statements 1 January 2023
Amendments to IAS 8 \u2013 Definition of Accounting Estimates Accounting policies, changes in
accounting estimates
1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 \u2013
Disclosure of Accounting Policies
Accounting policies 1 January 2023
Amendments to IAS 12 \u2013 Deferred Tax Related to Assets and
Liabilities Arising from a Single Transaction
Deferred tax 1 January 2023
These standards are not expected to have a material impact on the Group in the current or future reporting years or on foreseeable
future transactions.
Summary of new and amended accounting policies
FlexiPay: Lines of credit
Lending through the FlexiPay product is recognised on the balance sheet within lines of credit. This represents the drawn amount
of the facilities. The contractual cash flows represent solely payments of principal and interest (\u201cSPPI\u201d) and the business model
under which they are held is in order to collect the contractual cash flows resulting in the lines of credit being measured initially
at fair value and subsequently at amortised cost. The Group has presented FlexiPay under \u201clines of credit\u201d in the balance sheet
and reclassified the comparative which was previously presented in \u201cinvestment in SME loans (other)\u201d where they were also
measured at amortised cost. The origination fee associated with FlexiPay is recognised under IFRS 9 within interest income at
the effective interest rate in the consolidated statement of comprehensive income and is recognised over the contractual term
of the draw down.
Cash flows have been re-presented within \u201cOrigination of/cash receipts from lines of credit\u201d within cash flows from operating
activities and were previously presented within \u201cOrigination of/ cash receipts from SME loans (other)\u201d in cash flows from
investing activities in the year ended 31 December 2021.
The FlexiPay lines of credit are held net of expected credit loss allowances under IFRS 9, the methodology and definitions of
which align to the existing Group accounting policy on impairment of financial assets held at amortised cost with the exception
of being assessed at the available line of credit level, estimating the utilisation of the line of credit to the estimated point of
default and are detailed further within note 16. Additionally, the Group assesses the expected credit loss allowance in relation
to undrawn lines of credit, estimating the probability of default, loss given default and exposure at default in relation to these lines
of credit were they to be drawn. This has resulted in a \u00a30.3 million (2021: \u00a3nil) loss allowance recognised within other liabilities in
note 15.
1. Accounting policies continued
SME loans (securitised), SME loans (warehouse) and SME loans (other)
Following the call option being exercised on the UK and one of the US securitisation vehicles and the repayment of the
warehouse borrowings in 2021 and 2022, some of the SME loans were purchased from the vehicles and are held directly in
Funding Circle Limited and Funding Circle Marketplace LLC. These loans continue to be held at FVTPL as the business model
under which they are held remains to sell the loans. They continue to be presented within SME loans (securitised) and SME loans
(warehouse) representing the legacy nature of the loans.
Certain SME loans are originated by the Group under the business model of selling onwards, and are therefore measured initially
and subsequently at FVTPL. These loans are presented within SME loans (other) alongside loans held at amortised cost and can
be distinguished in note 16.
Summary of existing accounting policies
Basis of consolidation
Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the
following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the
investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that
there may be a change in any of these elements of control.
Structured entities are entities that are designed so that their activities are not governed by voting rights. In assessing whether
the Group has power over such entities, the Group considers factors such as the purpose and design of the entity; its practical
ability to direct the relevant activities of the entity; the nature of the relationship with the entity; and the size of its exposure to
the variability of returns of the entity.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity.
Intercompany transactions and balances between Group companies are therefore eliminated in full.
The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet, the
acquiree\u2019s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition
date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired operations are included in the
consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the
date on which control ceases.
Foreign currency translation
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which
they operate (their \u201cfunctional currency\u201d) are recorded at the rates ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the prevailing rate at the reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the
profit or loss on disposal.
Presentation currency
These consolidated financial statements are presented in GBP sterling, which is the Group\u2019s presentation currency.
All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated
at the prevailing rate at the reporting date. Income and expense items are translated at the average exchange rates for the year,
unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are
used. Exchange differences arising are recognised in other comprehensive income and accumulated 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 translated at the prevailing rate at the reporting date.
Segment reporting
Operating segments are reported in the manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, which is the function responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Global Leadership Team that makes strategic decisions. For each identified
operating segment, the Group has disclosed information for the key performance indicators that are assessed internally to
review and steer performance in the Strategic Report.
Transactions between segments are on an arm\u2019s length basis in a manner similar to transactions with third parties.
Exceptional items
Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of such
significance that they merit separate presentation in order to aid the reader\u2019s understanding of the Group\u2019s financial performance.
Such items would include profits or losses on disposal of businesses; transaction costs; acquisitions and disposals; major
restructuring programmes; significant goodwill or other asset impairments; and other particularly significant or unusual items
(see note 5).
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
1. Accounting policies continued
Income recognition
Fee income is recognised in line with IFRS 15 which provides a single, principles-based five-step model to be applied to all
contracts with customers:
1) identify the contract with the customer;
2) identify the performance obligations in the contract, introducing the new concept of \u201cdistinct\u201d;
3) determine the transaction price;
4) allocate the transaction price to the performance obligations in the contracts, on a relative stand-alone selling price basis; and
5) recognise income when (or as) the entity satisfies its performance obligation.
Fee income earned for the arrangement of loans is classified as transaction fees and is a cost of the borrower except for
government-guaranteed CBILS loans which were a cost to the government. The contract signed by the borrower and related
terms are clearly identifiable. The performance obligation in the contract is considered to be the funding of the loan through the
platform and the transaction price is clearly stated in the borrower\u2019s contract. Fees are recognised immediately once loans are
fully funded and after the loans are accepted by the borrowers. At this point the performance obligation has been met, there are
no clawback provisions and the fee is recognised. Such fees are automatically deducted from the amount borrowed (or
subsequently invoiced in the case of government-guaranteed CBILS loans).
Fee income earned from referrals to partner institutions is classified as transaction fees and is a cost to the partner institution.
There are contracts in place with partner institutions with clearly identifiable terms. The performance obligation in the contract is
considered to be the referral by the Group and subsequent funding of the referred loan by the partner institution and the transaction
price is clearly stated in the referral agreement. Fees are recognised once the referred loan has been funded by the partner
institution and accepted by the referred borrower. At this point the performance obligation has been met and there are no
significant clawback provisions.
Fee income earned from servicing third party loans is classified as servicing fees and is a cost of the investor, except in the case
of the first year of servicing fees related to CBILS loans, where the government paid the cost. It comprises an annualised fee
representing a percentage of outstanding principal. The contractual basis for the servicing fee and transaction price is based
on the terms and conditions agreed by investors to the lending platform. The performance obligation is servicing the loans and
allocating repayments of the loan parts to the respective lenders. The transaction price is allocated as a percentage of the
outstanding principal balance, representing the outstanding performance obligation. Fees are recognised on a monthly basis
upon repayment of loan parts. Due to the conditions of the loans, there are no partially completed contracts at the balance sheet
date and no advance payments from customers.
Other fees include excess premium earned from arrangements to buy back defaulted loans from certain institutional investors
and income earned on certain bought back loans. Other fees also includes income from collections charges levied on the
successful recovery of defaulted loans. These are recognised as services are performed.
Net income includes the following elements under which the recognition criteria of IFRS 9 and not IFRS 15 are applied:
Interest income includes:
5 interest income recognised on assets held at amortised cost under the effective interest rate method including FlexiPay.
Investment income includes:
5 interest income from SME loans and investments in trusts that the Group holds on balance sheet.
Investment expense includes:
5 interest payable on funds borrowed to finance the acquisition of underlying loan investments;
5 interest payable on bond liabilities held on balance sheet;
5 amortisation of costs associated with the issuing of bonds and the credit facility; and
5 gains/losses from changes in fair value of interest hedging instruments.
Fair value gains/losses includes:
5 gains/losses from changes in the fair value of financial assets and liabilities held on balance sheet.
Net income recorded in the financial statements is generated in the UK, the US, Germany and the Netherlands. All fees are
calculated based on the above income recognition policy.
1. Accounting policies continued
Administrative expenses
Administrative expenses are recognised as an expense in the statement of comprehensive income in the period in which they are
incurred on an accruals basis.
Share-based payments
The Group operates a number of equity-settled share-based compensation plans, under which the Group receives services from
employees as consideration for equity instruments (options and shares) of the Company. The fair value of the employee services
received in exchange for the grant of the options and shares is recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the options and shares granted:
5 including any market performance conditions (for example, an entity\u2019s share price);
5 excluding the impact of any service and non-market performance vesting conditions (for example, net income, earnings per
share and remaining an employee of the Group over a specified time period); and
5 including the impact of any non-vesting conditions (for example, the requirement for employees to save).
Non-market vesting conditions are included in assumptions about the number of options and shares that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are
to be satisfied. At the end of each reporting period, the Group revises its estimate of the number of options and shares that are
expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any,
in the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares or utilises shares that have been purchased in the market.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised.
The grant by the Company of options and shares over its equity instruments to the employees of subsidiary undertakings in the
Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date
fair value, is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding
credit to equity in the Parent entity (the \u201cCompany\u201d) accounts.
Pension obligations
The Group operates a defined contribution pension scheme for employees in the UK and US. The schemes are pension plans under
which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current
and prior years. Contributions payable to the Group\u2019s pension scheme are charged to the statement of comprehensive income in
the year to which they relate. The Group has no further payment obligations once the contributions have been paid.
Current and deferred tax
The tax expense for the year comprises current and deferred tax. Current tax is provided at amounts expected to be paid
(or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the
countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group
has established transfer pricing policies and ensures mechanisms are in place in ensuring subsidiaries receive an appropriate
tax rate and base. It establishes provisions, where appropriate, based on amounts expected to be paid to the tax authorities.
Deferred tax assets for unused tax losses, tax credits and deductible temporary differences are recognised to the extent that
it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and
joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient
taxable profit available against which the temporary difference can be utilised.
Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and
joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled
by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted at the year-end date and are
expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax balances are
not discounted.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
1. Accounting policies continued
Dividends
Dividends are recognised when they become legally payable, in accordance with the Companies Act 2006.
Intangible assets
Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. Useful lives and
amortisation methods are reviewed at the end of each annual reporting period, or more frequently when there is an indication
that the intangible asset may be impaired, with the effect of any changes accounted for on a prospective basis. Amortisation
commences when the intangible asset is available for use. The residual value of intangible assets is assumed to be zero.
Computer software licences
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised over the licence period, which is up to five years as at 31 December 2022.
Capitalised development costs
Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs
that are directly attributable to the design, build and testing of identifiable and unique software products controlled by the Group
are recognised as intangible assets when the following criteria are met:
5 it is technically feasible to complete the build of the platform products so that they will be available for use;
5 management intends to complete the build of the platform products for use within the Group;
5 there is an ability to use the platform products;
5 it can be demonstrated how the platform products will generate probable future economic benefits;
5 adequate technical, financial and other resources to complete the development and to use the platform products are
available; and
5 the expenditure attributable to the platform products during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee and
contractor costs. The capitalisation of employee costs is based on the amount of time spent on specific projects which meet the
criteria as a proportion of their total time, and this proportion of their salary-related costs is attributed to the applicable projects.
Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset in a subsequent period.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for
use over their estimated useful lives, ranging from three to five years.
Other intangibles
Other intangibles relate to the technology platform and customer relationship (representing fees due on contracted loans
expected to be realised in the foreseeable future) acquired on a business combination. These costs are amortised over their
estimated useful lives, which do not exceed three years.
Tangible fixed assets
Tangible fixed assets are stated at cost less depreciation and any provision for impairment. Depreciation is provided on all
tangible fixed assets, at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis
over its expected useful life, as follows:
Computer equipment 1\u20133 years
Furniture and fixtures 3\u20135 years
Leasehold improvements that qualify for recognition as an asset are measured at cost and are presented as part of property,
plant and equipment in the non-current assets section on the balance sheet. Depreciation on leasehold improvements is
calculated using the straight-line method over the lease term.
1. Accounting policies continued
Impairment of tangible and intangible assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are
tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by
which the asset\u2019s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the
asset\u2019s recoverable amount since the last impairment loss was recognised. If this was the case, the carrying amount of the asset
(or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU)
in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Leases
At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When
a lease is recognised in a contract the Group recognises a right-of-use asset and a lease liability at the lease commencement
date.
Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, less any lease
incentives. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated
impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line
basis over the length of the lease.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
5 fixed payments less any lease incentives receivable;
5 variable lease payments based on an index or a rate, initially measured using the index or rate at the commencement date; and
5 amounts expected to be payable by the Group under residual value guarantee.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group\u2019s
incremental borrowing rate is used, which is the rate that the Group would have to pay to borrow the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
5 where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect
changes in financing conditions since third party financing was received;
5 uses an approach taking the risk-free interest rate adjusted for credit risk for leases held by Funding Circle Holdings plc; and
5 makes adjustments specific to the lease for term, country and currency.
Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability and
reducing it by the lease payments made. The lease liability and right-of-use asset are remeasured when there is a lease
modification.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included
in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use asset.
Extension and termination options are included in a number of property leases in the Group. Management considers the facts
and circumstances that may create an economic incentive to exercise an extension or termination option in order to determine
whether the lease term should include or exclude such options. Extension or termination options are only included within the
lease term if they are reasonably certain to be exercised in the case of extension options and not exercised in the case of
termination options.
Considerations include:
5 if leasehold improvements are expected to have significant value at the end of the lease term;
5 expected costs or business disruption as a result of replacing a lease; and
5 significant penalties incurred in order to terminate.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
1. Accounting policies continued
Leases continued
Lease terms are reassessed if the option is exercised or if a significant event occurs which impacts the assessment of
reasonable certainty.
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e. those
leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value.
Lease payments on short-term leases and leases of low-value assets are recognised as expenses on a straight-line basis over
the lease term.
When the Group is an intermediate lessor, entering into a sublease, it accounts for the head lease and the sublease separately.
The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the lease term and the Group retains the
right-of-use asset deriving from the head lease and the lease liability on the balance sheet.
Amounts due from lessees under finance leases are recognised as receivables equivalent to the Group\u2019s net investment in the
lease and the right-of-use asset from the head lease is derecognised. Any difference resulting from the derecognition of the
right-of-use asset and recognition of the net investment in the sublease is recognised in the consolidated statement of
comprehensive income. The head lease liability remains on the balance sheet and interest expense continues to be recognised,
while interest income is recognised from the sublease.
Consolidation of special purpose vehicles (\u201cSPVs\u201d)
Subsidiaries are those entities, including structured vehicles, over which the Group has control. The Group controls an entity
when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the investee. The Group has power over an entity when it has existing rights that give it the current ability
to direct the activities that most significantly affect the entity\u2019s returns. Power may be determined on the basis of voting rights or,
in the case of structured entities, other contractual arrangements.
The Group assesses whether it controls SPVs and the requirement to consolidate them under the criteria of IFRS 10. Control is
determined to exist if the Group has the power to direct the activities of each entity (for example, managing the performance of
the underlying assets and raising debt on those assets which is used to fund the Group) and uses this control to obtain a variable
return (for example, retaining the residual risk on the assets). Structures that do not meet these criteria are not treated as
subsidiaries and the assets are derecognised when they are sold.
Where the Group manages the administration of its securitised assets and is exposed to the risks and rewards of the underlying
assets through its continued investment or where the Group does not retain a direct ownership interest in an SPE, but the
Directors have determined that the Group controls those entities, they are treated as subsidiaries and are consolidated.
Investment in associates
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations
made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
The Group\u2019s investment in its associate is accounted for using the equity method.
Under the equity method of accounting, the investments are initially recognised at cost. This is adjusted thereafter to recognise
the Group\u2019s share of the post-acquisition profits or losses of the investee in the consolidated statement of comprehensive
income. The Group\u2019s share of movements in other comprehensive income of the investee is recognised in other comprehensive
income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment.
When the Group\u2019s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any
other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group\u2019s interest
in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group determines whether there is an indication that the investment
in the associate is impaired. If there is such an indication, the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate and its carrying value, and then recognises the loss within the statement
of comprehensive income.
Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair
value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the
fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
1. Accounting policies continued
Financial instruments
Financial assets
The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification
and subsequent measurement are applied, which require financial assets to be classified based on the Group\u2019s business model
for managing the asset and the contractual cash flow characteristics of the asset:
5 financial assets are measured at amortised cost if they are held within a business model, the objective of which is to hold
financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of
principal and interest;
5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within the
business model defined as \u201dheld to collect and sell\u201d, the objective of which is achieved by both collecting contractual cash
flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest; and
5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or loss
(\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL if doing so
eliminates or significantly reduces an accounting mismatch.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value
through profit or loss, directly attributable transaction costs. The purchase of any credit-impaired assets is also at fair value after
any impairment.
Except for certain investments in SME loans as described below, the Group does not recognise on its balance sheet loans
arranged between borrowers and investors as it is not a principal party to the contracts and is not exposed to the risks and
rewards of these loans.
With the exception of investment in trusts and co-investments, SME loans (warehouse), certain SME loans (other) and SME loans
(securitised), all financial assets are held to collect contractual cash flows.
The five types of SME loans held are as follows:
i) SME loans (warehouse)
During the warehouse phase of the securitisation programme, the SME loans originated using both the Group\u2019s cash and
amounts borrowed under credit facilities were held on the Group\u2019s balance sheet. In 2021 these were transferred into other FC
entities and the credit facilities repaid and continue to be presented as SME loans (warehouse) to represent their legacy nature.
These SME loans have been classified as financial assets at fair value through profit or loss because all such loans are acquired
principally for selling in the short term and the collection of interest is incidental. They are initially measured at fair value on the
balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated
statement of comprehensive income.
ii) SME loans (securitised)
Under risk retention regulations the Group is required to retain at least 5% of the bonds issued by the securitisation SPV.
Retaining a significant proportion of the residual
Whilst the Group is required to retain 5% of the overall bond issuance, where the Group holds a significant proportion of the
unrated bonds (referred to as the \u201cresidual\u201d), the Group consolidates the securitisation SPV as it considers that the risks and
rewards of ownership continue to reside with the Group. As a result the underlying SME loan book held in the SPV is recognised
on balance sheet along with the bond liabilities to third parties. They are initially measured at fair value on the balance sheet
with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of
comprehensive income.
Selling a significant portion of the residual
Where the Group sells a significant portion of the residual, the Group may no longer be deemed to retain the majority of the
risks and rewards of ownership and the Group would deconsolidate the securitisation SPV. The Group would subsequently apply
the derecognition rules of IFRS 9 to the investment in SME loans. Cash on the sale of the Group\u2019s investment in the residual is
treated as an investing activity.
Exercising call rights associated with the residual
In certain vehicles the residual comes with call rights attached that become exercisable as the portfolio and bond liabilities of
the SPV amortise to below a minimum threshold. The calling of the vehicle allows the residual holder to purchase the remaining
loans from the SPV and use the proceeds and the remaining assets of the vehicle to repay bond liabilities. When the Group has
exercised its call rights and purchased loans from and SPV, subsequently held directly by subsidiaries of the Group, these loans
continue to be referred to as SME loans (securitised) based on the legacy nature of the loans.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
1. Accounting policies continued
Financial instruments continued
Financial assets continued
iii) SME loans (other)
The Group has originated PPP loans using the SBA\u2019s PPPLF facility which are held on balance sheet. Additionally the Group holds
investments in certain SME business loans as a result of a commercial arrangements with institutional investors and in certain
circumstances the Group also buys back loans from investors.
These loans are included in SME loans (other) (see note 12) and are classified as amortised cost (as they are held solely to
collect principal and interest payments) and are initially recognised at fair value and subsequently measured at amortised cost
less provision for impairment. PPP loans are fully guaranteed by the SBA.
SME loans (other) additionally includes loans temporarily funded by the Group in relation to the relaunch of commercial loans
which are classified as financial assets at fair value through profit or loss and are held with the intention of selling on to investors.
They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and
losses being recognised in the consolidated statement of comprehensive income.
iv) Lines of credit
The accounting policy and description is detailed under \u201cFlexiPay: Lines of credit\u201d in the summary of new and amended
accounting policies.
v) Investment in trusts and co-investments
The Group holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the majority
of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding Circle
Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and commercial loans, which retain
legal title to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain the
economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within, including
the SME loans, are not consolidated.
The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the
Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which
it is exposed to the majority of the variability. As the Group\u2019s holding is small compared to the majority investor and pari passu,
the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the
trust structures, so they are not consolidated by the Group.
Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on the balance
sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement
of comprehensive income.
The Group recognises transaction fee income on origination of loans within the trust and service fee income on the assets
within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged in relation to
the origination of CBILS and RLS loans and investment income is recognised in relation to returns on the investment.
Other financial assets
Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are
recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease
payment receivable. Interest is recognised within finance income in the statement of comprehensive income.
Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified as
FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other
short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets
approximates to their fair value.
Impairment of financial assets held at amortised cost
The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach:
5 Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that
have low credit risk at the reporting date. For these assets, 12-month expected credit losses (\u201cECLs\u201d) (that is, expected losses
arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying
amount of the asset (that is, without deduction for credit allowance).
5 Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they
have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECLs (that is, expected losses
arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated
on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding
amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets
are considered to be stage 2.
1. Accounting policies continued
Financial instruments continued
Financial assets continued
Impairment of financial assets held at amortised cost continued
5 Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact
on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECLs are also recognised,
but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default,
classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at
which the asset is considered to be credit-impaired.
5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets
the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs.
The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at
amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects:
5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
5 the time value of money; and
5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events,
current conditions and forecasts of future economic conditions.
If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the
carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment
loss is recognised in the statement of comprehensive income.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the
Group has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay
those cash flows to one or more recipients.
The Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership.
Financial liabilities
Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost.
The fair value of a non-interest-bearing liability is its discounted repayment amount. If the due date of the liability is less than one
year, discounting is omitted.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Bank borrowings
Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net
of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest
rate method.
Derivative financial instruments
Interest rate caps were in place to partially mitigate the floating rate interest rate risk associated with drawn amounts from
borrowing facilities and risk associated with floating rate ABS bond liabilities consolidated into the Group. The derivatives are
recognised initially at fair value reflecting the time value implicit in the premium paid and are subsequently measured at fair value
with gains and losses recognised in profit or loss. See note 16 for details of interest rate risk.
Bonds
Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME
loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are
eliminated upon consolidation.
IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group\u2019s case
the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair
value through profit and loss.
As the cash flows from the SME loans are used to repay the rated bond tranches in advance of the unrated bonds, the Group
does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the
rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the
SME loans, the Group has elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate
the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no
externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis.
See note 16 for details of the fair value methodology and interest rate risk.
Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime
of the bonds using the effective interest rate method.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
1. Accounting policies continued
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
Loan repurchases
Loan repurchase contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder
for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt
instrument. Loan repurchase contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the contract. The liability is subsequently measured at the higher of the best estimate of
the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation.
The expected credit loss model is used to measure and recognise the financial liability (as further detailed in note 15).
Share capital
Ordinary shares are classified as equity where their terms include no contractual obligation to transfer cash or another financial
asset to another entity.
Earnings/(loss) per share
The Group presents basic and diluted earnings/(losses) per share (\u201cEPS\u201d) for its ordinary shares. Basic and diluted EPS are
calculated by dividing the profit/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year excluding shares held as own shares in the Group\u2019s Employee Benefit Trusts.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees under
the Group\u2019s share-based compensation schemes which do not have an exercise price or where the exercise price is less than the
average market price of the Company\u2019s ordinary shares during the year.
Shares held by the Employee Benefit Trust and Share Incentive Plan Trust
The Company has established an offshore Employee Benefit Trust (\u201cEBT\u201d) and an onshore Share Incentive Plan (\u201cSIP\u201d) Trust.
The EBT and SIP Trust provide for the issue of shares to Group employees principally under share option schemes and SIP
respectively. The Group has control of the EBT and SIP Trust and therefore consolidates the Trusts in the Group financial
statements. The Group has commenced the purchase of own shares in the market during the financial year in order to satisfy the
exercise of employee share option schemes. Shares which are purchased are recognised at cost and are treated as a deduction
to shareholders\u2019 equity. No gain or loss is recognised in the income statement on the purchase or utilisation of equity shares.
Reserves
Foreign exchange reserve
The foreign exchange reserve represents the cumulative foreign currency translation movement on the assets and liabilities
of the Group\u2019s international operations at year-end exchange rates and on the profit and loss items from average exchange rates
to year-end exchange rates.
Share options reserve
The share options reserve represents the cumulative charges to income under IFRS 2 Share-based Payments on all share options
and schemes granted, net of share option exercises. The costs are transferred to retained earnings when options are exercised.
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires the Group to make estimates and judgements that affect the
application of policies and reported amounts. Critical judgements represent key decisions made by management in the application
of the Group accounting policies. Where a significant risk of materially different outcomes exists due to management
assumptions or sources of estimation uncertainty, this will represent a key source of estimation uncertainty.
Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances. Although these estimates are based on management\u2019s
best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
The significant judgements and estimates applied by the Group in the financial statements have been applied on a consistent
basis with the financial statements for the year to 31 December 2021.
Critical judgements
Consolidation and deconsolidation of special purpose vehicles (\u201cSPVs\u201d) and investment in trusts and co-investments (note 16)
As part of its asset-backed securitisation programmes, the Group has established warehouse and securitisation SPVs. Judgement
is required in determining who is most exposed to the variability of returns and who has the ability to affect those returns and
therefore who should consolidate these vehicles and subsequently deconsolidate them. Where the Group has a significant
interest in the junior tranches of the securitisation vehicles or the subordinated debt in the warehouses, the Group is deemed to
be exposed to the majority of the variability of the returns of those vehicles and controls them, and therefore consolidates them.
Where this interest is reduced, the Group considers whether the vehicles should be deconsolidated.
2. Critical accounting judgements and key sources of estimation uncertainty continued
Critical judgements continued
Consolidation and deconsolidation of special purpose vehicles (\u201cSPVs\u201d) and investment in trusts and co-investments (note 16)
continued
The Group also holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the remaining
majority of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding
Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and commercial loans, which
retain legal title to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain
the economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within,
including the SME loans, are not consolidated.
The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the
Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it
is exposed to the majority of the variability. As the Group\u2019s holding is small in comparison to the majority investor and is pari passu,
the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the
trust structures, so they are not consolidated by the Group.
Loans originated through the platform
The Group originates SME loans through its platform which have been funded primarily by banks, asset managers, other
institutional investors, funds, national entities, retail investors or by usage of its own capital. Judgement is required to determine
whether these loans should be recognised on the Group\u2019s balance sheet. Where the Group, its subsidiaries or SPVs which it
consolidates have legal and beneficial ownership to the title of those SME loans, they are recognised on the Group\u2019s balance
sheet. Where this is not the case, the loans are not recognised at the point of origination.
Key sources of estimation uncertainty
The following are the key sources of estimation uncertainty that the Directors have identified in the process of applying the
Group\u2019s accounting policies and have the most significant effect on the amounts recognised in the financial statements.
Fair value of financial instruments (note 16)
At 31 December 2022, the carrying value of the Group\u2019s financial instrument assets held at fair value was \u00a3219.4 million
(2021: \u00a3302.5 million) and the carrying value of financial liabilities carried at fair value was \u00a3nil (2021: \u00a312.8 million).
In accordance with IFRS 13 Fair Value Measurement, the Group categorises financial instruments carried on the consolidated
balance sheet at fair value using a three-level hierarchy. Financial instruments categorised as level 1 are valued using quoted market
prices and therefore there is minimal estimation applied in determining fair value. However, the fair value of financial instruments
categorised as level 2 and, in particular, level 3 is determined using valuation estimation techniques including discounted cash flow
analysis and valuation models. The most significant estimation is with respect to discount rates and default rates.
Since 31 December 2021 the assumptions related to estimating fair value have been revised to reflect the observed actual
performance of SME loans (securitised) and a revision to the timing of the assumed defaults to occur later in light of the
observed resilience of the loans performance and noting that the economic environment may lead to a later, more gradual but
longer lasting stress than the sooner and sharper stress previously expected. Additionally, recoveries have been observed to
have performed more favourable to previous stress assumptions and expectations have been revised upwards. The combination
of favourable observed performance, higher recoveries and later defaults on an amortising pool of loans has led to a lower
lifetime cumulative default expectation and a higher relative estimation of fair value.
However, market drivers of discount rates such as observed widening in collateralised loan obligation spreads and increases in the
risk-free rate due to central bank interest rate rises in order to curb inflationary pressures have resulted in the estimated cash flows
being discounted at a higher rate, which has led to a lower relative estimation of fair value compared to carrying value of the loans
partially offsetting the favourable revisions from default and recovery expectations.
With respect to investments in trusts and co-investments, where the Group holds a minority equity pari passu co-investment
structured through warehouse vehicles, the increase in interest rates and future expected increases in interest rates has decreased
the estimated fair value in these structures, as the floating rate interest on senior borrowing facilities within the vehicle is paid
before returns to the equity holders , including Funding Circle, are made. Additionally, while the majority of default stress particularly
on CBILS loans was previously expected to occur at the end of the product\u2019s first year payment free period, with lower defaults
observed than anticipated, the economic environment may lead to further defaults on these portfolios through the same more
gradual default stress outlined above. The nature of the vehicles is such that, while the loans may be government guaranteed, an
uptick in defaults in combination with higher borrowing costs will reduce the lifetime return to the equity holder and the inbuilt
mechanisms of the vehicles which prioritise repayments to the senior lender could lead to cash flowing to the equity holder later.
As a result the estimated fair value of the investment has decreased.
Sensitivities to assumptions in the valuation of SME loans (warehouse), SME loans (other) and money market funds within cash
and cash equivalents are not disclosed below as reasonably possible changes in the current assumptions would not be expected
to result in material changes in the carrying values.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
2. Critical accounting judgements and key sources of estimation uncertainty continued
Key sources of estimation uncertainty continued
Fair value of financial instruments (note 16)
Sensitivities to the default rates and discount rates are illustrated below.
Description
Fair value
\u00a3m Unobservable input Inputs
Relationship of
unobservable inputs to fair value
SME loans (securitised) 45.8 Lifetime cumulative default
rate as % of original
US: 14.6%
and 17.1%
1
UK: 6.9%
1
A change in the lifetime cumulative
default rate would have the
following impact:
US SPV1\u00b9: +68/-17 bps would decrease/
increase fair value by \u00a3(0.8) million/
\u00a30.3 million respectively.
US SPV2\u00b9: +127/-34 bps would
decrease/increase fair value by
\u00a3(1.8) million/\u00a30.6 million respectively.
UK: +36/-36 bps would decrease/
increase fair value by \u00a3(0.4) million/
\u00a30.4 million respectively.
Investments in Trusts and
co-investments
28.7 Lifetime cumulative default
rate as % of original
Blended: 16.0%
A change in the lifetime cumulative
default rate by +230/-480 bps would
decrease/increase fair value by
(\u00a30.8) million and \u00a31.8 million respectively.
1. Two cumulative default rates are presented for the US representing the portfolios in each of the two respective pools of SME loans (securitised) related to the remaining and
legacy securitisation vehicles. Separate sensitivities to default rates for the US securitisation vehicles represent the respective seasoning of the loans and the different
reasonably possible range of outcomes. US SPV2 default definition is \u201csynthetic default\u201d being 90+days past due based on original contractual terms including where borrowers
became 90+ days late due to going on approved forbearance measures such as payment holidays. UK and US SPV1 default definition is based on \u201ccontractual default\u201d
definition of 90+ days past due based on current contractual terms which may have been revised since the original contract. The UK and US SPV1 default definition was
previously aligned to the US but amended after the loans were sold from the SPV, driving the divergence in lifetime expected default rates presented between the SPVs.
The above sensitivities represent management\u2019s estimate of the reasonably possible range of outcomes and as a result the fair
value of the assets and liabilities measured at fair value could materially diverge from management\u2019s estimate.
Description
Fair value
\u00a3m Unobservable input Inputs
Relationship of
unobservable inputs to fair value
SME loans (securitised) 45.8 Risk-adjusted discount rate US: 15.1%
UK: 18.5%
A change in the discount rates
by +/-200 bps would decrease/
increase fair value by \u00a30.8 million/
\u00a3(0.8) million respectively.
Investments in Trusts and
co-investments
28.7 Risk-adjusted discount rate 7.5% to 20.3% A change in the discount rate by
+200/-200 bps would decrease/
increase fair value by \u00a31.0 million/
\u00a3(1.0) million respectively.
It is considered that the range of reasonably possible outcomes in relation to the discount rate used could be +/-200 bps and
as a result the fair value of the assets could materially diverge from management\u2019s estimate.
As the discount rate is risk adjusted, it should be noted that the sensitivities to discount rate and to lifetime cumulative default
rate contain a level of overlap regarding credit risk. The sensitivity in expected lifetime cumulative defaults should not also be
applied to the sensitivity of the credit risk element of the risk-adjusted discount rate and the sensitivities are most meaningful
viewed independently of each other.
3. Segmental information
IFRS 8 Operating Segments requires the Group to determine its operating segments based on information which is used
internally for decision making. Based on the internal reporting information and management structures within the Group, it has
been determined that there are four operating segments, three of which are loans businesses arranged geographically consistent
with the prior year and the fourth which is a line of credit business, FlexiPay, based in the United Kingdom. Reporting on this
basis is reviewed by the Global Leadership Team (\u201cGLT\u201d) which is the chief operating decision maker (\u201cCODM\u201d). The GLT is made
up of the Executive Directors and other senior management and is responsible for the strategic decision making of the Group.
The four reportable segments are as shown in the table below. The other segment includes the Group\u2019s businesses in Germany
and the Netherlands. In light of the increasing prominence of new products such as FlexiPay, an additional segment is reported
to the CODM related to FlexiPay and has been disclosed separately for the first time for the year to 31 December 2022.
The GLT measures the performance of each segment by reference to a non-GAAP measure, adjusted EBITDA, which is defined
as profit/loss before finance income and costs, taxation, depreciation and amortisation (\u201cEBITDA\u201d), and additionally excludes
share-based payment charges and associated social security costs, foreign exchange and exceptional items (see note 5).
Together with operating profit/loss, adjusted EBITDA is a key measure of Group performance as it allows better comparability
of the underlying performance of the business. The segment reporting, including Adjusted EBITDA, excludes the impact of the
Group\u2019s transfer pricing arrangements as this is not information presented to, or used by, the CODM in decision making or the
allocation of resources.
Net income
31 December 2022 31 December 2021
Loans FlexiPay Total Loans FlexiPay Total
United
Kingdom
\u00a3m
United
States
\u00a3m
Other
\u00a3m
United
Kingdom
\u00a3m \u00a3m
United
Kingdom
\u00a3m
United
States
\u00a3m
Other
\u00a3m
United
Kingdom
\u00a3m \u00a3m
Total income 117.0 28.6 1.6 1.5 148.7 159.4 44.8 2.7 \u2014 206.9
Fair value gains/(losses) (2.4) 7.2 \u2014 \u2014 4.8 10.5 18.1 \u2014 \u2014 28.6
Net income 114.6 35.8 1.6 1.5 153.5 169.9 62.9 2.7 \u2014 235.5
Segment (loss)/profit
31 December 2022 31 December 2021
Loans FlexiPay Total Loans FlexiPay Total
United
Kingdom
\u00a3m
United
States
\u00a3m
Other
\u00a3m
United
Kingdom
\u00a3m \u00a3m
United
Kingdom
\u00a3m
United
States
\u00a3m
Other
\u00a3m
United
Kingdom
\u00a3m \u00a3m
Adjusted EBITDA 11.7 (3.7) 2.8 (4.0) 6.8 61.9 28.4 1.5 \u2014 91.8
Depreciation and amortisation (11.7) (5.2) (0.1) \u2014 (17.0) (9.7) (4.1) (0.1) \u2014 (13.9)
Share-based payments and
social security costs (3.9) (0.8) \u2014 \u2014 (4.7) ( 7.6) (1.3) \u2014 \u2014 (8.9)
Foreign exchange losses 0.2 \u2014 \u2014 \u2014 0.2 (0.3) (0.6) \u2014 \u2014 (0.9)
Exceptional items (note 5) \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 (3.9) \u2014 \u2014 (3.9)
Operating (loss)/profit (3.7) (9.7) 2.7 (4.0) (14.7) 44.3 18.5 1.4 \u2014 64.2
Notes forming part of the consolidated financial statements continued for the year ended 31 December 2022 4. Operating expenses 31 December 2022 31 December 2021 Total \u00a3m Before exceptional items \u00a3m Exceptional items\u200a\u00a3m Total \u00a3m Depreciation 5.1 5.9 \u2014 5.9 Amortisation 10.1 8.0 \u2014 8.0 Rental income and other recharges (1.0) (0.9) \u2014 (0.9) Operating lease rentals: \u2013 Land and buildings 0.3 0.1 \u2014 0.1 Employment costs (including contractors) 85.9 77.7 \u2014 77.7 Marketing costs (excluding employment costs) 38.4 46.9 \u2014 46.9 Data and technology 9.7 9.0 \u2014 9.0 Expected credit loss impairment (credit)/charge (1.5) 1.2 \u2014 1.2 Impairment of intangible and tangible assets 1.8 \u2014 3.9 3.9 Other expenses 19.4 19.5 \u2014 19.5 Total operating expenses 168.2 167.4 3.9 171.3 Auditors\u2019 remuneration 31 December 2022 \u00a3m 31 December 2021 \u00a3m Audit fees \u2013 Fees payable to the Company\u2019s auditors for the audit of the Parent Company and consolidated financial statements 0.5 0.5 \u2013 Fees payable to the Company\u2019s auditors and its associates for the statutory audit of the financial statements of subsidiaries of the Company 0.3 0.3 Total audit fees 0.8 0.8 Non-audit service fees \u2013 Audit-related assurance services 0.3 0.2 \u2013 Other non-assurance services 0.1 0.1 Total non-audit service fees 0.4 0.3 5. Exceptional items 31 December 2022 \u00a3m 31 December 2021 \u00a3m Impairment of non-financial assets (note 11) \u2014 3.9 Total \u2014 3.9 5. Exceptional items continued
Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of such
significance that they merit separate presentation in order to aid the reader\u2019s understanding of the Group\u2019s financial
performance.
During the year to 31 December 2021 certain floors of the San Francisco office were sublet to third parties for the remainder
of the term of the head lease for an amount lower than the head lease rental. As a result the sublease was determined to be a
finance lease which resulted in the right-of-use asset being derecognised and a net investment in sublease recognised on the
balance sheet. The difference between the carrying value of the right-of-use asset and the net investment in the sublease was
\u00a33.3 million and has been recorded in the statement of comprehensive income as an impairment under exceptional items.
Additionally it was determined that the fixed assets associated with the office were impaired in full as they were no longer used
by the Group resulting in impairment of \u00a30.6 million. There was no cash movement in relation to the impairment.
In 2020, the Group restructured the German and Dutch (Other) businesses to focus on referring loans it originates to local
lenders. This restructuring resulted in one-off costs comprising redundancy costs and a related share-based payment credit and
impairment on right-of-use assets. Cash payments associated with these items totalled \u00a30.8 million in the previous year ended
31 December 2021. See note 15 for movement in associated provisions and note 22 for cash flow.
6. Employees
The average monthly number of employees (including Directors) during the year was:
2022
Number
2021
Number
UK 686 632
FlexiPay 20 2
US 177 155
Other 10 15
893 804
In addition to the employees above, the average monthly number of contractors during the year was 142 (2021: 125).
Employment costs (including Directors\u2019 emoluments) during the year were:
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Wages and salaries 72.2 61.4
Social security costs 7.6 6.2
Pension costs 1.9 1.8
Share-based payments 4.7 8.9
86.4 78.3
Contractor costs 12.0 7.6
Less: capitalised development costs (12.5) (8.2)
Employment costs net of capitalised development costs 85.9 7 7.7
7. Net finance income/(costs)
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Interest receivable 2.3 0.1
Total finance income 2.3 0.1
Interest on lease liabilities (0.9) (1.1)
Total finance costs (0.9) (1.1)
Net finance income/(costs) 1.4 (1.0)
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
8. Income tax (credit)/charge
The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK (losses)/profits of the
Company are subject to UK income tax at the standard corporation tax rate of 19% (2021: 19%).
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Current tax
UK
Current tax on (losses)/profits for the year 0.3 2.7
Adjustment in respect of prior years (0.3) (0.1)
\u2014 2.6
US and Other
Current tax on (losses)/profits for the year 0.4 \u2014
Adjustment in respect of prior years 0.5 0.3
0.9 0.3
Total current tax charge 0.9 2.9
Deferred tax
UK
Deferred tax on (losses)/profits for the year \u2014 \u2014
Adjustment in respect of prior years \u2014 \u2014
\u2014 \u2014
US and Other
Deferred tax on (losses)/profits for the year (6.9) \u2014
Adjustments in respect of prior years \u2014 \u2014
(6.9) \u2014
Total deferred tax (credit) (6.9) \u2014
Total tax (credit)/charge (6.0) 2.9
The above current tax charge represents the expected tax on the Research and Development Expenditure Credit (\u201cRDEC\u201d)
receivable for 2022 and US state taxes. In the prior year, the tax charge represents the tax liability on the Group\u2019s taxable profit
and the amount of tax deducted from the RDEC receivable for 2021. The deferred tax credit represents recognition of a deferred
tax asset in respect of US losses previously unrecognised.
The Group (credit)/charge for the year can be reconciled to the (loss)/profit before tax shown per the consolidated statement
of comprehensive income as follows.
Factors affecting the tax (credit)/charge for the year
31 December
2022
\u00a3m
31 December
2021
\u00a3m
(Loss)/profit before taxation (12.9) 64.1
Taxation on (loss)/profit at 19% (2021: 19%) (2.4) 12.2
Effects of:
Research and development 0.3 (0.6)
Effect of foreign tax rates 0.3 2.6
Non-taxable/non-deductible expenses 1.0 1.8
Movement in deferred tax not recognised 5.3 (8.4)
Utilisation of tax losses previously unrecognised (4.0) (5.9)
Adjustment in respect of prior years 0.2 0.1
Deferred tax assets recognised (6.9) \u2014
Impairment charge and other exceptional items 0.2 1.1
Total tax (credit)/charge (6.0) 2.9
8. Income tax (credit)/charge continued
The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates include the
UK 19%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was (45.85%) (2021: 4.5%).
The statutory UK corporation tax rate is currently 19% (effective 1 April 2020). The UK government announced on 3 March 2021
and confirmed in November 2022 that the rate of corporation tax will be increased to 25% from 1 April 2023.
The Group has recognised a deferred tax asset of \u00a36.9 million in respect of \u00a332.9 million of the US federal losses.
The Group has utilised tax losses in the US for the first time in 2021 and the Group\u2019s transfer pricing arrangements between the
UK and US entitle the US to earn an agreed profit margin. It is probable that the US will be in a profitable position going forwards
such that it could use some of its historical federal losses to offset profits.
In determining the amount of losses to recognise as deferred tax assets the Group has used the forecasts applied in the Parent
Company impairment testing with regards to the investment in the US business, detailed in note 1 of the Company financial
statements on page 182. It has then applied probability weightings to those five-year forecasts the further out it projects to
reflect greater levels of uncertainty with limited recognition beyond this point.
The key assumptions are:
5 cumulative annual revenue growth rate of 15%; and
5 the impact of transfer pricing arrangements within the Group are considered.
The estimated amount of deferred tax recognised is not materially sensitive to reasonably possible changes in these
assumptions.
The Group has recognised a deferred tax liability of \u00a32.8 million (2021: \u00a33.2 million) relating to the property, plant and equipment
in the UK. The deferred tax liability is predominantly due to the accelerated capital allowances of \u00a32.8 million (2021: \u00a32.6 million)
and in relation to securitisation and warehouse vehicles of the UK which are domiciled in Ireland of \u00a3nil (2021: \u00a30.6 million).
A deferred tax asset relating to unrelieved tax losses of \u00a32.8 million (2021: \u00a33.3 million) has been recognised in the UK to the
extent of the above mentioned deferred tax liability pursuant to IAS 12 para 74. Deferred tax has been determined using the
applicable effective future tax rate that will apply in the expected period of utilisation of the recognised deferred tax assets
or liabilities.
Unrecognised deferred tax
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Property, plant and equipment 17.4 10.3
Carry forward losses 133.3 25 7.3
Deferred stock options 18.5 15.7
US R&D credit 2.3 2.1
US fair value adjustments 47.1 46.3
Other 0.3 3.7
Unrecognised deferred tax
1
218.9 335.4
1. Balances presented in table above are gross timing differences and are not tax effected.
Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a350.1 million (2021: \u00a392.1 million).
The Group has unrelieved tax losses of \u00a3177.0 million (2021: \u00a3257.3 million) that are available for offset against future taxable
profits. Of these, there are \u00a3133.3 million (2021: \u00a3257.3 million) of unrecognised tax losses for deferred tax purposes.
There are \u00a381.7 million of losses carried forward in the US of which \u00a314.8 million will expire in 2035, \u00a323.7 million will expire
in 2036 and the remaining balance of \u00a343.2 million have no expiry period. There are \u00a396.1 million of German losses (of which
\u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade tax losses) that can no longer be used as the tax residence
of the German-incorporated entities has changed to the UK. There are \u00a397.3 million losses which relate to the UK.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
8. Income tax (credit)/charge continued
Factors affecting the tax charge in future years
Factors that may affect the Group\u2019s future tax charge include the geographic location of the Group\u2019s earnings, the tax rates in
those locations, changes in tax legislation and the use of brought forward tax losses. The calculation of the Group\u2019s total tax
charge involves a degree of estimation and judgement with respect to the recognition of any deferred tax asset.
9. (Loss)/earnings per share
Basic (loss)/earnings per share amounts are calculated by dividing the (loss)/profit for the year attributable to ordinary equity
holders of the Company by the weighted average number of ordinary shares outstanding during the year.
For diluted (loss)/earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees
under the Group\u2019s share-based compensation schemes which do not have an exercise price or where the exercise price is less
than the average market price of the Company\u2019s ordinary shares during the year.
The following table reflects the (loss)/profit and share data used in the basic and diluted (loss)/earnings per share computations:
31 December
2022
31 December
2021
(Loss)/profit for the year (\u00a3m) (6.9) 61.2
Basic weighted average number of ordinary shares in issue (million) 348.6 351.5
Basic (loss)/earnings per share (2.0)p 17.4p
(Loss)/profit for the year before exceptional items (\u00a3m) (6.9) 65.1
Basic weighted average number of ordinary shares in issue (million) 348.6 351.5
Basic (loss)/earnings per share before exceptional items (2.0)p 18.5p
(Loss)/profit for the year (\u00a3m) (6.9) 61.2
Diluted weighted average number of ordinary shares in issue (million) 379.5 381.7
Diluted (loss)/earnings per share (1.8)p 16.0p
(Loss)/profit for the year before exceptional items (\u00a3m) (6.9) 65.1
Diluted weighted average number of ordinary shares in issue (million) 379.5 381.7
Diluted (loss)/earnings per share before exceptional items (1.8)p 17.1p
Weighted average number of ordinary shares in issue (million) 348.6 351.5
Effect of dilutive share options (million) 30.9 30.2
Diluted weighted average number of ordinary shares in issue (million) 379.5 381.7
10. Intangible assets
Capitalised
development
costs
\u00a3m
Computer
software
\u00a3m
Other
intangibles
\u00a3m
Total
\u00a3m
Cost
At 1 January 2021 45.5 0.8 1.1 47.4
Exchange differences (0.2) 0.1 0.1 \u2014
Additions 8.5 0.1 \u2014 8.6
Disposals (4.8) (0.1) \u2014 (4.9)
At 31 December 2021 49.0 0.9 1.2 51.1
At 1 January 2022 49.0 0.9 1.2 51.1
Exchange differences 1.9 \u2014 \u2014 1.9
Additions 12.7 \u2014 \u2014 12.7
Disposals (8.8) (0.1) \u2014 (8.9)
At 31 December 2022 54.8 0.8 1.2 56.8
Accumulated amortisation
At 1 January 2021 21.3 0.7 1.0 23.0
Exchange differences (0.1) \u2014 0.2 0.1
Charge for the year 8.0 \u2014 \u2014 8.0
Disposals (4.8) (0.1) \u2014 (4.9)
At 31 December 2021 24.4 0.6 1.2 26.2
At 1 January 2022 24.4 0.6 1.2 26.2
Exchange differences 1.2 \u2014 \u2014 1.2
Charge for the year 10.0 0.1 \u2014 10.1
Disposals (8.8) (0.1) \u2014 (8.9)
At 31 December 2022 26.8 0.6 1.2 28.6
Carrying amount
At 31 December 2022 28.0 0.2 \u2014 28.2
At 31 December 2021 24.6 0.3 \u2014 24.9
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
11. Property, plant and equipment, right-of-use assets and lease liabilities
The Group has right-of-use assets which comprise property leases held by the Group. Information about leases for which the
Group is a lessee is presented below.
Analysis of property, plant and equipment between owned and leased assets
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Property, plant and equipment (owned) 2.7 2.7
Right-of-use assets 7.3 11.4
10.0 14.1
Reconciliation of amount recognised in the balance sheet
Leasehold
improvements
\u00a3m
Computer
equipment
\u00a3m
Furniture
and fixtures
\u00a3m
Right-of-use
assets
(property)
\u00a3m
Total
\u00a3m
Cost
At 1 January 2021 6.1 3.6 2.8 46.8 59.3
Disposals (1.4) (1.8) (1.0) \u2014 (4.2)
Additions \u2014 0.7 0.1 \u2014 0.8
Exchange differences \u2014 0.2 \u2014 (0.4) (0.2)
Derecognition of right-of-use assets \u2014 \u2014 \u2014 (15.4) (15.4)
At 31 December 2021 4.7 2.7 1.9 31.0 40.3
At 1 January 2022 4.7 2.7 1.9 31.0 40.3
Disposals \u2014 (0.8) \u2014 \u2014 (0.8)
Additions
1
0.5 1.0 0.1 0.7 2.3
Exchange differences \u2014 0.1 0.1 1.0 1.2
Derecognition of right-of-use assets \u2014 \u2014 \u2014 \u2014 \u2014
At 31 December 2022 5.2 3.0 2.1 32.7 43.0
Accumulated depreciation
At 1 January 2021 3.7 3.2 1.7 22.0 30.6
Disposals (1.4) (1.8) (1.0) \u2014 (4.2)
Charge for the year 0.8 0.6 0.3 4.2 5.9
Impairment (exceptional) 0.2 \u2014 0.4 3.3 3.9
Exchange differences (0.1) (0.1) 0.1 \u2014 (0.1)
Derecognition of right-of-use assets \u2014 \u2014 \u2014 (9.9) (9.9)
At 31 December 2021 3.2 1.9 1.5 19.6 26.2
At 1 January 2022 3.2 1.9 1.5 19.6 26.2
Disposals \u2014 (0.8) \u2014 \u2014 (0.8)
Charge for the year 0.7 0.7 0.2 3.5 5.1
Impairment \u2014 \u2014 \u2014 1.8 1.8
Exchange differences \u2014 0.1 0.1 0.5 0.7
Derecognition of right-of-use assets \u2014 \u2014 \u2014 \u2014 \u2014
At 31 December 2022 3.9 1.9 1.8 25.4 33.0
Carrying amount
At 31 December 2022 1.3 1.1 0.3 7.3 10.0
At 31 December 2021 1.5 0.8 0.4 11.4 14.1
1. Leasehold improvement additions in the year are non-cash in nature.
Certain right-of-use assets related to the US San Francisco office have been sublet under an operating sublease. Due to a
reduction in market values since inception of the sublet, the estimated cash flows expected on expiry of the existing sublet
and negotiation of further sublet are lower and as a result an impairment of \u00a31.8 million was recognised in the year ended
31 December 2022. The impairment was not treated as an exceptional item.
11. Property, plant and equipment, right-of-use assets and lease liabilities continued
Reconciliation of amount recognised in the balance sheet continued
During the previous year ended 31 December 2021, certain other right-of-use assets related to the US San Francisco office were
sublet in a finance sublease. As a result the right-of-use asset was derecognised and a net investment in sublease was recognised
within other receivables. During the previous year the right-of-use asset related to the Netherlands business was exited along
with the corresponding head lease liability. The carrying values of the right-of-use asset and lease liability at the point of
derecognition were \u00a30.4 million. See note 5 for related exceptional items.
Lease liabilities
Amounts recognised on the balance sheet were as follows:
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Current 7.2 6.9
Non-current 12.6 17.0
Total 19.8 23.9
Amounts recognised in the statement of comprehensive income were as follows:
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Depreciation charge of right-of-use assets (property) 3.5 4.2
Interest expense (included in finance costs) 0.9 1.1
Expense relating to short-term leases and leases of low-value assets 0.4 0.1
The total cash outflow for leases (excluding short-term and low-value leases) in 2022 was \u00a37.3 million (2021: \u00a38.1 million).
A maturity analysis illustrating the undiscounted contractual cash flows of lease liabilities is included within the liquidity risk
disclosure within note 16.
As at 31 December 2022 the potential future undiscounted cash outflows that have not been included in the lease liability, due
to lack of reasonable certainty the lease extension options might be exercised, amounted to \u00a3nil (2021: \u00a3nil).
12. Investment in SME loans
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Non-current
SME loans (other) \u2013 amortised cost 24.8 74.2
Investment in trusts and co-investments \u2013 FVTPL 28.7 39.1
Total non-current 53.5 113.3
Current
Lines of credit \u2013 amortised cost 16.0 1.6
SME loans (other) \u2013 FVTPL 20.9 \u2014
SME loans (warehouse) \u2013 FVTPL 2.4 3.2
SME loans (securitised) \u2013 FVTPL 45.8 14 8.1
Total current 85.1 152.9
Total 138.6 266.2
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
13. Trade and other receivables
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Other receivables 3.4 4.1
Non-current trade and other receivables 3.4 4.1
Trade receivables 0.4 1.8
Other receivables\u00b9 5.3 10.0
Prepayments 3.7 4.8
Accrued income 4.8 6.2
Rent and other deposits 2.3 2.2
Current trade and other receivables 16.5 25.0
19.9 29.1
1. Includes \u00a3nil (2021: \u00a33.6 million) in relation to cash and liquidity reserves held in the UK securitisation vehicle.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables described earlier.
No trade receivables were overdue or impaired.
Included in rent and other deposits are \u00a31.3 million of rental deposits (2021: \u00a31.6 million) in respect of the Group\u2019s property
leases which expire over the next five years.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
14. Trade and other payables
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Trade payables 2.5 3.7
Other taxes and social security costs 5.0 4.9
Other creditors 9.7 11.4
Accruals and deferred income 14.6 16.4
31.8 36.4
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
15. Provisions and other liabilities
Dilapidation
\u00a3m
Loan repurchase
\u00a3m
Restructuring
\u200a1
\u00a3m
Other\u200a
1\u200a\u200a
\u00a3m
Total
\u00a3m
At 1 January 2021 0.9 5.2 1.1 2.7 9.9
Exchange differences \u2014 (0.3) (0.1) 0.2 (0.2)
Additional provision/liability \u2014 \u2014 \u2014 1.1 1.1
Amount utilised \u2014 (2.6) (0.8) (0.2) (3.6)
Amount reversed (0.3) (0.1) \u2014 (2.7) (3.1)
At 31 December 2021 0.6 2.2 0.2 1.1 4.1
Exchange differences \u2014 0.1 \u2014 0.1 0.2
Additional provision/liability 0.5 \u2014 \u2014 0.5 1.0
Amount utilised \u2014 (0.9) (0.2) (0.2) (1.3)
Amount reversed \u2014 (0.9) \u2014 (1.0) (1.9)
At 31 December 2022 1.1 0.5 \u2014 0.5 2.1
1. Restructuring provision is in relation to reorganisation of the US, German and Dutch businesses; see note 5. Other provisions includes provisions for operational buybacks. \u00a30.3
million (2021: \u00a3nil) of expected credit loss impairment allowance related to undrawn FlexiPay lines of credit is also included within other.
15. Provisions and other liabilities continued
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Current provisions and other liabilities 1.0 3.4
Non-current provisions and other liabilities 1.1 0.7
2.1 4.1
The dilapidation provision represents an estimated cost for dismantling the customisation of offices and restoring the leasehold
premises to its original state at the end of the tenancy period. The provision is expected to be utilised by 2025.
Loan repurchase liability
In certain historical circumstances, in Germany and the Netherlands, Funding Circle entered into arrangements with institutional
investors to assume the credit risk on the loan investments made by the institutional investors. Under the terms of the agreements,
the Group is required either to make payments when the underlying borrower fails to meet its obligation under the loan contract
or buy the defaulted loan from the investors at its carrying value. In return for these commitments, the Group is entitled to the
excess returns or additional income which is recorded as other fees.
Under IFRS 9, the Group is required to provide for these loan repurchases under the expected credit loss (\u201cECL\u201d) model.
The liability related to each loan arranged is based on the ECLs associated with the probability of default of that loan in the next
12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has
been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable
presumption per IFRS 9.
The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding
a 90-day due date, which reflects the point at which the loan is considered to be credit impaired.
If the loan is bought back by the Group, at the point of buyback, the financial asset associated with the purchase meets the
definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the reserve is therefore based on lifetime ECLs.
After being bought back, POCI loans and associated impairment provisions are recognised within investment in SME loans
(other) on the balance sheet.
The Group bands each loan investment using an internal risk rating and assesses credit losses on a collective basis.
Performing:
12-month
ECL
\u00a3m
Underperforming:
lifetime
ECL
\u00a3m
Non-performing:
lifetime
ECL
\u00a3m
Total
\u00a3m
At 1 January 2021 2.2 1.5 1.5 5.2
Exchange differences (0.1) (0.1) (0.1) (0.3)
Liability against loans transferred between stages (0.2) (0.5) 1.7 1.0
Amounts utilised \u2014 \u2014 (2.6) (2.6)
Loans repaid (0.9) (0.4) (0.6) (1.9)
Change in probability of default 0.4 (0.1) 0.5 0.8
At 31 December 2021 1.4 0.4 0.4 2.2
Exchange differences \u2014 0.1 \u2014 0.1
Liability against loans transferred between stages (0.1) (0.2) 0.7 0.4
Amounts utilised \u2014 \u2014 (0.9) (0.9)
Loans repaid (0.9) (0.1) (0.2) (1.2)
Change in probability of default (0.2) (0.1) 0.2 (0.1)
At 31 December 2022 0.2 0.1 0.2 0.5
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
15. Provisions and other liabilities continued
Loan repurchase liability continued
At 31 December 2021
Expected credit
loss coverage
%
Basis for
recognition of
loan repurchase
liability
Gross assets
of external
parties subject
to loan repurchase
liability
\u00a3m
Loan
repurchase
liability
\u00a3m
Performing (due in 30 days or less) 15.3 12-month ECL 8.8 1.4
Underperforming (31\u201390 days overdue) 63.6 Lifetime ECL 0.6 0.4
Non-performing (90+ days overdue) 76.5 Lifetime ECL 0.6 0.4
Total 10.0 2.2
At 31 December 2022
Expected credit
loss coverage
%
Basis for
recognition of
loan repurchase
liability
Gross assets
of external
parties subject
to loan repurchase
liability
\u00a3m
Loan
repurchase
liability
\u00a3m
Performing (due in 30 days or less) 9.6 12-month ECL 2.4 0.2
Underperforming (31\u201390 days overdue) 32.6 Lifetime ECL 0.2 0.1
Non-performing (90+ days overdue) 92.9 Lifetime ECL 0.2 0.2
Total 2.8 0.5
The percentages applied above are based on the Group\u2019s past experience of delinquencies and loss trends, as well as forward-looking
information in the form of macroeconomic scenarios governed by an impairment committee, which considers macroeconomic
forecasts such as changes in interest rates, GDP and inflation which are incorporated into scenarios and probability weighted.
Estimation is required in assessing individual loans and when applying statistical models for collective assessments, using historical
trends from past performance as well as forward-looking information including macroeconomic forecasts in each market together
with the impact on loan defaults.
The maximum exposure the Group might have to pay at the balance sheet date if 100% of eligible loans were required to be bought
back would be \u00a32.8 million (2021: \u00a310.0 million). This would be dependent on the timing of any eligible loans defaulting. Repayments
of eligible loans are no longer reinvested and therefore the final loan is due to expire in December 2024, along with the associated
financial guarantees. At 31 December 2022, there is only one portfolio of loans.
16. Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Group\u2019s risk management framework.
The risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits
and controls and to monitor risks and ensure any limits are adhered to. The Group\u2019s activities are reviewed regularly and potential
risks are considered.
Risk factors
The Group has exposure to the following risks from its use of financial instruments:
5 credit risk;
5 liquidity risk; and
5 market risk (including foreign exchange risk, interest rate risk and other price risk).
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
5 SME loans;
5 investments in trusts and co-investments;
5 lines of credit;
5 trade and other receivables;
5 cash and cash equivalents;
5 trade and other payables;
5 bank borrowings;
5 bonds;
5 lease liabilities; and
5 loan repurchase liabilities.
Categorisation of financial assets and financial liabilities
The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at
31 December 2022:
Assets
Fair
value through
profit and loss
\u00a3m
Amortised
cost
\u00a3m
Other
\u00a3m
Total
\u00a3m
SME loans (other) 20.9 24.8 \u2014 45.7
SME loans (warehouse) 2.4 \u2014 \u2014 2.4
SME loans (securitised) 45.8 \u2014 \u2014 45.8
Lines of credit \u2014 16.0 \u2014 16.0
Investment in trusts and co-investments 28.7 \u2014 \u2014 28.7
Trade and other receivables \u2014 16.2 \u2014 16.2
Cash and cash equivalents 121.6 56.1 \u2014 17 7.7
219.4 113.1 \u2014 332.5
Liabilities
Fair
value through
profit and loss
\u00a3m
Amortised
cost
\u00a3m
Other
\u00a3m
Total
\u00a3m
Trade and other payables \u2014 (12.2) \u2014 (12.2)
Loan repurchase liability \u2014 \u2014 (0.5) (0.5)
Bank borrowings \u2014 (22.6) \u2014 (22.6)
Bonds \u2014 (23.7) \u2014 (23.7)
Lease liabilities \u2014 (19.8) \u2014 (19.8)
\u2014 (78.3) (0.5) (78.8)
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
16. Financial risk management continued
Principal financial instruments continued
Categorisation of financial assets and financial liabilities continued
The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at
31 December 2021:
Assets
Fair
value through
profit and loss
\u00a3m
Amortised
cost
\u00a3m
Other
\u00a3m
Total
\u00a3m
SME loans (other) \u2014 74.2 \u2014 74.2
SME loans (warehouse) 3.2 \u2014 \u2014 3.2
SME loans (securitised) 148.1 \u2014 \u2014 14 8.1
Lines of credit \u2014 1.6 \u2014 1.6
Investment in trusts and co-investments 39.1 \u2014 \u2014 39.1
Trade and other receivables \u2014 24.3 \u2014 24.3
Cash and cash equivalents 112.1 111.9 \u2014 224.0
302.5 212.0 \u2014 514.5
Liabilities
Fair
value through
profit and loss
\u00a3m
Amortised
cost
\u00a3m
Other
\u00a3m
Total
\u00a3m
Trade and other payables \u2014 (15.2) \u2014 (15.2)
Loan repurchase liability \u2014 \u2014 (2.2) (2.2)
Bank borrowings \u2014 (73.2) \u2014 (73.2)
Bonds (12.8) (127.5) \u2014 (140.3)
Lease liabilities \u2014 (23.9) \u2014 (23.9)
(12.8) (239.8) (2.2) (254.8)
Financial instruments measured at amortised cost
Financial instruments measured at amortised cost, rather than fair value, include cash and cash equivalents, trade and other
receivables, certain SME loans (other), bank borrowings, lease liabilities, certain bonds and trade and other payables. Due to their
nature, the carrying value of each of the above financial instruments approximates to their fair value.
Other financial instruments
Loan repurchase liabilities are measured at the amount of loss allowance determined under IFRS 9.
Financial instruments measured at fair value
IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair
value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement.
Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy:
5 level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
5 level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either
directly or indirectly; and
5 level 3 inputs are unobservable inputs for the assets or liabilities.
The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans) is
determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is
available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data,
the instrument is included in level 3. An assessment that the level applied to financial instruments is appropriate and whether a
transfer between levels is required is undertaken at the end of each accounting period. There were no transfers between levels
during the year or prior year.
The Finance department of the Group performs the valuations of items required for financial reporting purposes, including level
3 fair values. This team reports to the Chief Financial Officer (\u201cCFO\u201d). Discussions of valuation processes and results are held
regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the
Audit Committee.
16. Financial risk management continued
Financial instruments measured at fair value continued
Fair value measurement using
31 December 2022
Quoted prices
in active
markets
(level 1)
\u00a3m
Significant
observable
inputs
(level 2)
\u00a3m
Significant
unobservable
inputs
(level 3)
\u00a3m
Total
\u00a3m
Financial assets
SME loans (warehouse) \u2014 \u2014 2.4 2.4
SME loans (securitised) \u2014 \u2014 45.8 45.8
SME loans (other) \u2014 \u2014 20.9 20.9
Investment in trusts and co-investments \u2014 \u2014 28.7 28.7
Cash and cash equivalents 121.6 \u2014 \u2014 121.6
121.6 \u2014 97.8 219.4
Financial liabilities
Bonds \u2014 \u2014 \u2014 \u2014
\u2014 \u2014 \u2014 \u2014
Fair value measurement using
31 December 2021
Quoted prices
in active
markets
(level 1)
\u00a3m
Significant
observable
inputs
(level 2)
\u00a3m
Significant
unobservable
inputs
(level 3)
\u00a3m
Total
\u00a3m
Financial assets
SME loans (warehouse) \u2014 \u2014 3.2 3.2
SME loans (securitised) \u2014 \u2014 14 8.1 14 8.1
Investment in trusts and co-investments \u2014 \u2014 39.1 39.1
Cash and cash equivalents 112.1 \u2014 \u2014 112.1
112.1 \u2014 190.4 302.5
Financial liabilities
Bonds \u2014 \u2014 (12.8) (12.8)
\u2014 \u2014 (12.8) (12.8)
The fair value of SME loans (warehouse) has been estimated by discounting future cash flows of the loans using discount rates that
reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying
amount of the SME loans (warehouse) was \u00a32.4 million at 31 December 2022 (2021: \u00a33.2 million).
The fair value of SME loans (securitised) represents loan assets in the securitisation vehicles and legacy loans of this nature and has
been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and
observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (securitised) was
\u00a345.8 million at 31 December 2022 (2021: \u00a3148.1 million).
Bonds represent the unrated tranches of bond liabilities measured at fair value through profit and loss (the rated tranches of bonds
are measured at amortised cost). The fair value has been estimated by discounting estimated future cash flows in relation to the
bonds using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date.
The estimated fair value and carrying amount of the bonds was \u00a3nil at 31 December 2022 (2021: \u00a312.8 million).
Investment in trusts and co-investments represents the Group\u2019s investment in the trusts and other vehicles used to fund CBILS, RLS
and certain commercial loans and is measured at fair value through profit and loss. The government-owned British Business Bank will
guarantee up to 80% of the balance of CBILS loans in the event of default (and between 70% and 80% of RLS loans). The fair value has
been estimated by discounting future cash flows in relation to the trusts using discount rates that reflect the changes in market interest
rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the investment in trusts
and co-investments was \u00a328.7 million at 31 December 2022 (2021: \u00a339.1 million).
The SME loans (other) held at fair value represents loan assets temporarily funded by the Group in relation to the commercial loans and
is estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and
observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (other) was
\u00a320.9 million (2021: \u00a3nil).
The most relevant significant unobservable inputs relate to the default rate estimate and discount rates applied to the fair value
calculation, details of which are set out in note 2 for those with material estimation uncertainty.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
16. Financial risk management continued
Financial instruments measured at fair value continued
Fair value movements on SME loans (warehouse), SME loans (securitised), SME loans (other), investments in trusts and bonds (unrated)
are recognised through the profit and loss account in fair value gains/(losses).
A reconciliation of the movement in level 3 financial instruments is shown as follows:
SME loans
(warehouse)
\u00a3m
SME loans
(securitised)
\u00a3m
Bonds
(unrated)
\u00a3m
Investment
in trusts and
co-investments
\u00a3m
SME
loans (other)
\u00a3m
Trade and
other
receivables
\u00a3m
At 1 January 2021 221.8 279.8 (7.8) 21.2 \u2014 0.2
Additions \u2014 \u2014 \u2014 22.1 \u2014 \u2014
Transfers 0.2 \u2014 \u2014 \u2014 \u2014 (0.2)
Repayments (58.6) (150.2) \u2014 (3.3) \u2014 \u2014
Disposal (176.1) \u2014 \u2014 \u2014 \u2014 \u2014
Net gain/(loss) on the change in fair value of financial
instruments at fair value through profit and loss 16.3 18.2 (5.0) (0.9) \u2014 \u2014
Foreign exchange (loss)/gain (0.4) 0.3 \u2014 \u2014 \u2014 \u2014
At 31 December 2021 3.2 14 8.1 (12.8) 39.1 \u2014 \u2014
Additions \u2014 \u2014 \u2014 6.4 22.6 \u2014
Repayments (2.8) (86.8) 16.3 (10.0) (0.8) \u2014
Disposal \u2014 (39.5) \u2014 \u2014 \u2014 \u2014
Net gain/(loss) on the change in fair value of financial
instruments at fair value through profit and loss 2.0 14.7 (3.5) (7.0) (1.4) \u2014
Foreign exchange gain \u2014 9.3 \u2014 0.2 0.5 \u2014
At 31 December 2022 2.4 45.8 \u2014 28.7 20.9 \u2014
Financial risk factors
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group\u2019s receivables from customers and cash and cash equivalents held at banks.
The Group\u2019s maximum exposure to credit risk by class of financial asset is as follows:
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Non-current
SME loans (other) 24.8 74.2
Investment in trusts and co-investments 28.7 39.1
Trade and other receivables:
\u2013 Other receivables 3.4 4.1
Current
Line of credit 16.0 1.6
SME loans (other) 20.9 \u2014
SME loans (warehouse) 2.4 3.2
SME loans (securitised) 45.8 14 8.1
Trade and other receivables:
\u2013 Trade receivables 0.4 1.8
\u2013 Other receivables 5.3 10.0
\u2013 Accrued income 4.8 6.2
\u2013 Rent and other deposits 2.3 2.2
Cash and cash equivalents 177.7 224.0
Total gross credit risk exposure 332.5 514.5
Less bank borrowings and bond liabilities
1
(46.3) (213.5)
Total net credit risk exposure 286.2 301.0
1. Included within bank borrowings are \u00a322.6 million (2021: \u00a373.2 million) in relation to draw downs on the PPPLF.
16. Financial risk management continued
Financial risk factors continued
Credit risk continued
In addition the Group is subject to financial guarantees it has issued to buy back loans detailed in the loan repurchase liability
in note 15. The Group\u2019s maximum exposure to credit risk on financial guarantees were every eligible loan required to be bought
back would be \u00a32.8 million (2021: \u00a310.0 million).
An expected credit loss allowance related to undrawn lines of credit on the FlexiPay product of \u00a30.3 million (2021: \u00a3nil) is held
within provisions and other liabilities. The Group\u2019s maximum exposure to credit risk on the undrawn lines of credit if they were
all to be fully drawn would be \u00a341.6 million (2021: \u00a34.2 million).
SME loans (warehouse) and SME loans (securitised) relate to the underlying pool of SME loans in both the warehouse and
securitisation vehicles or are loans from the legacy warehouses and SPVs that have since been purchased or novated into other
Funding Circle entities, but remain held at FVTPL with the business model of holding the loans for sale. Whilst there is credit risk
from the loans defaulting, certain of these SME loans (securitised) and the third party bonds that remain in SPVs are held within
bankruptcy remote vehicles. If the SME loans were to all default, then the bank debt or third party bonds do not receive their
money back. Therefore the overall exposure to the Group for these investments is the Group\u2019s net investment in the SME loans
which is after taking account of the bank debt and third party bonds.
SME loans (other) includes \u00a320.9 million (2021: \u00a3nil) loans originated by the Group with the intention of selling onwards, which
are held at FVTPL and are therefore disclosed as current.
Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss (\u201cECL\u201d)
model. The impairment related to each loan is based on the ECLs associated with the probability of default of that loan in the
next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes
there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with
the rebuttable presumption per IFRS 9.
The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding
a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. In some circumstances where
loans are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or
originated credit impaired (\u201cPOCI\u201d); this element of the impairment is therefore based on lifetime ECLs.
Lines of credit utilises the same default definition and probability of default under IFRS 9, however, are assessed based on
12-month probability of default at the overall available line of credit level, estimating the expected utilisation of the line of credit
at the estimated point of default. The expected credit loss impairment associated with undrawn lines of credit is disclosed within
other liabilities in note 15 and in note 27.
SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the US government in the
event of default and the loans are anticipated to be forgiven. At the point of default and subsequent collection of the guarantee
or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished. SME loans (other) also
includes loans which have been brought back from investors and are held at amortised cost.
Lines of credit comprises \u00a316.0 million (2021: \u00a31.6 million) of drawn amounts through the FlexiPay product net of expected credit
loss impairment, enabling businesses to spread UK invoices or payments over three months with the initial payment made on
a borrower\u2019s behalf.
The gross principal value of SME loans (other) is \u00a339.6 million (2021: \u00a389.5 million) and drawn lines of credit held at amortised
cost is \u00a317.6 million (2021: \u00a31.6 million), totalling \u00a357.2 million (2021: \u00a391.1 million), and an allowance for expected credit losses
of \u00a314.8 million (2021: \u00a315.3 million) and \u00a31.6 million (2021: \u00a3nil) respectively, totalling \u00a316.4 million (2021: \u00a315.3 million), is held
against these loans and drawn lines of credit as detailed below.
An impairment credit of \u00a30.9 million (2021: charge of \u00a31.3 million) was recognised through the statement of comprehensive
income in the year to 31 December 2022 within credit/(provision) for expected credit losses in the income statement.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
16. Financial risk management continued
Financial risk factors continued
Credit risk continued
Performing:
12-month
ECL
\u00a3m
Underperforming:
Lifetime
ECL
\u00a3m
Non-performing:
Lifetime
ECL
\u00a3m
POCI:
Lifetime
ECL
\u00a3m
Total
\u00a3m
At 1 January 2021 0.1 \u2014 0.4 12.2 12.7
Impairment against additions 0.1 \u2014 \u2014 2.6 2.7
Exchange differences \u2014 \u2014 \u2014 (0.6) (0.6)
Impairment against loans transferred from/(to)
performing \u2014 0.3 0.7 \u2014 1.0
Loans repaid (0.1) \u2014 \u2014 (0.9) (1.0)
Change in probability of default or loss given default
assumptions
0.5 \u2014 \u2014 \u2014 0.5
At 31 December 2021 0.6 0.3 1.1 13.3 15.3
Impairment against additions 0.1 \u2014 \u2014 1.1 1.2
Exchange differences 0.1 \u2014 0.1 1.0 1.2
Impairment against loans transferred from/(to)
performing (0.1) 0.3 0.3 \u2014 0.5
Loans repaid (0.3) (0.3) (0.5) (1.2) (2.3)
Change in probability of default or loss given default
assumptions
0.7 \u2014 (0.1) (0.1) 0.5
At 31 December 2022 1.1 0.3 0.9 14.1 16.4
Expected credit
loss coverage
%
Basis for
recognition of
expected credit
loss impairment
Gross lines
of credit and
SME loans (other)
\u00a3m
Provision
for expected
credit loss
\u00a3m
Net carrying
amount
\u00a3m
As at 31 December 2021
Performing (due in 30 days or less) 0.7 12-month ECL 75.7 (0.6) 75.1
Underperforming (31\u201390 days overdue) 100.0 Lifetime ECL 0.3 (0.3) \u2014
Non-performing (90+ days overdue) 100.0 Lifetime ECL 1.1 (1.1) \u2014
POCI (90+ days overdue) 95.1 Lifetime ECL 14.0 (13.3) 0.7
Total 91.1 (15.3) 75.8
As at 31 December 2022
Performing (due in 30 days or less) 2.7 12 month ECL 39.2 (1.1) 38.1
Underperforming (31\u201390 days overdue) 36.5 Lifetime ECL 0.7 (0.3) 0.4
Non-performing (90+ days overdue) 43.1 Lifetime ECL 2.3 (0.9) 1.4
POCI (90+ days overdue) 94.2 Lifetime ECL 15.0 (14.1) 0.9
Total 57. 2 (16.4) 40.8
Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk
of financial loss is deemed minimal because the counterparties are well established financial institutions.
Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate, a provision
for expected credit losses is recorded in the financial statements.
Other receivables include net investment in subleases of offices representing the present value of future sublease payments
receivable. Where appropriate, impairment is recorded where the receivable is in doubt.
Individual risk limits for banks and financial institutions are set by the Group with reference to external rating agencies. The
Group\u2019s treasury policy has set limits and quantities that the Group must remain within. No credit or counterparty limits were
exceeded during the year. The Group\u2019s cash and cash equivalents split by S&P counterparty rating were A/A- rated: \u00a356.2 million
(2021: \u00a3111.9 million), A+ or better rated: \u00a3121.5 million (2021: \u00a3112.0 million) and below A- rated: \u00a3nil (2021: \u00a30.1 million).
16. Financial risk management continued
Financial risk factors continued
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group\u2019s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient financial resources to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group\u2019s position.
The Group\u2019s liquidity position is monitored and reviewed on an ongoing basis by the Directors.
The amounts disclosed in the following tables are the contractual undiscounted cash flows. The liquidity requirements of the
bonds are met from cash flows generated by the investment in SME loans (securitised) and the liquidity requirements of bank
borrowings are met from cash flows generated by investment in SME loans (warehouse) and SME loans (other).
The maturity analysis of financial instruments at 31 December 2022 and 31 December 2021 is as follows:
At 31 December 2022
Less than
3 months
\u00a3m
Between
3 months
and 1 year
\u00a3m
Between 1
and 5 years
\u00a3m
Over
5 years
\u00a3m
Total
undiscounted
cash flows
\u00a3m
Impact of
discounting\u200a
2
\u00a3m
Carrying
amount
\u00a3m
Financial liabilities
Trade and other payables (12.2) \u2014 \u2014 \u2014 (12.2) \u2014 (12.2)
Bank borrowings \u2014 \u2014 (22.6) \u2014 (22.6) \u2014 (22.6)
Bonds (5.1) (12.5) (6.4) \u2014 (24.0) 0.3 (23.7)
Loan repurchase liability
1
(0.5) \u2014 \u2014 \u2014 (0.5) \u2014 (0.5)
Lease liabilities (1.7) (5.6) (13.7) \u2014 (21.0) 1.2 (19.8)
(19.5) (18.1) (42.7) \u2014 (80.3) 1.5 (78.8)
At 31 December 2021
Less than
3 months
\u00a3m
Between
3 months
and 1 year
\u00a3m
Between 1
and 5 years
\u00a3m
Over
5 years
\u00a3m
Total
undiscounted
cash flows
\u00a3m
Impact of
discounting\u200a
2
\u00a3m
Carrying
amount
\u00a3m
Financial liabilities
Trade and other payables (15.2) \u2014 \u2014 \u2014 (15.2) \u2014 (15.2)
Bank borrowings \u2014 \u2014 (73.2) \u2014 (73.2) \u2014 (73.2)
Bonds (28.8) (60.5) (60.8) (0.2) (150.3) 10.0 (140.3)
Loan repurchase liability
1
(2.2) \u2014 \u2014 \u2014 (2.2) \u2014 (2.2)
Lease liabilities (1.7) (5.2) (18.9) \u2014 (25.8) 1.9 (23.9)
(47.9) (65.7) (152.9) (0.2) (266.7) 11.9 (254.8)
1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called.
2. Included within the impact of discounting on bonds is \u00a30.3 million of deferred bond issuance costs (2021: \u00a31.1 million).
Bank borrowings consist of drawn amounts in the US of $27.3 million (2021: $98.7 million) on the PPP Liquidity Facility available
from the Federal Reserve Bank at a fixed interest rate of 0.35%.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
16. Financial risk management continued
Financial risk factors continued
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
prices. The Group\u2019s market risk arises from open positions in interest-bearing assets and liabilities, to the extent that these are
exposed to general and specific market movements.
a) Other price risk
The fair value of the SME loans which are held at fair value through profit and loss can fluctuate depending on market pricing of
relative interest rates and credit risk. This is reflected in the discount rate used to derive a valuation for the loan assets. A sensitivity
to the discount rates used in the valuation of the assets measured at fair value through profit and loss and which are exposed to
greater estimation uncertainty is disclosed in note 2.
b) Interest rate risk
The Group is exposed to interest rate risk in relation to financial liabilities through drawn committed borrowing facilities and on
bonds and on financial assets through investment in SME loans.
Non-trading interest rate risk
The Group\u2019s interest risk on financial instruments is limited to interest receivable on loan note investments, cash and cash
equivalent balances and interest on bonds and bank borrowings. The maturities of financial instruments subject to interest rate
risk are as follows:
Less than 3 months Between 3 months and 1 year Between 1 and 5 years
At 31 December
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
2022
\u00a3m
2021
\u00a3m
Fixed rate
SME loans (other)
2
0.9 \u2014 0.4 \u2014 44.4 74.2
Investment in trusts and co-
investments \u2014 \u2014 \u2014 \u2014 28.7 39.1
Lines of credit 16.0 1.6 \u2014 \u2014 \u2014 \u2014
SME loans (warehouse)
1
0.1 \u2014 0.1 0.1 2.2 3.1
SME loans (securitised)
1
0.1 0.2 4.0 10.1 41.7 137.8
Bank borrowings
2
\u2014 \u2014 \u2014 \u2014 (22.6) (73.2)
Bonds
1
\u2014 \u2014 \u2014 \u2014 (23.7) (80.2)
Floating rate
Cash and cash equivalents 177.7 224.0 \u2014 \u2014 \u2014 \u2014
Bank borrowings \u2014 \u2014 \u2014 \u2014 \u2014 \u2014
Bonds
1
\u2014 \u2014 \u2014 \u2014 \u2014 (60.1)
194.8 225.8 4.5 10.2 70.7 40.7
1. The bonds, SME loans (warehouse) and SME loans (securitised) are classified as current on the balance sheet, reflecting that the position is held to sell. The above table
represents the contractual maturities.
2. The fixed rate bank borrowings and SME loans (other) include the Group\u2019s drawing of the PPP Liquidity Facility in the US in order to fund PPP loan originations. These are
classified as non-current on the balance sheet, and the above table represents the contractual maturities, although the PPP loans could be forgiven by the SBA and the
associated liability could be repaid from the proceeds within 12 months of the balance sheet date.
There are no financial assets which are held for a period of over five years.
Interest rate risk sensitivity analysis \u2013 non-trading interest (fixed rate)
Interest on loan note investments including SME loans (other), SME loans (warehouse), SME loans (securitised), the unleveraged
investment in trusts and co-investments, lines of credit, certain bank borrowings (in the US) and bond liabilities (in the US) is
fixed until the maturity of the investment, and is not impacted by market rate changes. The level of future interest rate receivable
would be similar to that received in the year and the impact of movements in interest rates on the value of the assets is
considered immaterial to the Group\u2019s overall performance for the year.
Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate)
Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk
and note there have recently been significant increases in rates and expectation of future rate rises observed. The Directors
believe that any reasonable increase in the base rate would not significantly impact the Group\u2019s cash or finance income.
Interest on bonds (in the UK) was subject to movements in the Sterling Overnight Index Average Rate (\u201cSONIA\u201d). However, the
Group had mitigated the risk of increases in interest rates through the use of interest rate caps and the bonds were fully repaid
during the year.
16. Financial risk management continued
Financial risk factors continued
Market risk continued
b) Interest rate risk continued
Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) continued
Some of the Group\u2019s investment in trusts are through warehouse vehicles where the Group is a minority equity investor. The
senior borrowing facilities utilised in these vehicles receive interest on borrowings in priority to payments to the equity investors
at SONIA plus a margin. As a result of the increase in SONIA and anticipated future increases, the increased borrowing costs
have reduced the expected cash returns to the equity investors of the investment held at fair value through profit and loss. The
impact is recognised in fair value gains and losses in the statement of comprehensive income. Some, but not all of the vehicles,
have interest rate caps or interest rate swaps within their structures which can mitigate the impact of future rate rises. Further
increases in SONIA or the expected future increases in SONIA could reduce the fair value further. A 100bps increase in projected
SONIA rates over the life of the trusts would reduce the fair value of the investments in trusts at 31 December 2022 by \u00a30.1 million.
Following the financial crisis, the reform and replacement of benchmark interest rates such as GBP LIBOR and other inter-bank
offered rates (\u201cIBORs\u201d) has become a priority for global regulators. There remains some uncertainty around the timing and
precise nature of these changes.
This uncertainty will remain until the Group\u2019s contracts that reference LIBOR are amended to reference the alternative benchmark
which is complete for the UK and remains ongoing for the US; however, there are no remaining material exposures to USD LIBOR
at 31 December 2022.
c) Sensitivity analysis
IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report date
showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably
possible at that date.
As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no sensitivity analysis
for those risks has been disclosed with the exception of sensitivity to discount rates on SME loans held at fair value through
profit and loss within note 2.
d) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the US dollar, the UK pound and the euro. Foreign exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign operations.
The Group\u2019s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the
cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other
than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that
currency will, where possible, be transferred from elsewhere within the Group.
Apart from these particular cash flows, the Group aims to fund expenses and investments in the respective currency and to
manage foreign exchange risk at a local level by matching the currency in which income is generated and expenses are incurred.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
The table below sets out the Group\u2019s currency exposures from financial assets and liabilities held by Group companies in currencies
other than their functional currencies and resulting in exchange movements in the income statement and balance sheet.
31 December 2022 31 December 2021
USD
\u00a3m
GBP
\u00a3m
EUR
\u00a3m
Total
\u00a3m
USD
\u00a3m
GBP
\u00a3m
EUR
\u00a3m
Total
\u00a3m
Cash and cash
equivalents 0.2 \u2014 \u2014 0.2 0.2 \u2014 2.2 2.4
Intra-group assets \u2014 \u2014 1.0 1.0 \u2014 \u2014 \u2014 \u2014
Intra-group liabilities (16.5) \u2014 (0.8) (17.3) (20.8) (0.1) (4.0) (24.9)
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
16. Financial risk management continued
Financial risk factors continued
Market risk continued
d) Foreign exchange risk continued
The Group assessed the sensitivity to a 10% depreciation and 10% appreciation in pound sterling against the relevant foreign
currencies (2021 comparative sensitivities are presented based on 5%). While 5% is the sensitivity rate used when reporting
foreign currency risk internally to senior management personnel, in light of recent fluctuations in foreign exchange rates, 10%
represents management\u2019s current assessment of a reasonably possible change in foreign exchange rates. The sensitivity
analysis to the income statement includes only outstanding foreign currency-denominated monetary items and adjusts their
translation at the year end for a 10% change in foreign currency rates. The sensitivity analysis illustrates the impact on the
foreign currency translation reserve within equity of the retranslation of quasi-equity loans to foreign operations within the Group
and net investment in foreign operations of the Group.
The Group\u2019s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the Parent Company.
Appreciation in pound sterling Depreciation in pound sterling
At 31 December
Income
statement
2022
\u00a3m
Equity
2022
\u00a3m
Income
statement
2021
\u00a3m
Equity
2021
\u00a3m
Income
statement
2022
\u00a3m
Equity
2022
\u00a3m
Income
statement
2021
\u00a3m
Equity
2021
\u00a3m
US dollars \u2014 (3.6) (1.0) (3.3) \u2014 4.4 1.1 3.6
Euros \u2014 0.6 (0.1) 0.5 \u2014 (0.7) 0.1 (0.5)
\u2014 (3.0) (1.1) (2.8) \u2014 3.7 1.2 3.1
Capital management
The Group considers its capital to comprise its ordinary share capital, share premium, foreign exchange reserve, share options
reserve and retained earnings. Quantitative detail is shown in the consolidated statement of changes in equity.
The Directors\u2019 objective when managing capital is to safeguard the Group\u2019s ability to continue as a going concern in order to
provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
The Directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of the
budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the Group.
Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures indicate the
performance of the business against budget/forecast and confirm that the Group has adequate resources to meet its working
capital requirements.
The Group is subject to externally imposed capital requirements by the Financial Conduct Authority but these are lower than
internally set requirements. During the period the Group complied with all externally imposed requirements.
Sources of estimation uncertainty and critical judgements that may result in a material adjustment in future periods are outlined
in note 2.
17. Share capital
31 December
2022
Number
31 December
2022
\u00a3
31 December
2021
Number
31 December
2021
\u00a3
Called up, allotted and fully paid
Ordinary shares of \u00a30.001 361,303,143 361,303 356,619,718 356,620
During 2022, the Company issued 4,683,425 ordinary shares of \u00a30.001 (2021: \u00a30.001) ranking pari passu with ordinary shares in issue
(2021: 3,675,743) in connection with employee share schemes, giving rise to a total share premium of \u00a30.1 million (2021: \u00a30.4 million).
Included in the total number of ordinary shares outstanding are 16,726,515 (2021: 283,786) shares held by the Group\u2019s Employee
Benefit Trust, which includes 16,471,239 shares (2021: nil) that were purchased during the year (17,660,340 purchased and
1,189,101 utilised to satisfy employee share option plans) and 5,539,201 (2021: 2,984,437) shares held by the Group\u2019s Share Incentive
Plan Trust.
18. Share premium account
2022
\u00a3m
2021
\u00a3m
At 1 January 293.0 292.6
Exercise of options \u2013 proceeds received 0.1 0.4
At 31 December 293.1 293.0
19. Foreign exchange reserve
\u00a3m
At 1 January 2021 9.7
Exchange difference on translating the net assets of foreign operations 1.4
At 31 December 2021 11.1
Exchange difference on translating the net assets of foreign operations 5.8
At 31 December 2022 16.9
Exchange differences relating to the translation of the net assets of the Group\u2019s subsidiaries from their functional currency into
the Company\u2019s functional currency are recognised directly in the foreign exchange reserves within equity.
20. Accumulated losses
\u00a3m
At 1 January 2021 (98.6)
Transfer of share option costs 1.8
Profit for the year 61.2
At 31 December 2021 (35.6)
Transfer of share option costs 2.6
Purchase of own shares (8.7)
Loss for the year (6.9)
At 31 December 2022 (48.6)
The transfer of share option costs is in relation to the exercise of share options during the year and their associated costs in the
share options reserve which are transferred to (accumulated losses)/retained earnings.
During the year ended 31 December 2022, \u00a38.7 million (2021: \u00a3nil) of ordinary shares were purchased by the EBT for the
purposes of satisfying employee share option plans. The number of shares purchased was 17.6 million and the average
purchase price was \u00a30.50. All shares have a nominal value of \u00a30.001.
21. Share-based payment
The Company operates share schemes for all employees of the Group. The terms of the main current schemes from which the
Group\u2019s employees benefit are set out below.
Post-IPO employee share plans
Since the Company\u2019s admission on the London Stock Exchange to the year ended 31 December 2019, the Company operated a single
discretionary share-based long-term incentive plan (\u201cLTIP\u201d). In November 2020, the Company introduced a Share Incentive Plan (\u201cSIP\u201d)
approved by HMRC, which includes free shares, partnership shares and matching shares. This plan is only relevant for UK-based
employees; the LTIP will continue to make awards for non-UK-based employees and employees in senior management positions.
The main features of the LTIP and SIP are set out below.
Post-IPO \u2013 LTIP
Form of LTIP Awards
The Board grants awards in the form of restricted stock units at no cost or options to acquire shares at no cost (a nil-cost option).
Performance conditions
LTIP Awards are not currently subject to performance conditions with the exception of LTIP Awards granted to Executive
Directors which are subject to performance conditions. Refer to the Remuneration Report for further details.
Any performance condition may be amended or substituted if one or more events occur which cause the Board to reasonably
consider that an amended or substituted performance condition would be more appropriate and would not be materially less
difficult to satisfy than originally intended.
Vesting and release of LTIP Awards
LTIP Awards granted to employees, excluding Executive Directors, currently vest subject to continued service only (\u201cTime-Based
Vesting\u201d) in accordance with a vesting schedule set at grant.
LTIP Awards granted to Executive Directors vest at the end of three years subject to achievement of performance conditions.
Further details are shown in the Remuneration Report.
The Board may determine at grant that an LTIP Award is subject to an additional holding period following vesting (a \u201cHolding
Period\u201d). LTIP Options will be exercisable from the date of vesting or, if applicable, the end of the Holding Period until the tenth
anniversary of the grant date, or such earlier date as the Board determines.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
21. Share-based payment continued
Post-IPO employee share plans continued
Post-IPO \u2013 LTIP continued
Cessation of employment
LTIP Options may normally be exercised to the extent vested for a period of six months after ceasing employment or 12 months
after death (or such other period as the Board may determine).
Post-IPO \u2013 SIP
Form of SIP awards
The Board grants awards in the form of free shares, partnership shares and matching shares.
Performance conditions
There are no performance conditions attached to free shares, partnership shares and matching shares.
Free shares
Under the SIP, UK employees are eligible to receive up to a maximum of \u00a33,600, or 10% of annual salary if less, of free shares per
tax year. Free shares will be awarded annually with a forfeiture period of two years and a holding period of three years.
Matching shares
UK employees are invited to buy partnership shares from pre-tax salary with a maximum investment in each tax year of \u00a31,800,
or 10% of annual salary if less. Partnership shares are purchased every month. Employees can withdraw partnership shares
from the SIP at any time although there are tax advantages if the shares are retained in the SIP for at least three years.
Participants are awarded one matching share for every one partnership share they purchase. There are tax advantages if the
matching shares are retained in the SIP for at least three years.
Whilst employed by the Company, a participant will forfeit a corresponding number of matching shares if they choose to transfer
partnership shares out of the SIP within three years of the date of purchase.
Under normal circumstances, if a participant leaves the Company before the second anniversary of the date of award, they will
forfeit their matching shares. If they leave between two and three years of the date of award, they retain their matching shares
but those shares must be removed from the SIP and any tax advantages are lost. If a participant leaves under special
circumstances, they will retain all of their matching shares, regardless of how long they have been held in the SIP.
Pre-IPO employee share plans
EMI Options
Prior to June 2014, the Company issued options to UK subsidiary undertakings\u2019 employees under the EMI Options Scheme.
Since then, the Company is not eligible to issue under the scheme.
Unapproved Options
The Company has an Unapproved Options Scheme for all employees of the Group. In accordance with standard vesting terms,
the full award will vest four years after the vesting start date, with 25% vesting on the first anniversary of the vesting date and
6.25% every three months thereafter. If the options remain unexercised after a period of ten years from the date of grant, the
options expire. Options are forfeited if the employee leaves the Group before the options vest.
US Options Scheme 2
Options granted under the \u201cUS Options Scheme 2\u201d are Unapproved Options granted to US employees as either non-qualifying
options or incentive stock options. The US Options Scheme 2 has the same vesting period as Unapproved Options. If the options
remain unexercised after a period of ten years from the date of grant, the options expire. Unvested options are forfeited if the
employee leaves the Group before the options vest.
Growth Shares with \u201cshadow\u201d Unapproved Options
Growth Shares were an upfront award of B, D or E ordinary shares with a nominal value of \u00a30.00001 per share where the ability to
receive dividends and a capital return from the shares was conditional on the achievement of a performance target (namely, the
growth of the enterprise value of the business beyond a hurdle). According to the terms and conditions, the performance target
differed depending on the underlying share.
If this performance target was met, the participants would profit from the whole of the value of the business, not just the growth
from the date of the award, on the same basis as the ordinary shares.
The Growth Shares were each issued in conjunction with a \u201cshadow\u201d Unapproved Option. The Unapproved Option could be exercised
if the applicable enterprise value hurdle is not met upon an exit event. Both the Growth Shares and the \u201cshadow\u201d Unapproved Options
vested according to the Company\u2019s standard vesting terms, as discussed in the description of Unapproved Options above.
All share-based incentives are subject to service conditions. Such conditions are not taken into account in the fair value of the
service received. The fair value of services received in return for share-based incentives is measured by reference to the fair
value of share-based incentives granted. The estimate of the fair value of the share-based incentives is measured using market
prices. When market prices do not exist for shares or rights to shares with similar characteristics, fair value is determined by
using a valuation technique (either the Monte Carlo or Black-Scholes pricing model as is most appropriate for each scheme).
21. Share-based payment continued
Charge for the year
Included in operating expenses of the Group is a charge for share-based payments and associated social security costs of
\u00a34.7 million (2021: \u00a38.9 million) that arises from transactions accounted for as equity-settled share-based payment transactions.
Movements in share plans
Details of movements in the share schemes during the year are as follows:
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Scheme Total
Number and WAEP
\u200a1
Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP
Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3
Outstanding at
1 January 2021 306,312 0.027 6,292,089 0.300 2,499,297 \u2014
14,515,220
\u2014 3,654,855 0.424 27,267,7 73 0.14 0
Granted during
the year \u2014 \u2014 \u2014 \u2014 1,340,578 \u2014 8,680,546 \u2014 \u2014 \u2014 10,021,124 \u2014
Exercised during
the year \u2014 \u2014 (1,108,496) 0.200 (31,582) \u2014 (982,792) \u2014 (709,527) 0.367 (2,832,397) 0.170
Forfeited during
the year (7,312) 0.027 (41,509) 0.850 (950,520) \u2014 (2,872,931) \u2014 (126,048) 0.598 (3,998,320) 0.028
Outstanding at
31 December
2021 299,000 0.027 5,142,084 0.317 2,857,773 \u2014
19,340,043
\u2014 2,819,280 0.431 30,458,180 0.106
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Scheme Total
Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP
Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3
Outstanding at
1 January 2022 299,000 0.027 5,142,084 0.317 2,857,773 \u2014
19,340,043
\u2014 2,819,280 0.431 30,458,180 0.106
Granted during
the year \u2014 \u2014 \u2014 \u2014 3,131,344 \u2014 11, 817,920 \u2014 \u2014 \u2014 14,949,264 \u2014
Exercised during
the year (152,700) 0.027 (129,399) 0.417 \u2014 \u2014 (3,121,272) \u2014 (2,383) 0.410 (3,405,754) 0.017
Forfeited during
the year (5,000) 0.027 (2,789) 1.682 (1,155,891) \u2014 (8,175,973) \u2014 (625) 0.440 (9,340,278) 0.001
Outstanding at
31 December
2022 141,300 0.026 5,009,896 0.314 4,833,226 \u2014
19,860,718
\u2014 2,816,272 0.431 32,661,412 0.097
1. Weighted average exercise price.
The following table summarises information about the share awards outstanding at 31 December 2022:
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Total
Range of
exercise prices
Number and WARCL\u200a
1
Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number and WARCL
Number Years Number Years Number Years Number Years Number Years Number Years
\u00a30\u2013\u00a30.008 \u2014 \u2014 2,260,017 5.4 4,833,226 \u2014 19,860,718 7.9 \u2014 \u2014 26,953,961 6.2
\u00a30.009\u2013\u00a30.176 141,300 0.8 214,142 0.5 \u2014 \u2014 \u2014 \u2014 24,302 1.4 379,744 0.6
\u00a30.177\u2013\u00a30.471 \u2014 \u2014 2,167,099 4.3 \u2014 \u2014 \u2014 \u2014 2,193,087 2.8 4,360,186 3.5
\u00a30.472\u2013\u00a31.75 \u2014 \u2014 368,638 5.5 \u2014 \u2014 \u2014 \u2014 598,883 5.4 967, 521 5.4
141,300 0.8 5,009,896 4.7 4,833,226 \u2014
19,860,718
7.9 2,816,272 3.3 32,661,412 5.8
The following table summarises information about the share awards outstanding at 31 December 2021:
EMI Options Unapproved Options
Free shares and
matching shares LTIP Awards US Options Total
Range of
exercise prices
Number and WARCL
1
Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number and WARCL
Number Years Number Years Number Years Number Years Number Years Number Years
\u00a30\u2013\u00a30.008 \u2014 \u2014 2,260,017 6.4 2,857,773 \u2014 19,340,043 7.5 \u2014 \u2014 24,457,833 6.6
\u00a30.009\u2013\u00a30.176 299,000 1.3 214,299 1.5 \u2014 \u2014 \u2014 \u2014 24,385 2.4 5 37,68 4 1.4
\u00a30.177\u2013\u00a30.471 \u2014 \u2014 2,305,977 5.5 \u2014 \u2014 \u2014 \u2014 2,196,012 3.8 4,501,989 4.7
\u00a30.472\u2013\u00a31.75 \u2014 \u2014 361,791 6.5 \u2014 \u2014 \u2014 \u2014 598,883 6.4 960,674 6.4
299,000 1.3 5,142,084 5.8 2,857,773 \u2014
19,340,043
7.5 2,819,280 4.4 30,458,180 6.2
1. Weighted average remaining contractual life.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
21. Share-based payment continued
Unapproved Options Scheme
There have been no Unapproved Options granted since IPO in 2018. The weighted average fair values of options granted under the
Unapproved Options Scheme and the US Options Scheme ranged between \u00a30.73 and \u00a31.80 per option respectively in the previous
year. These values were determined using the Black-Scholes valuation model. The significant inputs into the model are as follows:
Unapproved Options Scheme
31 December
2018
Share price (various times during the year) \u00a31.89
Exercise price \u00a3nil\u2013\u00a30.44
Expected life 4 years
Expected volatility 48%
Risk-free interest rate (between) 0.93%\u20131.02%
Dividend yield Nil
Forward exchange rate \u2013 US Options (between) 0.769
LTIP Awards
Since all LTIP Awards were made post-IPO, the Company has used its share price at grant date as the fair value of the LTIP
Awards granted during the year to employees.
In the prior financial year, the only exception to this was for awards made to the former Chief Financial Officer, who departed
prior to the end of this financial year (these awards have therefore lapsed). These awards contained market-based performance
conditions and the fair value at grant date was calculated using a Black-Scholes model.
The incumbent Chief Financial Officer\u2019s LTIP Awards do not contain market-based performance conditions but do include
non-market performance conditions (refer to the Remuneration Report for further detail) and, therefore, the Company\u2019s share
price at grant date is the fair value used, with the likelihood of achieving the non-market performance conditions factored into
the accounting charge. In line with IFRS 2, the likelihood will be reassessed at the end of each reporting period.
Free shares and matching shares
The Company has used its share price at grant date as the fair value of free shares and matching shares granted during the year
to employees.
22. Notes to the consolidated statement of cash flows
Cash (outflow)/inflow from operating activities
31 December
2022
\u00a3m
31 December
2021
(re-presented)
1
\u00a3m
(Loss)/profit before taxation (12.9) 64.1
Adjustments for
Depreciation of property, plant and equipment 5.1 5.9
Amortisation of intangible assets 10.1 8.0
Impairment of intangible and tangible assets (prior year exceptional item) 1.8 3.9
Interest receivable (2.3) (0.1)
Interest payable 0.9 1.1
Non-cash employee benefits expense \u2013 share-based payments and associated social security costs 4.7 8.5
Fair value gains (4.8) (28.6)
Movement in restructuring provision (prior year exceptional item) (0.2) (0.9)
Movement in loan repurchase liability (1.8) (3.0)
Movement in other provisions (0.1) (1.9)
Share of gains of associates (0.4) (0.9)
Other non-cash movements 1.4 (0.7)
Changes in working capital
Movement in trade and other receivables 8.8 46.4
Movement in trade and other payables (3.7) 1.4
Tax paid (1.0) (3.1)
Originations of lines of credit
1
(59.6) (3.6)
Cash receipts from lines of credit
1
43.6 2.0
Net cash (outflow)/inflow from operating activities (10.4) 98.5
1. As disclosed in note 1, FlexiPay drawn lines of credit have been re-presented within \u201cOrigination of/cash receipts from lines of credit\u201d within cash flows from operating activities
and were previously presented within \u201cOrigination of/ cash receipts from SME loans (other)\u201d in cash flows from investing activities in the year ended 31 December 2021.
22. Notes to the consolidated statement of cash flows continued
Cash and cash equivalents
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Cash and cash equivalents 17 7.7 224.0
The cash and cash equivalents balance is made up of cash and money market funds. The carrying amount of these assets is
approximately equal to their fair value. Included within cash and cash equivalents above is a total of \u00a312.1 million (2021: \u00a324.6 million)
in cash which is restricted in use. Of this \u00a31.1 million (2021: \u00a31.0 million) is restricted in use in the event of rental payment defaults
and cash held in the securitisation SPVs of \u00a32.9 million (2021: \u00a314.4 million) which has been collected for on-payment to bond
holders and is therefore restricted in its use. A further \u00a38.1 million (2021: \u00a39.2 million) of cash is held which is restricted in use
to repaying investors in CBILS and RLS loans and paying CBILS and RLS-related costs to the UK government.
At 31 December 2022, money market funds totalled \u00a3121.6 million (2021: \u00a3112.1 million).
Analysis of changes in liabilities from financing activities
1 January
2021
\u00a3m
Cash flow
\u00a3m
Exchange
movements
\u00a3m
Other non-cash
movements
\u00a3m
31 December
2021
\u00a3m
Bank borrowings (195.5) 123.1 (0.8) \u2014 (73.2)
Bonds (294.3) 160.6 (1.6) (5.0) (140.3)
Lease liabilities (30.8) 8.1 (0.1) (1.1) (23.9)
Liabilities from financing activities (520.6) 291.8 (2.5) (6.1) (237.4)
1 January
2022
\u00a3m
Cash flow
\u00a3m
Exchange
movements
\u00a3m
Other non-cash
movements
\u00a3m
31 December
2022
\u00a3m
Bank borrowings (73.2) 57.9 (7.3) \u2014 (22.6)
Bonds (140.3) 129.1 (8.1) (4.4) (23.7)
Lease liabilities (23.9) 7.3 (1.6) (1.6) (19.8)
Liabilities from financing activities (237.4) 194.3 (17.0) (6.0) (66.1)
23. Operating lease arrangements
As disclosed in notes 1 and 11, leases of low-value items or short-term leases continue to be treated as operating leases.
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Lease payments under operating leases recognised as an expense in the year 0.3 0.1
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases of \u00a30.7 million (2021: \u00a3nil).
Operating lease payments represent payments for lease assets that are individually considered low value.
24. Dividends per share
No ordinary dividends were declared or paid in the current or previous financial years.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
25. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Compensation of key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Group. The Group\u2019s key management personnel comprises the Global Leadership Team (\u201cGLT\u201d), which is made
up of the Executive Directors and other senior management as defined in note 3 as the chief operating decision maker (\u201cCODM\u201d)
and the Non-Executive Directors of the Group.
31 December
2022
\u00a3m
31 December
2021
\u00a3m
Salaries and short-term benefits 5.1 4.2
Equity-based compensation 1.3 1.9
Post-employment benefits 0.1 0.1
6.5 6.2
Further details on Directors\u2019 remuneration are disclosed in the Remuneration Report in the Corporate Governance section
of the Annual Report and Accounts on pages 100 to 115.
Transactions with other related parties
During the year the Group invested \u00a3nil (2021: \u00a3nil) into entities accounted for as associates, received capital redemptions
of \u00a35.1 million (2021: \u00a33.9 million) and received dividends of \u00a30.3 million (2021: \u00a3nil).
During the year the Group received service fees from loans held by Knightrider Lending Designated Activity Company of
\u00a30.1 million (2021: \u00a30.2 million) and from Throgmorton Lending Designated Activity Company of \u00a30.4 million (2021: \u00a30.7 million).
These entities are subsidiaries of the Group\u2019s associates, as detailed in note 29.
26. Ultimate controlling party
In the opinion of the Directors, the Group does not have a single ultimate controlling party.
27. Contingent liabilities and commitments
As part of the ongoing business, the Group has operational requirements with its investors. At any point in time, it is possible that
a particular investor may expect the Group to buy back their loan if they did not believe that the terms of business had been fully
complied with. Where a loan is bought back it is presented within Investment in SME loans (other) on the face of the consolidated
balance sheet and held at amortised cost under IFRS 9.
In common with other businesses, the Group is involved from time to time in disputes in the ordinary course of business.
There are no active cases expected to have a material adverse financial impact on the Group.
The Group has commitments related to undrawn amounts on issued FlexiPay lines of credit. At 31 December 2022 there were
undrawn commitments of \u00a341.6 million (2021: \u00a34.2 million). An expected credit loss impairment allowance is held within other
provisions by the Group of \u00a30.3 million (2021: \u00a3nil) in relation to the estimated credit losses the Group may be exposed to on
these undrawn lines of credit.
28. Subsequent events
Subsequent to the 31 December 2022, an agreement was signed in February 2023 to sell loans valued at \u00a319.8m at
31 December 2022 and presented within SME loans (other) to a third party investor. The sale did not give rise to a material
gain or loss.
29. Interests in other entities
Investments in subsidiaries
The Group had the following subsidiaries, all of which have been included in these consolidated financial statements.
The proportion of the voting rights in subsidiary undertakings held directly by the Company does not differ from the proportion
of ordinary shares held.
Subsidiary undertakings
Place of
incorporation
Proportion of
ownership
interest
Directly/
indirectly
held Registered office address
Funding Circle Ltd UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Asset Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle BB Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Eclipse Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Focal Point Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Global Partners Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Midco Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Property Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Trustee Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Made To Do More Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Horizon Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle Polaris Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY
Funding Circle USA, Inc. USA 100% Directly
85 Second Street, 4th Floor,
San Francisco, California 94105
Funding Circle Notes Program, LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
FC Marketplace, LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
Funding Circle Investor Funds, LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
FC Depositor US LLC USA 100% Indirectly
85 Second Street, 4th Floor,
San Francisco, California 94105
Funding Circle CE GmbH Germany 100% Directly Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Deutschland GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Connect GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow
FC Forderungsmanagement GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Espana S.L. Spain 100% Indirectly
Calle Claudio Coello n\u00famero 91,
3a planta, 28006 Madrid
Funding Circle Nederland B.V. Netherlands 100% Indirectly Atrium, Strawinskylaan 3075,
4th Floor, 1077 ZX Amsterdam
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
29. Interests in other entities continued
Investments in associates
Set out below are the associates of the Group as at 31 December 2022 which, in the opinion of the Directors, are material to the
Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group.
The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest
is the same as the proportion of voting rights held.
Associate entity name
Place of
incorporation
Proportion of
ownership
interest
Directly/
indirectly
held Registered office address
Funding Circle European SME Direct
Lending Fund I\u00b9 Ireland 24% Indirectly 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland
Funding Circle UK SME Direct Lending Fund I\u00b9 Ireland 8% Indirectly 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland
1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address of 70, Sir John
Rogerson\u2019s Quay, Dublin 2, Ireland.
The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered to be
related parties of the Group.
Other related party name
Place of
incorporation Relationship
% ownership by
associate Immediate parent entity Registered office address
Knightrider
Lending Designated
Activity Company
1
Ireland Subsidiary
of associate
100% Funding Circle European SME
Direct Lending Fund I
70, Sir John Rogerson\u2019s Quay,
Dublin 2, Ireland
Throgmorton
Lending Designated
Activity Company
Ireland Subsidiary
of associate
100% Funding Circle UK SME Direct
Lending Fund I
70, Sir John Rogerson\u2019s Quay,
Dublin 2, Ireland
1. Knightrider Lending Designated Activity Company is in liquidation, having appointed a liquidator on 16 December 2022.
The tables below provide summarised financial information for those associates that are material to the Group. The information
disclosed reflects the amounts presented in the financial statements of the relevant associates and not Funding Circle Holdings
plc\u2019s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method,
including modifications for differences in accounting policy. While the Group holds less than 20% ownership in Funding Circle
UK SME Direct Lending Fund I the Group considers that it has significant influence over the entity through representation on its
Board and so continues to account for it as an associate instead of a trade investment.
The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk with respect
to the performance of the underlying loans in the associates, to the extent that the share of profit from associate may diminish.
The table below illustrates the Group\u2019s maximum exposure to the investment in associate which represents the value on the
Group balance sheet. The value of the investment is derived from net asset value statements from the sub-funds; however, being
private these are not from observable market data, and therefore the fair value is considered to be aligned to the carrying value.
In July 2022 an agreement was signed by Funding Circle European Private Fund DAC I to sell the loans held by the fund as part
of its strategy to return capital to shareholders in a cost effective manner. The Group received \u00a32.6 million in cash in August 2022
as a final capital distribution and the corresponding investment in associate held by the Group was reduced by this distribution
to \u00a3nil. There was no impact on the statement of comprehensive income from the transaction.
Summarised balance sheet (Group\u2019s share)
Funding Circle
European
SME Direct
Lending Fund I
31 December
2022
\u00a3m
Funding Circle
UK
SME Direct
Lending Fund I
31 December
2022
\u00a3m
Funding Circle
European
SME Direct
Lending Fund I
31 December
2021
\u00a3m
Funding Circle
UK
SME Direct
Lending Fund I
31 December
2021
\u00a3m
Non-current assets \u2014 2.4 3.1 3.7
Current assets \u2014 0.3 0.6 0.5
Current liabilities \u2014 \u2014 \u2014 \u2014
Non-current liabilities \u2014 \u2014 \u2014 \u2014
Net assets \u2014 2.7 3.7 4.2
29. Interests in other entities continued
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated
financial statements
Funding Circle
European
SME Direct
Lending Fund I
2022
\u00a3m
Funding Circle
UK
SME Direct
Lending Fund I
2022
\u00a3m
Funding Circle
European
SME Direct
Lending Fund I
2021
\u00a3m
Funding Circle
UK
SME Direct
Lending Fund I
2021
\u00a3m
Opening net assets as at 1 January 2022 15.5 51.3 26.3 6 4.1
(Loss)/profit for the year (0.7) 3.2 2.0 3.1
Exchange differences 0.3 \u2014 (1.6) \u2014
Other comprehensive income \u2014 \u2014 \u2014 \u2014
Capital redemptions in the year (15.1) (18.1) (11.2) (15.4)
Dividends paid in the year \u2014 (3.9) \u2014 (0.5)
Closing net assets as at 31 December 2022 \u2014 32.5 15.5 51.3
Group\u2019s share in % 23.6% 8.3% 23.6% 8.3%
Group\u2019s share of net assets as at 31 December \u2014 2.7 3.7 4.2
Accounting policy alignment \u2014 \u2014 (0.2) (0.1)
Group\u2019s carrying amount \u2014 2.7 3.5 4.1
Summarised statement of comprehensive income (Group\u2019s share)
Funding Circle
European
SME Direct
Lending Fund I
2022
\u00a3m
Funding Circle
UK
SME Direct
Lending Fund I
2022
\u00a3m
Funding Circle
European
SME Direct
Lending Fund I
2021
\u00a3m
Funding Circle
UK
SME Direct
Lending Fund I
2021
\u00a3m
Gross income 0.1 0.3 0.5 0.5
Profit for the year \u2014 0.4 0.6 0.3
Other comprehensive income \u2014 \u2014 \u2014 \u2014
Total comprehensive income \u2014 0.4 0.6 0.3
Dividends received from associates \u2014 0.3 \u2014 \u2014
Capital redemptions received from associates 3.6 1.5 2.6 1.3
Interest in other entities
Stichting Derdengelden Funding Circle is not a direct or indirect subsidiary of Funding Circle Holdings plc but is an independent
special purpose foundation which is required in the Netherlands to safeguard borrower and investor funds and is consolidated as
it is controlled by the Group. The registered office address is Atrium, Strawinskylaan 3075, 4th Floor, 1077 ZX Amsterdam.
The Funding Circle Holdings Employee Benefit Trust was established on 14 September 2018. The purpose of the trust is to
facilitate the acquisition of shares in the Company by, or for the benefit of, existing and future employees of the Company and
Group subsidiaries and is consolidated as it is controlled by the Group.
Consolidated structured entities: Small Business Origination Loan Trust 2019-3 DAC, Great Trinity Lending 1 DAC, Small Business
Lending Trust 2019-A, Small Business Lending Grantor Trust 2019-A, Small Business Lending Trust 2020-A and Small Business
Lending Grantor Trust 2020-A are consolidated structured warehouse and securitisation entities which either hold SME loan
assets in a warehouse or hold the portfolio of SME loans and issue bonds after securitisation has occurred.
The entities are bankruptcy remote special purpose vehicles and as such there is no requirement for the Group to provide
financial support to the entities. The entities\u2019 activities are not governed by voting rights and the Group has assessed that it has
power over the entities based on the purpose and design of the entity and ability to direct the relevant activities of the entity, the
nature of the relationship with the entity and the size of its exposure to the variability of the returns from each entity.
As explained in note 16 the Group experiences credit risk and prepayment risk in relation to the SME loan assets net of bond
liabilities, and interest rate risk in relation to the warehouse loan facilities and floating rate bond liabilities which is partially
mitigated through the use of derivative financial instruments.
Notes forming part of the consolidated financial statements continued
for the year ended 31 December 2022
29. Interests in other entities continued
Interest in other entities continued
The principal activities of the Group\u2019s most significant subsidiary undertakings are set out below. These are considered
significant in the context of the Group\u2019s business, results and financial position.
Subsidiary undertakings Principal activity
Funding Circle Ltd Acts as facilitator and performs intermediary services in respect of all loans made
through the Funding Circle platform in the UK.
Funding Circle USA, Inc. The US operating subsidiary of Funding Circle. Acts as the administrator of the Funding
Circle platform in the US.
FC Marketplace, LLC Acts as originator and servicer of all loans made through the Funding Circle platform in
the US. FC Marketplace, LLC sells each loan it originates, on a servicing retained basis, to
third party institutional investors or to affiliates (e.g. Funding Circle Notes Program, LLC)
on an arm\u2019s length basis.
Funding Circle Notes Program, LLC A special purpose bankruptcy remote entity which issues loan payment dependent debt
securities to accredited investors. It uses the proceeds to purchase a specific corresponding
loan made through the Funding Circle platform from FC Marketplace, LLC. The entity retains
the contractual rights to receive the cash flows from the loan assets it has purchased, but
has assumed a contractual obligation to pay those cash flows to the holders of the debt
securities. The eligibility criteria have been met to derecognise the loan assets and
associated issued debt securities as a pass-through arrangement under IFRS 9.
Funding Circle Focal Point Lending Limited Subsidiary via which CBILS loans are originated and which holds legal title to loans which
are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Eclipse Lending Limited Subsidiary via which RLS loans are originated and which holds legal title to loans which
are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Deutschland GmbH Operates the Funding Circle platform in Germany and services loans.
Funding Circle Nederland B.V. Operates the Funding Circle platform in the Netherlands and services loans.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-333": {
"value": "1. Accounting policies General information Funding Circle Holdings plc (the \u201cCompany\u201d) is a public company limited by shares, which is listed on the London Stock Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006 and registered in England and Wales. The address of its registered office is given on page 196. The consolidated financial statements of the Group for the year ended 31 December 2022 comprise the Company and its subsidiaries (together referred to as the \u201cGroup\u201d and individually as \u201cGroup entities\u201d). The principal activities of the Group and the nature of the Group\u2019s operations are as a global SME loan platform. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Going concern The Group\u2019s business activities together with the factors likely to affect its future development and position are set out in the Strategic Report. The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future (which has been taken as at least 12 months from the date of approval of the financial statements). The Group made a total comprehensive loss of \u00a31.1 million during the year ended 31 December 2022 (2021: profit of \u00a362.6 million). As at 31 December 2022, the Group had net assets of \u00a3284.0 million (2021: \u00a3288.0 million). This includes \u00a3177.7 million of cash and cash equivalents (2021: \u00a3224.0 million) of which \u00a312.1 million (2021: \u00a324.6 million) is held within the securitisation vehicles or for other specific purposes and is restricted in use. Additionally, within the net assets, the Group holds \u00a396.5 million (2021: \u00a369.7 million) of invested capital, some of which is capable of being monetised if liquidity needs arise. The Group has prepared detailed cash flow forecasts for the next 15 months and has updated the going concern assessment to factor in the potential ongoing impact of inflation and related economic stress. The base case scenario assumes: 5 continued growth in origination of the Group\u2019s commercial lending product until June 2024; 5 there remains macroeconomic stress in 2023 from inflation, and supply chain pressures with a peak in defaults, which gradually de-stress in the following years; 5 no extensions or new government schemes that the Group participated in; 5 the rollout of the new FlexiPay product using the Group\u2019s balance sheet to fund it; and 5 costs and headcount grow modestly with the new product and with investment in technology. Management prepared a severe but plausible downside scenario in which: 5 further macroeconomic volatility continues through the period with increased inflation and interest rates reducing originations and increasing costs; 5 investment returns reduce owing to increased funding costs, widening discount rates and deterioration in loan performance; 5 an operational event occurs requiring a cash outlay; and 5 a downside loss scenario is applied to Funding Circle\u2019s on-balance sheet investment in SME loans resulting in higher initial fair value losses and lower cash flows to the investments it owns. Management has reviewed financial covenants the Group must adhere to in relation to its servicing agreements. These are with institutional investors for which there are unrestricted cash, tangible net worth and debt to tangible net worth ratios. Management has also reviewed regulatory capital requirements. In the downside scenario the risk of covenant or capital requirement breach is considered remote. The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and have, at the time of approving these financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Further detail is contained in the Strategic Report on pages 70 and 71. Basis of preparation The Group presents its annual financial statements in conformity with United Kingdom laws and regulations. The financial statements have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the United Kingdom\u2019s Financial Conduct Authority. 1. Accounting policies continued Basis of preparation continued The financial statements have been prepared on the historical cost basis except for certain financial instruments that are carried at fair value through profit and loss (\u201cFVTPL\u201d). The preparation of financial statements requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the Group\u2019s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the year the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Significant changes in the current reporting year The financial position and performance of the Group were affected by the following events and transactions during the year ended 31 December 2022: i) Sale of securitised SME loans and unwind of UK and US SPVs (note 16) In May 2022, Funding Circle exercised the call rights associated with the majority ownership of the unrated junior residual tranches of Small Business Origination Loan Trust 2019-3\u2019s bonds in the UK. The call option became exercisable as the portfolio and bond liabilities of the SPV had amortised to below a minimum threshold. Funding Circle and the other junior note holder purchased the loans from the SPV, in line with their proportional ownership of the note tranches, at fair value. The proceeds, cash, and other assets of the vehicle were liquidated and used to repay outstanding expenses and interest and principal on the bond liabilities. As the SPV is consolidated, the net impact on the Group\u2019s financial statements was a sale of 49% of the UK securitised SME loans to the other junior note holder and repayment of the bond liabilities. The bond liabilities held at FVTPL were repaid at an amount higher than their previous fair value estimate as the cash flows were delivered sooner and at a higher amount resulting in a fair value loss as set out in note 15. As a result, there are no unrated bond liabilities remaining for the Group. Subsequently the Group owned 51% of the securitised SME loans, directly through the subsidiary Funding Circle Ltd. The majority of the retained loans were sold to a third party with an economic cut off of 30 June 2022 and cash settlement in September 2022 for their fair value, with no gain or loss on sale, and as a result only a smaller portfolio of delinquent and defaulted loans was retained by the Group. In October 2022, Funding Circle exercised the call rights associated with the ownership of the unrated junior residual tranches of Small Business Lending Trust 2019-A\u2019s bonds in the US. The call option became exercisable as the portfolio and bond liabilities of the SPV had amortised to below the minimum threshold. Funding Circle purchased the loans from the SPV at fair value. The proceeds, cash and other assets of the vehicle were liquidated and used to repay outstanding expenses, and interest and principal on the bond liabilities. As the SPV is consolidated, the net impact on the Group\u2019s financial statements was the repayment of the bond liabilities of the vehicle. The Group continues to consolidate 100% of the securitised SME loans, now owned directly by the subsidiary FC Marketplace LLC. The Group continues to consolidate both the SPVs, which subsequently began a liquidation process, and holds an immaterial amount of cash and accruals, through exposure to the majority of the variability in any excess cash flows available after the liquidation is completed. The loans retained continue to be held at fair value through profit and loss, within SME Loans (securitised), as the Group continues to hold these with the intention of selling them if, and when, an attractive price can be realised. ii) Scaling up of new products The Group has continued to invest in the scaling up lending through lines of credit in its FlexiPay product. Through FlexiPay, borrowers are provided with a facility which can be drawn to pay invoices and expenses, and are subsequently repaid over three months. A fee of 3% was charged in the year on the drawn amount which is recognised over the three-month life of the drawdown in interest income under the effective interest rate method. The accounting policy regarding FlexiPay is outlined later in this note. As outlined later, the loans are measured at amortised cost. As FlexiPay will continue to become a larger part of the Group\u2019s business, this has been disclosed as a separate segment within note 3. As a result the Group has presented FlexiPay under \u201clines of credit\u201d on the balance sheet and reclassified the comparative which was previously presented in \u201cinvestment in SME loans (other)\u201d and cash flows have been re-presented within \u201corigination of/cash receipts from lines of credit\u201d within cash flows from operating activities and were previously presented within \u201corigination of/ cash receipts from SME loans (other)\u201d in cash flows from investing activities in the year ended 31 December 2021. iii) Redemption of investment in associate In July 2022 an agreement was signed by Funding Circle European Private Fund DAC I to sell the loans held by the fund as part of its strategy to return capital to shareholders in a cost effective manner. The Group received \u00a32.6 million in cash in August 2022 as a final capital distribution and the corresponding investment in associate held by the Group was reduced by this distribution to nil. 1. Accounting policies continued Changes in accounting policy and disclosures The Group has adopted the following new and amended IFRSs and interpretations from 1 January 2022 on a full retrospective basis. Standard/interpretation Content Applicable for financial years beginning on/after Amendments to IFRS 3 \u2013 Reference to the Conceptual Framework Business combinations 1 January 2022 Amendments to IAS 16 \u2013 Property, Plant and Equipment: Proceeds before Intended Use Property, plant and equipment 1 January 2022 Amendments to IAS 37 \u2013 Onerous Contracts \u2013 Costs of Fulfilling a Contract Provisions \u2013 onerous contracts 1 January 2022 The amendments and interpretations listed above did not materially affect the current year and are not expected to materially affect future years. Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting years and have not been early adopted by the Group as follows: Standard/interpretation Content Applicable for financial years beginning on/after Amendments to IAS 1 \u2013 Classification of Liabilities as Current or Non-current Presentation of financial statements 1 January 2023 Amendments to IAS 8 \u2013 Definition of Accounting Estimates Accounting policies, changes in accounting estimates 1 January 2023 Amendments to IAS 1 and IFRS Practice Statement 2 \u2013 Disclosure of Accounting Policies Accounting policies 1 January 2023 Amendments to IAS 12 \u2013 Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction Deferred tax 1 January 2023 These standards are not expected to have a material impact on the Group in the current or future reporting years or on foreseeable future transactions. Summary of new and amended accounting policies FlexiPay: Lines of credit Lending through the FlexiPay product is recognised on the balance sheet within lines of credit. This represents the drawn amount of the facilities. The contractual cash flows represent solely payments of principal and interest (\u201cSPPI\u201d) and the business model under which they are held is in order to collect the contractual cash flows resulting in the lines of credit being measured initially at fair value and subsequently at amortised cost. The Group has presented FlexiPay under \u201clines of credit\u201d in the balance sheet and reclassified the comparative which was previously presented in \u201cinvestment in SME loans (other)\u201d where they were also measured at amortised cost. The origination fee associated with FlexiPay is recognised under IFRS 9 within interest income at the effective interest rate in the consolidated statement of comprehensive income and is recognised over the contractual term of the draw down. Cash flows have been re-presented within \u201cOrigination of/cash receipts from lines of credit\u201d within cash flows from operating activities and were previously presented within \u201cOrigination of/ cash receipts from SME loans (other)\u201d in cash flows from investing activities in the year ended 31 December 2021. The FlexiPay lines of credit are held net of expected credit loss allowances under IFRS 9, the methodology and definitions of which align to the existing Group accounting policy on impairment of financial assets held at amortised cost with the exception of being assessed at the available line of credit level, estimating the utilisation of the line of credit to the estimated point of default and are detailed further within note 16. Additionally, the Group assesses the expected credit loss allowance in relation to undrawn lines of credit, estimating the probability of default, loss given default and exposure at default in relation to these lines of credit were they to be drawn. This has resulted in a \u00a30.3 million (2021: \u00a3nil) loss allowance recognised within other liabilities in note 15. 1. Accounting policies continued SME loans (securitised), SME loans (warehouse) and SME loans (other) Following the call option being exercised on the UK and one of the US securitisation vehicles and the repayment of the warehouse borrowings in 2021 and 2022, some of the SME loans were purchased from the vehicles and are held directly in Funding Circle Limited and Funding Circle Marketplace LLC. These loans continue to be held at FVTPL as the business model under which they are held remains to sell the loans. They continue to be presented within SME loans (securitised) and SME loans (warehouse) representing the legacy nature of the loans. Certain SME loans are originated by the Group under the business model of selling onwards, and are therefore measured initially and subsequently at FVTPL. These loans are presented within SME loans (other) alongside loans held at amortised cost and can be distinguished in note 16. Summary of existing accounting policies Basis of consolidation Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Structured entities are entities that are designed so that their activities are not governed by voting rights. In assessing whether the Group has power over such entities, the Group considers factors such as the purpose and design of the entity; its practical ability to direct the relevant activities of the entity; the nature of the relationship with the entity; and the size of its exposure to the variability of returns of the entity. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet, the acquiree\u2019s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. Foreign currency translation Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their \u201cfunctional currency\u201d) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the prevailing rate at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal. Presentation currency These consolidated financial statements are presented in GBP sterling, which is the Group\u2019s presentation currency. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the prevailing rate at the reporting date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are used. Exchange differences arising are recognised in other comprehensive income and accumulated 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 translated at the prevailing rate at the reporting date. Segment reporting Operating segments are reported in the manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, which is the function responsible for allocating resources and assessing performance of the operating segments, has been identified as the Global Leadership Team that makes strategic decisions. For each identified operating segment, the Group has disclosed information for the key performance indicators that are assessed internally to review and steer performance in the Strategic Report. Transactions between segments are on an arm\u2019s length basis in a manner similar to transactions with third parties. Exceptional items Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of such significance that they merit separate presentation in order to aid the reader\u2019s understanding of the Group\u2019s financial performance. Such items would include profits or losses on disposal of businesses; transaction costs; acquisitions and disposals; major restructuring programmes; significant goodwill or other asset impairments; and other particularly significant or unusual items (see note 5). 1. Accounting policies continued Income recognition Fee income is recognised in line with IFRS 15 which provides a single, principles-based five-step model to be applied to all contracts with customers: 1) identify the contract with the customer; 2) identify the performance obligations in the contract, introducing the new concept of \u201cdistinct\u201d; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contracts, on a relative stand-alone selling price basis; and 5) recognise income when (or as) the entity satisfies its performance obligation. Fee income earned for the arrangement of loans is classified as transaction fees and is a cost of the borrower except for government-guaranteed CBILS loans which were a cost to the government. The contract signed by the borrower and related terms are clearly identifiable. The performance obligation in the contract is considered to be the funding of the loan through the platform and the transaction price is clearly stated in the borrower\u2019s contract. Fees are recognised immediately once loans are fully funded and after the loans are accepted by the borrowers. At this point the performance obligation has been met, there are no clawback provisions and the fee is recognised. Such fees are automatically deducted from the amount borrowed (or subsequently invoiced in the case of government-guaranteed CBILS loans). Fee income earned from referrals to partner institutions is classified as transaction fees and is a cost to the partner institution. There are contracts in place with partner institutions with clearly identifiable terms. The performance obligation in the contract is considered to be the referral by the Group and subsequent funding of the referred loan by the partner institution and the transaction price is clearly stated in the referral agreement. Fees are recognised once the referred loan has been funded by the partner institution and accepted by the referred borrower. At this point the performance obligation has been met and there are no significant clawback provisions. Fee income earned from servicing third party loans is classified as servicing fees and is a cost of the investor, except in the case of the first year of servicing fees related to CBILS loans, where the government paid the cost. It comprises an annualised fee representing a percentage of outstanding principal. The contractual basis for the servicing fee and transaction price is based on the terms and conditions agreed by investors to the lending platform. The performance obligation is servicing the loans and allocating repayments of the loan parts to the respective lenders. The transaction price is allocated as a percentage of the outstanding principal balance, representing the outstanding performance obligation. Fees are recognised on a monthly basis upon repayment of loan parts. Due to the conditions of the loans, there are no partially completed contracts at the balance sheet date and no advance payments from customers. Other fees include excess premium earned from arrangements to buy back defaulted loans from certain institutional investors and income earned on certain bought back loans. Other fees also includes income from collections charges levied on the successful recovery of defaulted loans. These are recognised as services are performed. Net income includes the following elements under which the recognition criteria of IFRS 9 and not IFRS 15 are applied: Interest income includes: 5 interest income recognised on assets held at amortised cost under the effective interest rate method including FlexiPay. Investment income includes: 5 interest income from SME loans and investments in trusts that the Group holds on balance sheet. Investment expense includes: 5 interest payable on funds borrowed to finance the acquisition of underlying loan investments; 5 interest payable on bond liabilities held on balance sheet; 5 amortisation of costs associated with the issuing of bonds and the credit facility; and 5 gains/losses from changes in fair value of interest hedging instruments. Fair value gains/losses includes: 5 gains/losses from changes in the fair value of financial assets and liabilities held on balance sheet. Net income recorded in the financial statements is generated in the UK, the US, Germany and the Netherlands. All fees are calculated based on the above income recognition policy. 1. Accounting policies continued Administrative expenses Administrative expenses are recognised as an expense in the statement of comprehensive income in the period in which they are incurred on an accruals basis. Share-based payments The Group operates a number of equity-settled share-based compensation plans, under which the Group receives services from employees as consideration for equity instruments (options and shares) of the Company. The fair value of the employee services received in exchange for the grant of the options and shares is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options and shares granted: 5 including any market performance conditions (for example, an entity\u2019s share price); 5 excluding the impact of any service and non-market performance vesting conditions (for example, net income, earnings per share and remaining an employee of the Group over a specified time period); and 5 including the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market vesting conditions are included in assumptions about the number of options and shares that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimate of the number of options and shares that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares or utilises shares that have been purchased in the market. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The grant by the Company of options and shares over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding credit to equity in the Parent entity (the \u201cCompany\u201d) accounts. Pension obligations The Group operates a defined contribution pension scheme for employees in the UK and US. The schemes are pension plans under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior years. Contributions payable to the Group\u2019s pension scheme are charged to the statement of comprehensive income in the year to which they relate. The Group has no further payment obligations once the contributions have been paid. Current and deferred tax The tax expense for the year comprises current and deferred tax. Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group has established transfer pricing policies and ensures mechanisms are in place in ensuring subsidiaries receive an appropriate tax rate and base. It establishes provisions, where appropriate, based on amounts expected to be paid to the tax authorities. Deferred tax assets for unused tax losses, tax credits and deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted at the year-end date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax balances are not discounted. 1. Accounting policies continued Dividends Dividends are recognised when they become legally payable, in accordance with the Companies Act 2006. Intangible assets Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. Useful lives and amortisation methods are reviewed at the end of each annual reporting period, or more frequently when there is an indication that the intangible asset may be impaired, with the effect of any changes accounted for on a prospective basis. Amortisation commences when the intangible asset is available for use. The residual value of intangible assets is assumed to be zero. Computer software licences Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over the licence period, which is up to five years as at 31 December 2022. Capitalised development costs Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design, build and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: 5 it is technically feasible to complete the build of the platform products so that they will be available for use; 5 management intends to complete the build of the platform products for use within the Group; 5 there is an ability to use the platform products; 5 it can be demonstrated how the platform products will generate probable future economic benefits; 5 adequate technical, financial and other resources to complete the development and to use the platform products are available; and 5 the expenditure attributable to the platform products during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software product include the software development employee and contractor costs. The capitalisation of employee costs is based on the amount of time spent on specific projects which meet the criteria as a proportion of their total time, and this proportion of their salary-related costs is attributed to the applicable projects. Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use over their estimated useful lives, ranging from three to five years. Other intangibles Other intangibles relate to the technology platform and customer relationship (representing fees due on contracted loans expected to be realised in the foreseeable future) acquired on a business combination. These costs are amortised over their estimated useful lives, which do not exceed three years. Tangible fixed assets Tangible fixed assets are stated at cost less depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful life, as follows: Computer equipment 1\u20133 years Furniture and fixtures 3\u20135 years Leasehold improvements that qualify for recognition as an asset are measured at cost and are presented as part of property, plant and equipment in the non-current assets section on the balance sheet. Depreciation on leasehold improvements is calculated using the straight-line method over the lease term. 1. Accounting policies continued Impairment of tangible and intangible assets Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset\u2019s recoverable amount since the last impairment loss was recognised. If this was the case, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Leases At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When a lease is recognised in a contract the Group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, less any lease incentives. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line basis over the length of the lease. Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: 5 fixed payments less any lease incentives receivable; 5 variable lease payments based on an index or a rate, initially measured using the index or rate at the commencement date; and 5 amounts expected to be payable by the Group under residual value guarantee. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group\u2019s incremental borrowing rate is used, which is the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group: 5 where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received; 5 uses an approach taking the risk-free interest rate adjusted for credit risk for leases held by Funding Circle Holdings plc; and 5 makes adjustments specific to the lease for term, country and currency. Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability and reducing it by the lease payments made. The lease liability and right-of-use asset are remeasured when there is a lease modification. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Extension and termination options are included in a number of property leases in the Group. Management considers the facts and circumstances that may create an economic incentive to exercise an extension or termination option in order to determine whether the lease term should include or exclude such options. Extension or termination options are only included within the lease term if they are reasonably certain to be exercised in the case of extension options and not exercised in the case of termination options. Considerations include: 5 if leasehold improvements are expected to have significant value at the end of the lease term; 5 expected costs or business disruption as a result of replacing a lease; and 5 significant penalties incurred in order to terminate. 1. Accounting policies continued Leases continued Lease terms are reassessed if the option is exercised or if a significant event occurs which impacts the assessment of reasonable certainty. The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expenses on a straight-line basis over the lease term. When the Group is an intermediate lessor, entering into a sublease, it accounts for the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. Rental income from operating leases is recognised on a straight-line basis over the lease term and the Group retains the right-of-use asset deriving from the head lease and the lease liability on the balance sheet. Amounts due from lessees under finance leases are recognised as receivables equivalent to the Group\u2019s net investment in the lease and the right-of-use asset from the head lease is derecognised. Any difference resulting from the derecognition of the right-of-use asset and recognition of the net investment in the sublease is recognised in the consolidated statement of comprehensive income. The head lease liability remains on the balance sheet and interest expense continues to be recognised, while interest income is recognised from the sublease. Consolidation of special purpose vehicles (\u201cSPVs\u201d) Subsidiaries are those entities, including structured vehicles, over which the Group has control. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee. The Group has power over an entity when it has existing rights that give it the current ability to direct the activities that most significantly affect the entity\u2019s returns. Power may be determined on the basis of voting rights or, in the case of structured entities, other contractual arrangements. The Group assesses whether it controls SPVs and the requirement to consolidate them under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of each entity (for example, managing the performance of the underlying assets and raising debt on those assets which is used to fund the Group) and uses this control to obtain a variable return (for example, retaining the residual risk on the assets). Structures that do not meet these criteria are not treated as subsidiaries and the assets are derecognised when they are sold. Where the Group manages the administration of its securitised assets and is exposed to the risks and rewards of the underlying assets through its continued investment or where the Group does not retain a direct ownership interest in an SPE, but the Directors have determined that the Group controls those entities, they are treated as subsidiaries and are consolidated. Investment in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group\u2019s investment in its associate is accounted for using the equity method. Under the equity method of accounting, the investments are initially recognised at cost. This is adjusted thereafter to recognise the Group\u2019s share of the post-acquisition profits or losses of the investee in the consolidated statement of comprehensive income. The Group\u2019s share of movements in other comprehensive income of the investee is recognised in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. When the Group\u2019s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group\u2019s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is an indication that the investment in the associate is impaired. If there is such an indication, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss within the statement of comprehensive income. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 1. Accounting policies continued Financial instruments Financial assets The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification and subsequent measurement are applied, which require financial assets to be classified based on the Group\u2019s business model for managing the asset and the contractual cash flow characteristics of the asset: 5 financial assets are measured at amortised cost if they are held within a business model, the objective of which is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest; 5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within the business model defined as \u201dheld to collect and sell\u201d, the objective of which is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest; and 5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or loss (\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The purchase of any credit-impaired assets is also at fair value after any impairment. Except for certain investments in SME loans as described below, the Group does not recognise on its balance sheet loans arranged between borrowers and investors as it is not a principal party to the contracts and is not exposed to the risks and rewards of these loans. With the exception of investment in trusts and co-investments, SME loans (warehouse), certain SME loans (other) and SME loans (securitised), all financial assets are held to collect contractual cash flows. The five types of SME loans held are as follows: i) SME loans (warehouse) During the warehouse phase of the securitisation programme, the SME loans originated using both the Group\u2019s cash and amounts borrowed under credit facilities were held on the Group\u2019s balance sheet. In 2021 these were transferred into other FC entities and the credit facilities repaid and continue to be presented as SME loans (warehouse) to represent their legacy nature. These SME loans have been classified as financial assets at fair value through profit or loss because all such loans are acquired principally for selling in the short term and the collection of interest is incidental. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. ii) SME loans (securitised) Under risk retention regulations the Group is required to retain at least 5% of the bonds issued by the securitisation SPV. Retaining a significant proportion of the residual Whilst the Group is required to retain 5% of the overall bond issuance, where the Group holds a significant proportion of the unrated bonds (referred to as the \u201cresidual\u201d), the Group consolidates the securitisation SPV as it considers that the risks and rewards of ownership continue to reside with the Group. As a result the underlying SME loan book held in the SPV is recognised on balance sheet along with the bond liabilities to third parties. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. Selling a significant portion of the residual Where the Group sells a significant portion of the residual, the Group may no longer be deemed to retain the majority of the risks and rewards of ownership and the Group would deconsolidate the securitisation SPV. The Group would subsequently apply the derecognition rules of IFRS 9 to the investment in SME loans. Cash on the sale of the Group\u2019s investment in the residual is treated as an investing activity. Exercising call rights associated with the residual In certain vehicles the residual comes with call rights attached that become exercisable as the portfolio and bond liabilities of the SPV amortise to below a minimum threshold. The calling of the vehicle allows the residual holder to purchase the remaining loans from the SPV and use the proceeds and the remaining assets of the vehicle to repay bond liabilities. When the Group has exercised its call rights and purchased loans from and SPV, subsequently held directly by subsidiaries of the Group, these loans continue to be referred to as SME loans (securitised) based on the legacy nature of the loans. 1. Accounting policies continued Financial instruments continued Financial assets continued iii) SME loans (other) The Group has originated PPP loans using the SBA\u2019s PPPLF facility which are held on balance sheet. Additionally the Group holds investments in certain SME business loans as a result of a commercial arrangements with institutional investors and in certain circumstances the Group also buys back loans from investors. These loans are included in SME loans (other) (see note 12) and are classified as amortised cost (as they are held solely to collect principal and interest payments) and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. PPP loans are fully guaranteed by the SBA. SME loans (other) additionally includes loans temporarily funded by the Group in relation to the relaunch of commercial loans which are classified as financial assets at fair value through profit or loss and are held with the intention of selling on to investors. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. iv) Lines of credit The accounting policy and description is detailed under \u201cFlexiPay: Lines of credit\u201d in the summary of new and amended accounting policies. v) Investment in trusts and co-investments The Group holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the majority of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and commercial loans, which retain legal title to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain the economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within, including the SME loans, are not consolidated. The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it is exposed to the majority of the variability. As the Group\u2019s holding is small compared to the majority investor and pari passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the trust structures, so they are not consolidated by the Group. Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. The Group recognises transaction fee income on origination of loans within the trust and service fee income on the assets within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged in relation to the origination of CBILS and RLS loans and investment income is recognised in relation to returns on the investment. Other financial assets Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease payment receivable. Interest is recognised within finance income in the statement of comprehensive income. Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets approximates to their fair value. Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. 1. Accounting policies continued Financial instruments continued Financial assets continued Impairment of financial assets held at amortised cost continued 5 Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be credit-impaired. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs. The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay those cash flows to one or more recipients. The Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership. Financial liabilities Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair value of a non-interest-bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Bank borrowings Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest rate method. Derivative financial instruments Interest rate caps were in place to partially mitigate the floating rate interest rate risk associated with drawn amounts from borrowing facilities and risk associated with floating rate ABS bond liabilities consolidated into the Group. The derivatives are recognised initially at fair value reflecting the time value implicit in the premium paid and are subsequently measured at fair value with gains and losses recognised in profit or loss. See note 16 for details of interest rate risk. Bonds Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are eliminated upon consolidation. IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group\u2019s case the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair value through profit and loss. As the cash flows from the SME loans are used to repay the rated bond tranches in advance of the unrated bonds, the Group does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the SME loans, the Group has elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis. See note 16 for details of the fair value methodology and interest rate risk. Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime of the bonds using the effective interest rate method. 1. Accounting policies continued Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Loan repurchases Loan repurchase contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Loan repurchase contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the contract. The liability is subsequently measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation. The expected credit loss model is used to measure and recognise the financial liability (as further detailed in note 15). Share capital Ordinary shares are classified as equity where their terms include no contractual obligation to transfer cash or another financial asset to another entity. Earnings/(loss) per share The Group presents basic and diluted earnings/(losses) per share (\u201cEPS\u201d) for its ordinary shares. Basic and diluted EPS are calculated by dividing the profit/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year excluding shares held as own shares in the Group\u2019s Employee Benefit Trusts. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees under the Group\u2019s share-based compensation schemes which do not have an exercise price or where the exercise price is less than the average market price of the Company\u2019s ordinary shares during the year. Shares held by the Employee Benefit Trust and Share Incentive Plan Trust The Company has established an offshore Employee Benefit Trust (\u201cEBT\u201d) and an onshore Share Incentive Plan (\u201cSIP\u201d) Trust. The EBT and SIP Trust provide for the issue of shares to Group employees principally under share option schemes and SIP respectively. The Group has control of the EBT and SIP Trust and therefore consolidates the Trusts in the Group financial statements. The Group has commenced the purchase of own shares in the market during the financial year in order to satisfy the exercise of employee share option schemes. Shares which are purchased are recognised at cost and are treated as a deduction to shareholders\u2019 equity. No gain or loss is recognised in the income statement on the purchase or utilisation of equity shares. Reserves Foreign exchange reserve The foreign exchange reserve represents the cumulative foreign currency translation movement on the assets and liabilities of the Group\u2019s international operations at year-end exchange rates and on the profit and loss items from average exchange rates to year-end exchange rates. Share options reserve The share options reserve represents the cumulative charges to income under IFRS 2 Share-based Payments on all share options and schemes granted, net of share option exercises. The costs are transferred to retained earnings when options are exercised. ",
"dimensions": {
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"language": "en",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"value": "General information Funding Circle Holdings plc (the \u201cCompany\u201d) is a public company limited by shares, which is listed on the London Stock Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006 and registered in England and Wales. The address of its registered office is given on page 196. The consolidated financial statements of the Group for the year ended 31 December 2022 comprise the Company and its subsidiaries (together referred to as the \u201cGroup\u201d and individually as \u201cGroup entities\u201d). The principal activities of the Group and the nature of the Group\u2019s operations are as a global SME loan platform. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. ",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-330": {
"value": "Funding Circle Holdings plc (the \u201cCompany\u201d) is a public company limited by shares, which is listed on the London Stock ",
"dimensions": {
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"language": "en",
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"fact-1": {
"value": "Funding Circle Holdings plc",
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"entity": "scheme:2138003EK6UAINBBUS19",
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"fact-4": {
"value": "public company limited by shares",
"dimensions": {
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"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"value": "United Kingdom ",
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"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
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"fact-2": {
"value": "United Kingdom",
"dimensions": {
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"fact-3": {
"value": "The principal activities of the Group and the nature of the Group\u2019s operations are as a global SME loan platform. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"value": "Going concern The Group\u2019s business activities together with the factors likely to affect its future development and position are set out in the Strategic Report. The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future (which has been taken as at least 12 months from the date of approval of the financial statements). The Group made a total comprehensive loss of \u00a31.1 million during the year ended 31 December 2022 (2021: profit of \u00a362.6 million). As at 31 December 2022, the Group had net assets of \u00a3284.0 million (2021: \u00a3288.0 million). This includes \u00a3177.7 million of cash and cash equivalents (2021: \u00a3224.0 million) of which \u00a312.1 million (2021: \u00a324.6 million) is held within the securitisation vehicles or for other specific purposes and is restricted in use. Additionally, within the net assets, the Group holds \u00a396.5 million (2021: \u00a369.7 million) of invested capital, some of which is capable of being monetised if liquidity needs arise. The Group has prepared detailed cash flow forecasts for the next 15 months and has updated the going concern assessment to factor in the potential ongoing impact of inflation and related economic stress. The base case scenario assumes: 5 continued growth in origination of the Group\u2019s commercial lending product until June 2024; 5 there remains macroeconomic stress in 2023 from inflation, and supply chain pressures with a peak in defaults, which gradually de-stress in the following years; 5 no extensions or new government schemes that the Group participated in; 5 the rollout of the new FlexiPay product using the Group\u2019s balance sheet to fund it; and 5 costs and headcount grow modestly with the new product and with investment in technology. Management prepared a severe but plausible downside scenario in which: 5 further macroeconomic volatility continues through the period with increased inflation and interest rates reducing originations and increasing costs; 5 investment returns reduce owing to increased funding costs, widening discount rates and deterioration in loan performance; 5 an operational event occurs requiring a cash outlay; and 5 a downside loss scenario is applied to Funding Circle\u2019s on-balance sheet investment in SME loans resulting in higher initial fair value losses and lower cash flows to the investments it owns. Management has reviewed financial covenants the Group must adhere to in relation to its servicing agreements. These are with institutional investors for which there are unrestricted cash, tangible net worth and debt to tangible net worth ratios. Management has also reviewed regulatory capital requirements. In the downside scenario the risk of covenant or capital requirement breach is considered remote. The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and have, at the time of approving these financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Further detail is contained in the Strategic Report on pages 70 and 71. ",
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"fact-336": {
"value": "Basis of preparation The Group presents its annual financial statements in conformity with United Kingdom laws and regulations. The financial statements have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the United Kingdom\u2019s Financial Conduct Authority. Basis of preparation continued The financial statements have been prepared on the historical cost basis except for certain financial instruments that are carried at fair value through profit and loss (\u201cFVTPL\u201d). The preparation of financial statements requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the Group\u2019s accounting policies. Changes in assumptions may have a significant impact on the financial statements in the year the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. ",
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"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-337": {
"value": "Significant changes in the current reporting year The financial position and performance of the Group were affected by the following events and transactions during the year ended 31 December 2022: i) Sale of securitised SME loans and unwind of UK and US SPVs (note 16) In May 2022, Funding Circle exercised the call rights associated with the majority ownership of the unrated junior residual tranches of Small Business Origination Loan Trust 2019-3\u2019s bonds in the UK. The call option became exercisable as the portfolio and bond liabilities of the SPV had amortised to below a minimum threshold. Funding Circle and the other junior note holder purchased the loans from the SPV, in line with their proportional ownership of the note tranches, at fair value. The proceeds, cash, and other assets of the vehicle were liquidated and used to repay outstanding expenses and interest and principal on the bond liabilities. As the SPV is consolidated, the net impact on the Group\u2019s financial statements was a sale of 49% of the UK securitised SME loans to the other junior note holder and repayment of the bond liabilities. The bond liabilities held at FVTPL were repaid at an amount higher than their previous fair value estimate as the cash flows were delivered sooner and at a higher amount resulting in a fair value loss as set out in note 15. As a result, there are no unrated bond liabilities remaining for the Group. Subsequently the Group owned 51% of the securitised SME loans, directly through the subsidiary Funding Circle Ltd. The majority of the retained loans were sold to a third party with an economic cut off of 30 June 2022 and cash settlement in September 2022 for their fair value, with no gain or loss on sale, and as a result only a smaller portfolio of delinquent and defaulted loans was retained by the Group. In October 2022, Funding Circle exercised the call rights associated with the ownership of the unrated junior residual tranches of Small Business Lending Trust 2019-A\u2019s bonds in the US. The call option became exercisable as the portfolio and bond liabilities of the SPV had amortised to below the minimum threshold. Funding Circle purchased the loans from the SPV at fair value. The proceeds, cash and other assets of the vehicle were liquidated and used to repay outstanding expenses, and interest and principal on the bond liabilities. As the SPV is consolidated, the net impact on the Group\u2019s financial statements was the repayment of the bond liabilities of the vehicle. The Group continues to consolidate 100% of the securitised SME loans, now owned directly by the subsidiary FC Marketplace LLC. The Group continues to consolidate both the SPVs, which subsequently began a liquidation process, and holds an immaterial amount of cash and accruals, through exposure to the majority of the variability in any excess cash flows available after the liquidation is completed. The loans retained continue to be held at fair value through profit and loss, within SME Loans (securitised), as the Group continues to hold these with the intention of selling them if, and when, an attractive price can be realised. ii) Scaling up of new products The Group has continued to invest in the scaling up lending through lines of credit in its FlexiPay product. Through FlexiPay, borrowers are provided with a facility which can be drawn to pay invoices and expenses, and are subsequently repaid over three months. A fee of 3% was charged in the year on the drawn amount which is recognised over the three-month life of the drawdown in interest income under the effective interest rate method. The accounting policy regarding FlexiPay is outlined later in this note. As outlined later, the loans are measured at amortised cost. As FlexiPay will continue to become a larger part of the Group\u2019s business, this has been disclosed as a separate segment within note 3. As a result the Group has presented FlexiPay under \u201clines of credit\u201d on the balance sheet and reclassified the comparative which was previously presented in \u201cinvestment in SME loans (other)\u201d and cash flows have been re-presented within \u201corigination of/cash receipts from lines of credit\u201d within cash flows from operating activities and were previously presented within \u201corigination of/ cash receipts from SME loans (other)\u201d in cash flows from investing activities in the year ended 31 December 2021. iii) Redemption of investment in associate In July 2022 an agreement was signed by Funding Circle European Private Fund DAC I to sell the loans held by the fund as part of its strategy to return capital to shareholders in a cost effective manner. The Group received \u00a32.6 million in cash in August 2022 as a final capital distribution and the corresponding investment in associate held by the Group was reduced by this distribution to nil. ",
"dimensions": {
"concept": "fundingcircle:DisclosureOfSignificantChangesInTheCurrentReportingYear",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-338": {
"value": "Changes in accounting policy and disclosures The Group has adopted the following new and amended IFRSs and interpretations from 1 January 2022 on a full retrospective basis. Standard/interpretation Content Applicable for financial years beginning on/after Amendments to IFRS 3 \u2013 Reference to the Conceptual Framework Business combinations 1 January 2022 Amendments to IAS 16 \u2013 Property, Plant and Equipment: Proceeds before Intended Use Property, plant and equipment 1 January 2022 Amendments to IAS 37 \u2013 Onerous Contracts \u2013 Costs of Fulfilling a Contract Provisions \u2013 onerous contracts 1 January 2022 The amendments and interpretations listed above did not materially affect the current year and are not expected to materially affect future years. Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting years and have not been early adopted by the Group as follows: Standard/interpretation Content Applicable for financial years beginning on/after Amendments to IAS 1 \u2013 Classification of Liabilities as Current or Non-current Presentation of financial statements 1 January 2023 Amendments to IAS 8 \u2013 Definition of Accounting Estimates Accounting policies, changes in accounting estimates 1 January 2023 Amendments to IAS 1 and IFRS Practice Statement 2 \u2013 Disclosure of Accounting Policies Accounting policies 1 January 2023 Amendments to IAS 12 \u2013 Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction Deferred tax 1 January 2023 These standards are not expected to have a material impact on the Group in the current or future reporting years or on foreseeable future transactions. Summary of new and amended accounting policies FlexiPay: Lines of credit Lending through the FlexiPay product is recognised on the balance sheet within lines of credit. This represents the drawn amount of the facilities. The contractual cash flows represent solely payments of principal and interest (\u201cSPPI\u201d) and the business model under which they are held is in order to collect the contractual cash flows resulting in the lines of credit being measured initially at fair value and subsequently at amortised cost. The Group has presented FlexiPay under \u201clines of credit\u201d in the balance sheet and reclassified the comparative which was previously presented in \u201cinvestment in SME loans (other)\u201d where they were also measured at amortised cost. The origination fee associated with FlexiPay is recognised under IFRS 9 within interest income at the effective interest rate in the consolidated statement of comprehensive income and is recognised over the contractual term of the draw down. Cash flows have been re-presented within \u201cOrigination of/cash receipts from lines of credit\u201d within cash flows from operating activities and were previously presented within \u201cOrigination of/ cash receipts from SME loans (other)\u201d in cash flows from investing activities in the year ended 31 December 2021. The FlexiPay lines of credit are held net of expected credit loss allowances under IFRS 9, the methodology and definitions of which align to the existing Group accounting policy on impairment of financial assets held at amortised cost with the exception of being assessed at the available line of credit level, estimating the utilisation of the line of credit to the estimated point of default and are detailed further within note 16. Additionally, the Group assesses the expected credit loss allowance in relation to undrawn lines of credit, estimating the probability of default, loss given default and exposure at default in relation to these lines of credit were they to be drawn. This has resulted in a \u00a30.3 million (2021: \u00a3nil) loss allowance recognised within other liabilities in note 15. SME loans (securitised), SME loans (warehouse) and SME loans (other) Following the call option being exercised on the UK and one of the US securitisation vehicles and the repayment of the warehouse borrowings in 2021 and 2022, some of the SME loans were purchased from the vehicles and are held directly in Funding Circle Limited and Funding Circle Marketplace LLC. These loans continue to be held at FVTPL as the business model under which they are held remains to sell the loans. They continue to be presented within SME loans (securitised) and SME loans (warehouse) representing the legacy nature of the loans. Certain SME loans are originated by the Group under the business model of selling onwards, and are therefore measured initially and subsequently at FVTPL. These loans are presented within SME loans (other) alongside loans held at amortised cost and can be distinguished in note 16. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-339": {
"value": "Basis of consolidation Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Structured entities are entities that are designed so that their activities are not governed by voting rights. In assessing whether the Group has power over such entities, the Group considers factors such as the purpose and design of the entity; its practical ability to direct the relevant activities of the entity; the nature of the relationship with the entity; and the size of its exposure to the variability of returns of the entity. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet, the acquiree\u2019s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-340": {
"value": "Foreign currency translation Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their \u201cfunctional currency\u201d) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the prevailing rate at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-341": {
"value": "Presentation currency These consolidated financial statements are presented in GBP sterling, which is the Group\u2019s presentation currency. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the prevailing rate at the reporting date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are used. Exchange differences arising are recognised in other comprehensive income and accumulated 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 translated at the prevailing rate at the reporting date. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-342": {
"value": "Segment reporting Operating segments are reported in the manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, which is the function responsible for allocating resources and assessing performance of the operating segments, has been identified as the Global Leadership Team that makes strategic decisions. For each identified operating segment, the Group has disclosed information for the key performance indicators that are assessed internally to review and steer performance in the Strategic Report. Transactions between segments are on an arm\u2019s length basis in a manner similar to transactions with third parties. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-343": {
"value": "Exceptional items Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of such significance that they merit separate presentation in order to aid the reader\u2019s understanding of the Group\u2019s financial performance. Such items would include profits or losses on disposal of businesses; transaction costs; acquisitions and disposals; major restructuring programmes; significant goodwill or other asset impairments; and other particularly significant or unusual items (see note 5). ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForExceptionalItemsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-344": {
"value": "Income recognition Fee income is recognised in line with IFRS 15 which provides a single, principles-based five-step model to be applied to all contracts with customers: 1) identify the contract with the customer; 2) identify the performance obligations in the contract, introducing the new concept of \u201cdistinct\u201d; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contracts, on a relative stand-alone selling price basis; and 5) recognise income when (or as) the entity satisfies its performance obligation. Fee income earned for the arrangement of loans is classified as transaction fees and is a cost of the borrower except for government-guaranteed CBILS loans which were a cost to the government. The contract signed by the borrower and related terms are clearly identifiable. The performance obligation in the contract is considered to be the funding of the loan through the platform and the transaction price is clearly stated in the borrower\u2019s contract. Fees are recognised immediately once loans are fully funded and after the loans are accepted by the borrowers. At this point the performance obligation has been met, there are no clawback provisions and the fee is recognised. Such fees are automatically deducted from the amount borrowed (or subsequently invoiced in the case of government-guaranteed CBILS loans). Fee income earned from referrals to partner institutions is classified as transaction fees and is a cost to the partner institution. There are contracts in place with partner institutions with clearly identifiable terms. The performance obligation in the contract is considered to be the referral by the Group and subsequent funding of the referred loan by the partner institution and the transaction price is clearly stated in the referral agreement. Fees are recognised once the referred loan has been funded by the partner institution and accepted by the referred borrower. At this point the performance obligation has been met and there are no significant clawback provisions. Fee income earned from servicing third party loans is classified as servicing fees and is a cost of the investor, except in the case of the first year of servicing fees related to CBILS loans, where the government paid the cost. It comprises an annualised fee representing a percentage of outstanding principal. The contractual basis for the servicing fee and transaction price is based on the terms and conditions agreed by investors to the lending platform. The performance obligation is servicing the loans and allocating repayments of the loan parts to the respective lenders. The transaction price is allocated as a percentage of the outstanding principal balance, representing the outstanding performance obligation. Fees are recognised on a monthly basis upon repayment of loan parts. Due to the conditions of the loans, there are no partially completed contracts at the balance sheet date and no advance payments from customers. Other fees include excess premium earned from arrangements to buy back defaulted loans from certain institutional investors and income earned on certain bought back loans. Other fees also includes income from collections charges levied on the successful recovery of defaulted loans. These are recognised as services are performed. Net income includes the following elements under which the recognition criteria of IFRS 9 and not IFRS 15 are applied: Interest income includes: 5 interest income recognised on assets held at amortised cost under the effective interest rate method including FlexiPay. Investment income includes: 5 interest income from SME loans and investments in trusts that the Group holds on balance sheet. Investment expense includes: 5 interest payable on funds borrowed to finance the acquisition of underlying loan investments; 5 interest payable on bond liabilities held on balance sheet; 5 amortisation of costs associated with the issuing of bonds and the credit facility; and 5 gains/losses from changes in fair value of interest hedging instruments. Fair value gains/losses includes: 5 gains/losses from changes in the fair value of financial assets and liabilities held on balance sheet. Net income recorded in the financial statements is generated in the UK, the US, Germany and the Netherlands. All fees are calculated based on the above income recognition policy. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-345": {
"value": "Administrative expenses Administrative expenses are recognised as an expense in the statement of comprehensive income in the period in which they are incurred on an accruals basis. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-346": {
"value": "Share-based payments The Group operates a number of equity-settled share-based compensation plans, under which the Group receives services from employees as consideration for equity instruments (options and shares) of the Company. The fair value of the employee services received in exchange for the grant of the options and shares is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options and shares granted: 5 including any market performance conditions (for example, an entity\u2019s share price); 5 excluding the impact of any service and non-market performance vesting conditions (for example, net income, earnings per share and remaining an employee of the Group over a specified time period); and 5 including the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market vesting conditions are included in assumptions about the number of options and shares that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimate of the number of options and shares that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares or utilises shares that have been purchased in the market. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The grant by the Company of options and shares over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding credit to equity in the Parent entity (the \u201cCompany\u201d) accounts. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-347": {
"value": "Pension obligations The Group operates a defined contribution pension scheme for employees in the UK and US. The schemes are pension plans under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior years. Contributions payable to the Group\u2019s pension scheme are charged to the statement of comprehensive income in the year to which they relate. The Group has no further payment obligations once the contributions have been paid. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-391": {
"value": "Current and deferred tax The tax expense for the year comprises current and deferred tax. Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group has established transfer pricing policies and ensures mechanisms are in place in ensuring subsidiaries receive an appropriate tax rate and base. It establishes provisions, where appropriate, based on amounts expected to be paid to the tax authorities. Deferred tax assets for unused tax losses, tax credits and deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted at the year-end date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax balances are not discounted. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-348": {
"value": "Current and deferred tax The tax expense for the year comprises current and deferred tax. Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group has established transfer pricing policies and ensures mechanisms are in place in ensuring subsidiaries receive an appropriate tax rate and base. It establishes provisions, where appropriate, based on amounts expected to be paid to the tax authorities. Deferred tax assets for unused tax losses, tax credits and deductible temporary differences are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted at the year-end date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax balances are not discounted. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-349": {
"value": "Dividends Dividends are recognised when they become legally payable, in accordance with the Companies Act 2006. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-350": {
"value": "Intangible assets Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. Useful lives and amortisation methods are reviewed at the end of each annual reporting period, or more frequently when there is an indication that the intangible asset may be impaired, with the effect of any changes accounted for on a prospective basis. Amortisation commences when the intangible asset is available for use. The residual value of intangible assets is assumed to be zero. Computer software licences Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over the licence period, which is up to five years as at 31 December 2022. Capitalised development costs Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design, build and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: 5 it is technically feasible to complete the build of the platform products so that they will be available for use; 5 management intends to complete the build of the platform products for use within the Group; 5 there is an ability to use the platform products; 5 it can be demonstrated how the platform products will generate probable future economic benefits; 5 adequate technical, financial and other resources to complete the development and to use the platform products are available; and 5 the expenditure attributable to the platform products during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software product include the software development employee and contractor costs. The capitalisation of employee costs is based on the amount of time spent on specific projects which meet the criteria as a proportion of their total time, and this proportion of their salary-related costs is attributed to the applicable projects. Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use over their estimated useful lives, ranging from three to five years. Other intangibles Other intangibles relate to the technology platform and customer relationship (representing fees due on contracted loans expected to be realised in the foreseeable future) acquired on a business combination. These costs are amortised over their estimated useful lives, which do not exceed three years. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-351": {
"value": "Tangible fixed assets Tangible fixed assets are stated at cost less depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful life, as follows: Computer equipment 1\u20133 years Furniture and fixtures 3\u20135 years Leasehold improvements that qualify for recognition as an asset are measured at cost and are presented as part of property, plant and equipment in the non-current assets section on the balance sheet. Depreciation on leasehold improvements is calculated using the straight-line method over the lease term. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-352": {
"value": "Impairment of tangible and intangible assets Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset\u2019s recoverable amount since the last impairment loss was recognised. If this was the case, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-353": {
"value": "Leases At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When a lease is recognised in a contract the Group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, less any lease incentives. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line basis over the length of the lease. Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: 5 fixed payments less any lease incentives receivable; 5 variable lease payments based on an index or a rate, initially measured using the index or rate at the commencement date; and 5 amounts expected to be payable by the Group under residual value guarantee. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group\u2019s incremental borrowing rate is used, which is the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group: 5 where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received; 5 uses an approach taking the risk-free interest rate adjusted for credit risk for leases held by Funding Circle Holdings plc; and 5 makes adjustments specific to the lease for term, country and currency. Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability and reducing it by the lease payments made. The lease liability and right-of-use asset are remeasured when there is a lease modification. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Extension and termination options are included in a number of property leases in the Group. Management considers the facts and circumstances that may create an economic incentive to exercise an extension or termination option in order to determine whether the lease term should include or exclude such options. Extension or termination options are only included within the lease term if they are reasonably certain to be exercised in the case of extension options and not exercised in the case of termination options. Considerations include: 5 if leasehold improvements are expected to have significant value at the end of the lease term; 5 expected costs or business disruption as a result of replacing a lease; and 5 significant penalties incurred in order to terminate. Leases continued Lease terms are reassessed if the option is exercised or if a significant event occurs which impacts the assessment of reasonable certainty. The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expenses on a straight-line basis over the lease term. When the Group is an intermediate lessor, entering into a sublease, it accounts for the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. Rental income from operating leases is recognised on a straight-line basis over the lease term and the Group retains the right-of-use asset deriving from the head lease and the lease liability on the balance sheet. Amounts due from lessees under finance leases are recognised as receivables equivalent to the Group\u2019s net investment in the lease and the right-of-use asset from the head lease is derecognised. Any difference resulting from the derecognition of the right-of-use asset and recognition of the net investment in the sublease is recognised in the consolidated statement of comprehensive income. The head lease liability remains on the balance sheet and interest expense continues to be recognised, while interest income is recognised from the sublease. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-354": {
"value": "Consolidation of special purpose vehicles (\u201cSPVs\u201d) Subsidiaries are those entities, including structured vehicles, over which the Group has control. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee. The Group has power over an entity when it has existing rights that give it the current ability to direct the activities that most significantly affect the entity\u2019s returns. Power may be determined on the basis of voting rights or, in the case of structured entities, other contractual arrangements. The Group assesses whether it controls SPVs and the requirement to consolidate them under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of each entity (for example, managing the performance of the underlying assets and raising debt on those assets which is used to fund the Group) and uses this control to obtain a variable return (for example, retaining the residual risk on the assets). Structures that do not meet these criteria are not treated as subsidiaries and the assets are derecognised when they are sold. Where the Group manages the administration of its securitised assets and is exposed to the risks and rewards of the underlying assets through its continued investment or where the Group does not retain a direct ownership interest in an SPE, but the Directors have determined that the Group controls those entities, they are treated as subsidiaries and are consolidated. ",
"dimensions": {
"concept": "fundingcircle:DescriptionOfAccountingPolicyForConsolidationOfSpecialPurposeVehiclesSPVs",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-355": {
"value": "Investment in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group\u2019s investment in its associate is accounted for using the equity method. Under the equity method of accounting, the investments are initially recognised at cost. This is adjusted thereafter to recognise the Group\u2019s share of the post-acquisition profits or losses of the investee in the consolidated statement of comprehensive income. The Group\u2019s share of movements in other comprehensive income of the investee is recognised in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. When the Group\u2019s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group\u2019s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is an indication that the investment in the associate is impaired. If there is such an indication, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss within the statement of comprehensive income. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-356": {
"value": "Financial instruments Financial assets The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification and subsequent measurement are applied, which require financial assets to be classified based on the Group\u2019s business model for managing the asset and the contractual cash flow characteristics of the asset: 5 financial assets are measured at amortised cost if they are held within a business model, the objective of which is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest; 5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within the business model defined as \u201dheld to collect and sell\u201d, the objective of which is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest; and 5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or loss (\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The purchase of any credit-impaired assets is also at fair value after any impairment. Except for certain investments in SME loans as described below, the Group does not recognise on its balance sheet loans arranged between borrowers and investors as it is not a principal party to the contracts and is not exposed to the risks and rewards of these loans. With the exception of investment in trusts and co-investments, SME loans (warehouse), certain SME loans (other) and SME loans (securitised), all financial assets are held to collect contractual cash flows. The five types of SME loans held are as follows: i) SME loans (warehouse) During the warehouse phase of the securitisation programme, the SME loans originated using both the Group\u2019s cash and amounts borrowed under credit facilities were held on the Group\u2019s balance sheet. In 2021 these were transferred into other FC entities and the credit facilities repaid and continue to be presented as SME loans (warehouse) to represent their legacy nature. These SME loans have been classified as financial assets at fair value through profit or loss because all such loans are acquired principally for selling in the short term and the collection of interest is incidental. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. ii) SME loans (securitised) Under risk retention regulations the Group is required to retain at least 5% of the bonds issued by the securitisation SPV. Retaining a significant proportion of the residual Whilst the Group is required to retain 5% of the overall bond issuance, where the Group holds a significant proportion of the unrated bonds (referred to as the \u201cresidual\u201d), the Group consolidates the securitisation SPV as it considers that the risks and rewards of ownership continue to reside with the Group. As a result the underlying SME loan book held in the SPV is recognised on balance sheet along with the bond liabilities to third parties. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. Selling a significant portion of the residual Where the Group sells a significant portion of the residual, the Group may no longer be deemed to retain the majority of the risks and rewards of ownership and the Group would deconsolidate the securitisation SPV. The Group would subsequently apply the derecognition rules of IFRS 9 to the investment in SME loans. Cash on the sale of the Group\u2019s investment in the residual is treated as an investing activity. Exercising call rights associated with the residual In certain vehicles the residual comes with call rights attached that become exercisable as the portfolio and bond liabilities of the SPV amortise to below a minimum threshold. The calling of the vehicle allows the residual holder to purchase the remaining loans from the SPV and use the proceeds and the remaining assets of the vehicle to repay bond liabilities. When the Group has exercised its call rights and purchased loans from and SPV, subsequently held directly by subsidiaries of the Group, these loans continue to be referred to as SME loans (securitised) based on the legacy nature of the loans. Financial instruments continued Financial assets continued iii) SME loans (other) The Group has originated PPP loans using the SBA\u2019s PPPLF facility which are held on balance sheet. Additionally the Group holds investments in certain SME business loans as a result of a commercial arrangements with institutional investors and in certain circumstances the Group also buys back loans from investors. These loans are included in SME loans (other) (see note 12) and are classified as amortised cost (as they are held solely to collect principal and interest payments) and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. PPP loans are fully guaranteed by the SBA. SME loans (other) additionally includes loans temporarily funded by the Group in relation to the relaunch of commercial loans which are classified as financial assets at fair value through profit or loss and are held with the intention of selling on to investors. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. iv) Lines of credit The accounting policy and description is detailed under \u201cFlexiPay: Lines of credit\u201d in the summary of new and amended accounting policies. v) Investment in trusts and co-investments The Group holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the majority of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and commercial loans, which retain legal title to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain the economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within, including the SME loans, are not consolidated. The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it is exposed to the majority of the variability. As the Group\u2019s holding is small compared to the majority investor and pari passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the trust structures, so they are not consolidated by the Group. Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. The Group recognises transaction fee income on origination of loans within the trust and service fee income on the assets within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged in relation to the origination of CBILS and RLS loans and investment income is recognised in relation to returns on the investment. Other financial assets Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease payment receivable. Interest is recognised within finance income in the statement of comprehensive income. Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets approximates to their fair value. Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. Financial instruments continued Financial assets continued Impairment of financial assets held at amortised cost continued 5 Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be credit-impaired. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs. The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay those cash flows to one or more recipients. The Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership. Financial liabilities Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair value of a non-interest-bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Bank borrowings Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest rate method. Derivative financial instruments Interest rate caps were in place to partially mitigate the floating rate interest rate risk associated with drawn amounts from borrowing facilities and risk associated with floating rate ABS bond liabilities consolidated into the Group. The derivatives are recognised initially at fair value reflecting the time value implicit in the premium paid and are subsequently measured at fair value with gains and losses recognised in profit or loss. See note 16 for details of interest rate risk. Bonds Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are eliminated upon consolidation. IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group\u2019s case the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair value through profit and loss. As the cash flows from the SME loans are used to repay the rated bond tranches in advance of the unrated bonds, the Group does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the SME loans, the Group has elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis. See note 16 for details of the fair value methodology and interest rate risk. Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime of the bonds using the effective interest rate method. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-392": {
"value": "Financial assets The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification and subsequent measurement are applied, which require financial assets to be classified based on the Group\u2019s business model for managing the asset and the contractual cash flow characteristics of the asset: 5 financial assets are measured at amortised cost if they are held within a business model, the objective of which is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest; 5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within the business model defined as \u201dheld to collect and sell\u201d, the objective of which is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest; and 5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or loss (\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The purchase of any credit-impaired assets is also at fair value after any impairment. Except for certain investments in SME loans as described below, the Group does not recognise on its balance sheet loans arranged between borrowers and investors as it is not a principal party to the contracts and is not exposed to the risks and rewards of these loans. With the exception of investment in trusts and co-investments, SME loans (warehouse), certain SME loans (other) and SME loans (securitised), all financial assets are held to collect contractual cash flows. The five types of SME loans held are as follows: i) SME loans (warehouse) During the warehouse phase of the securitisation programme, the SME loans originated using both the Group\u2019s cash and amounts borrowed under credit facilities were held on the Group\u2019s balance sheet. In 2021 these were transferred into other FC entities and the credit facilities repaid and continue to be presented as SME loans (warehouse) to represent their legacy nature. These SME loans have been classified as financial assets at fair value through profit or loss because all such loans are acquired principally for selling in the short term and the collection of interest is incidental. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. ii) SME loans (securitised) Under risk retention regulations the Group is required to retain at least 5% of the bonds issued by the securitisation SPV. Retaining a significant proportion of the residual Whilst the Group is required to retain 5% of the overall bond issuance, where the Group holds a significant proportion of the unrated bonds (referred to as the \u201cresidual\u201d), the Group consolidates the securitisation SPV as it considers that the risks and rewards of ownership continue to reside with the Group. As a result the underlying SME loan book held in the SPV is recognised on balance sheet along with the bond liabilities to third parties. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. Selling a significant portion of the residual Where the Group sells a significant portion of the residual, the Group may no longer be deemed to retain the majority of the risks and rewards of ownership and the Group would deconsolidate the securitisation SPV. The Group would subsequently apply the derecognition rules of IFRS 9 to the investment in SME loans. Cash on the sale of the Group\u2019s investment in the residual is treated as an investing activity. Exercising call rights associated with the residual In certain vehicles the residual comes with call rights attached that become exercisable as the portfolio and bond liabilities of the SPV amortise to below a minimum threshold. The calling of the vehicle allows the residual holder to purchase the remaining loans from the SPV and use the proceeds and the remaining assets of the vehicle to repay bond liabilities. When the Group has exercised its call rights and purchased loans from and SPV, subsequently held directly by subsidiaries of the Group, these loans continue to be referred to as SME loans (securitised) based on the legacy nature of the loans. Financial assets continued iii) SME loans (other) The Group has originated PPP loans using the SBA\u2019s PPPLF facility which are held on balance sheet. Additionally the Group holds investments in certain SME business loans as a result of a commercial arrangements with institutional investors and in certain circumstances the Group also buys back loans from investors. These loans are included in SME loans (other) (see note 12) and are classified as amortised cost (as they are held solely to collect principal and interest payments) and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. PPP loans are fully guaranteed by the SBA. SME loans (other) additionally includes loans temporarily funded by the Group in relation to the relaunch of commercial loans which are classified as financial assets at fair value through profit or loss and are held with the intention of selling on to investors. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. iv) Lines of credit The accounting policy and description is detailed under \u201cFlexiPay: Lines of credit\u201d in the summary of new and amended accounting policies. v) Investment in trusts and co-investments The Group holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the majority of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and commercial loans, which retain legal title to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain the economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within, including the SME loans, are not consolidated. The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it is exposed to the majority of the variability. As the Group\u2019s holding is small compared to the majority investor and pari passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the trust structures, so they are not consolidated by the Group. Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. The Group recognises transaction fee income on origination of loans within the trust and service fee income on the assets within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged in relation to the origination of CBILS and RLS loans and investment income is recognised in relation to returns on the investment. Other financial assets Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease payment receivable. Interest is recognised within finance income in the statement of comprehensive income. Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets approximates to their fair value. Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. Financial assets continued Impairment of financial assets held at amortised cost continued 5 Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be credit-impaired. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs. The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay those cash flows to one or more recipients. The Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-412": {
"value": "Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. Impairment of financial assets held at amortised cost continued 5 Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be credit-impaired. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs. The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-413": {
"value": "Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay those cash flows to one or more recipients. The Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-393": {
"value": "Financial liabilities Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair value of a non-interest-bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-395": {
"value": "Bank borrowings Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest rate method. Bonds Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are eliminated upon consolidation. IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group\u2019s case the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair value through profit and loss. As the cash flows from the SME loans are used to repay the rated bond tranches in advance of the unrated bonds, the Group does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the SME loans, the Group has elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis. See note 16 for details of the fair value methodology and interest rate risk. Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime of the bonds using the effective interest rate method. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-394": {
"value": "Derivative financial instruments Interest rate caps were in place to partially mitigate the floating rate interest rate risk associated with drawn amounts from borrowing facilities and risk associated with floating rate ABS bond liabilities consolidated into the Group. The derivatives are recognised initially at fair value reflecting the time value implicit in the premium paid and are subsequently measured at fair value with gains and losses recognised in profit or loss. See note 16 for details of interest rate risk. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-357": {
"value": "Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-358": {
"value": "Loan repurchases Loan repurchase contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Loan repurchase contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the contract. The liability is subsequently measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation. The expected credit loss model is used to measure and recognise the financial liability (as further detailed in note 15). ",
"dimensions": {
"concept": "fundingcircle:DescriptionOfAccountingPolicyForLoanRepurchases",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-359": {
"value": "Share capital Ordinary shares are classified as equity where their terms include no contractual obligation to transfer cash or another financial asset to another entity. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-362": {
"value": "Earnings/(loss) per share The Group presents basic and diluted earnings/(losses) per share (\u201cEPS\u201d) for its ordinary shares. Basic and diluted EPS are calculated by dividing the profit/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year excluding shares held as own shares in the Group\u2019s Employee Benefit Trusts. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees under the Group\u2019s share-based compensation schemes which do not have an exercise price or where the exercise price is less than the average market price of the Company\u2019s ordinary shares during the year. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-363": {
"value": "Shares held by the Employee Benefit Trust and Share Incentive Plan Trust The Company has established an offshore Employee Benefit Trust (\u201cEBT\u201d) and an onshore Share Incentive Plan (\u201cSIP\u201d) Trust. The EBT and SIP Trust provide for the issue of shares to Group employees principally under share option schemes and SIP respectively. The Group has control of the EBT and SIP Trust and therefore consolidates the Trusts in the Group financial statements. The Group has commenced the purchase of own shares in the market during the financial year in order to satisfy the exercise of employee share option schemes. Shares which are purchased are recognised at cost and are treated as a deduction to shareholders\u2019 equity. No gain or loss is recognised in the income statement on the purchase or utilisation of equity shares. ",
"dimensions": {
"concept": "fundingcircle:DescriptionOfAccountingPolicyForSharesHeldByEmployeeBenefitTrustAndShareIncentivePlanTrust",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-360": {
"value": "Reserves Foreign exchange reserve The foreign exchange reserve represents the cumulative foreign currency translation movement on the assets and liabilities of the Group\u2019s international operations at year-end exchange rates and on the profit and loss items from average exchange rates to year-end exchange rates. Share options reserve The share options reserve represents the cumulative charges to income under IFRS 2 Share-based Payments on all share options and schemes granted, net of share option exercises. The costs are transferred to retained earnings when options are exercised. ",
"dimensions": {
"concept": "fundingcircle:DescriptionOfAccountingPolicyForReserves",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-361": {
"value": "2. Critical accounting judgements and key sources of estimation uncertainty The preparation of the consolidated financial statements requires the Group to make estimates and judgements that affect the application of policies and reported amounts. Critical judgements represent key decisions made by management in the application of the Group accounting policies. Where a significant risk of materially different outcomes exists due to management assumptions or sources of estimation uncertainty, this will represent a key source of estimation uncertainty. Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on management\u2019s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The significant judgements and estimates applied by the Group in the financial statements have been applied on a consistent basis with the financial statements for the year to 31 December 2021. Critical judgements Consolidation and deconsolidation of special purpose vehicles (\u201cSPVs\u201d) and investment in trusts and co-investments (note 16) As part of its asset-backed securitisation programmes, the Group has established warehouse and securitisation SPVs. Judgement is required in determining who is most exposed to the variability of returns and who has the ability to affect those returns and therefore who should consolidate these vehicles and subsequently deconsolidate them. Where the Group has a significant interest in the junior tranches of the securitisation vehicles or the subordinated debt in the warehouses, the Group is deemed to be exposed to the majority of the variability of the returns of those vehicles and controls them, and therefore consolidates them. Where this interest is reduced, the Group considers whether the vehicles should be deconsolidated. 2. Critical accounting judgements and key sources of estimation uncertainty continued Critical judgements continued Consolidation and deconsolidation of special purpose vehicles (\u201cSPVs\u201d) and investment in trusts and co-investments (note 16) continued The Group also holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the remaining majority of the beneficial ownership held by institutional investors. The SME loans are originated by a Group subsidiary, Funding Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited for RLS and commercial loans, which retain legal title to the loans. These entities hold this legal title of trust on behalf of the majority investors who substantially retain the economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within, including the SME loans, are not consolidated. The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it is exposed to the majority of the variability. As the Group\u2019s holding is small in comparison to the majority investor and is pari passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the trust structures, so they are not consolidated by the Group. Loans originated through the platform The Group originates SME loans through its platform which have been funded primarily by banks, asset managers, other institutional investors, funds, national entities, retail investors or by usage of its own capital. Judgement is required to determine whether these loans should be recognised on the Group\u2019s balance sheet. Where the Group, its subsidiaries or SPVs which it consolidates have legal and beneficial ownership to the title of those SME loans, they are recognised on the Group\u2019s balance sheet. Where this is not the case, the loans are not recognised at the point of origination. Key sources of estimation uncertainty The following are the key sources of estimation uncertainty that the Directors have identified in the process of applying the Group\u2019s accounting policies and have the most significant effect on the amounts recognised in the financial statements. Fair value of financial instruments (note 16) At 31 December 2022, the carrying value of the Group\u2019s financial instrument assets held at fair value was \u00a3219.4 million (2021: \u00a3302.5 million) and the carrying value of financial liabilities carried at fair value was \u00a3nil (2021: \u00a312.8 million). In accordance with IFRS 13 Fair Value Measurement, the Group categorises financial instruments carried on the consolidated balance sheet at fair value using a three-level hierarchy. Financial instruments categorised as level 1 are valued using quoted market prices and therefore there is minimal estimation applied in determining fair value. However, the fair value of financial instruments categorised as level 2 and, in particular, level 3 is determined using valuation estimation techniques including discounted cash flow analysis and valuation models. The most significant estimation is with respect to discount rates and default rates. Since 31 December 2021 the assumptions related to estimating fair value have been revised to reflect the observed actual performance of SME loans (securitised) and a revision to the timing of the assumed defaults to occur later in light of the observed resilience of the loans performance and noting that the economic environment may lead to a later, more gradual but longer lasting stress than the sooner and sharper stress previously expected. Additionally, recoveries have been observed to have performed more favourable to previous stress assumptions and expectations have been revised upwards. The combination of favourable observed performance, higher recoveries and later defaults on an amortising pool of loans has led to a lower lifetime cumulative default expectation and a higher relative estimation of fair value. However, market drivers of discount rates such as observed widening in collateralised loan obligation spreads and increases in the risk-free rate due to central bank interest rate rises in order to curb inflationary pressures have resulted in the estimated cash flows being discounted at a higher rate, which has led to a lower relative estimation of fair value compared to carrying value of the loans partially offsetting the favourable revisions from default and recovery expectations. With respect to investments in trusts and co-investments, where the Group holds a minority equity pari passu co-investment structured through warehouse vehicles, the increase in interest rates and future expected increases in interest rates has decreased the estimated fair value in these structures, as the floating rate interest on senior borrowing facilities within the vehicle is paid before returns to the equity holders , including Funding Circle, are made. Additionally, while the majority of default stress particularly on CBILS loans was previously expected to occur at the end of the product\u2019s first year payment free period, with lower defaults observed than anticipated, the economic environment may lead to further defaults on these portfolios through the same more gradual default stress outlined above. The nature of the vehicles is such that, while the loans may be government guaranteed, an uptick in defaults in combination with higher borrowing costs will reduce the lifetime return to the equity holder and the inbuilt mechanisms of the vehicles which prioritise repayments to the senior lender could lead to cash flowing to the equity holder later. As a result the estimated fair value of the investment has decreased. Sensitivities to assumptions in the valuation of SME loans (warehouse), SME loans (other) and money market funds within cash and cash equivalents are not disclosed below as reasonably possible changes in the current assumptions would not be expected to result in material changes in the carrying values. 2. Critical accounting judgements and key sources of estimation uncertainty continued Key sources of estimation uncertainty continued Fair value of financial instruments (note 16) Sensitivities to the default rates and discount rates are illustrated below. Description Fair value \u00a3m Unobservable input Inputs Relationship of unobservable inputs to fair value SME loans (securitised) 45.8 Lifetime cumulative default rate as % of original US: 14.6% and 17.1%1 UK: 6.9%1 A change in the lifetime cumulative default rate would have the following impact: US SPV1\u00b9: +68/-17 bps would decrease/ increase fair value by \u00a3(0.8) million/ \u00a30.3 million respectively. US SPV2\u00b9: +127/-34 bps would decrease/increase fair value by \u00a3(1.8) million/\u00a30.6 million respectively. UK: +36/-36 bps would decrease/ increase fair value by \u00a3(0.4) million/ \u00a30.4 million respectively. Investments in Trusts and co-investments 28.7 Lifetime cumulative default rate as % of original Blended: 16.0% A change in the lifetime cumulative default rate by +230/-480 bps would decrease/increase fair value by (\u00a30.8) million and \u00a31.8 million respectively. 1. Two cumulative default rates are presented for the US representing the portfolios in each of the two respective pools of SME loans (securitised) related to the remaining and legacy securitisation vehicles. Separate sensitivities to default rates for the US securitisation vehicles represent the respective seasoning of the loans and the different reasonably possible range of outcomes. US SPV2 default definition is \u201csynthetic default\u201d being 90+days past due based on original contractual terms including where borrowers became 90+ days late due to going on approved forbearance measures such as payment holidays. UK and US SPV1 default definition is based on \u201ccontractual default\u201d definition of 90+ days past due based on current contractual terms which may have been revised since the original contract. The UK and US SPV1 default definition was previously aligned to the US but amended after the loans were sold from the SPV, driving the divergence in lifetime expected default rates presented between the SPVs. The above sensitivities represent management\u2019s estimate of the reasonably possible range of outcomes and as a result the fair value of the assets and liabilities measured at fair value could materially diverge from management\u2019s estimate. Description Fair value \u00a3m Unobservable input Inputs Relationship of unobservable inputs to fair value SME loans (securitised) 45.8 Risk-adjusted discount rate US: 15.1% UK: 18.5% A change in the discount rates by +/-200 bps would decrease/ increase fair value by \u00a30.8 million/ \u00a3(0.8) million respectively. Investments in Trusts and co-investments 28.7 Risk-adjusted discount rate 7.5% to 20.3% A change in the discount rate by +200/-200 bps would decrease/ increase fair value by \u00a31.0 million/ \u00a3(1.0) million respectively. It is considered that the range of reasonably possible outcomes in relation to the discount rate used could be +/-200 bps and as a result the fair value of the assets could materially diverge from management\u2019s estimate. As the discount rate is risk adjusted, it should be noted that the sensitivities to discount rate and to lifetime cumulative default rate contain a level of overlap regarding credit risk. The sensitivity in expected lifetime cumulative defaults should not also be applied to the sensitivity of the credit risk element of the risk-adjusted discount rate and the sensitivities are most meaningful viewed independently of each other. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-364": {
"value": "3. Segmental information IFRS 8 Operating Segments requires the Group to determine its operating segments based on information which is used internally for decision making. Based on the internal reporting information and management structures within the Group, it has been determined that there are four operating segments, three of which are loans businesses arranged geographically consistent with the prior year and the fourth which is a line of credit business, FlexiPay, based in the United Kingdom. Reporting on this basis is reviewed by the Global Leadership Team (\u201cGLT\u201d) which is the chief operating decision maker (\u201cCODM\u201d). The GLT is made up of the Executive Directors and other senior management and is responsible for the strategic decision making of the Group. The four reportable segments are as shown in the table below. The other segment includes the Group\u2019s businesses in Germany and the Netherlands. In light of the increasing prominence of new products such as FlexiPay, an additional segment is reported to the CODM related to FlexiPay and has been disclosed separately for the first time for the year to 31 December 2022. The GLT measures the performance of each segment by reference to a non-GAAP measure, adjusted EBITDA, which is defined as profit/loss before finance income and costs, taxation, depreciation and amortisation (\u201cEBITDA\u201d), and additionally excludes share-based payment charges and associated social security costs, foreign exchange and exceptional items (see note 5). Together with operating profit/loss, adjusted EBITDA is a key measure of Group performance as it allows better comparability of the underlying performance of the business. The segment reporting, including Adjusted EBITDA, excludes the impact of the Group\u2019s transfer pricing arrangements as this is not information presented to, or used by, the CODM in decision making or the allocation of resources. Net income 31 December 2022 31 December 2021 Loans FlexiPay Total Loans FlexiPay Total United Kingdom \u00a3m United States \u00a3m Other \u00a3m United Kingdom \u00a3m \u00a3m United Kingdom \u00a3m United States \u00a3m Other \u00a3m United Kingdom \u00a3m \u00a3m Total income 117.0 28.6 1.6 1.5 148.7 159.4 44.8 2.7 \u2014 206.9 Fair value gains/(losses) (2.4) 7.2 \u2014 \u2014 4.8 10.5 18.1 \u2014 \u2014 28.6 Net income 114.6 35.8 1.6 1.5 153.5 169.9 62.9 2.7 \u2014 235.5 Segment (loss)/profit 31 December 2022 31 December 2021 Loans FlexiPay Total Loans FlexiPay Total United Kingdom \u00a3m United States \u00a3m Other \u00a3m United Kingdom \u00a3m \u00a3m United Kingdom \u00a3m United States \u00a3m Other \u00a3m United Kingdom \u00a3m \u00a3m Adjusted EBITDA 11.7 (3.7) 2.8 (4.0) 6.8 61.9 28.4 1.5 \u2014 91.8 Depreciation and amortisation (11.7) (5.2) (0.1) \u2014 (17.0) (9.7) (4.1) (0.1) \u2014 (13.9) Share-based payments and social security costs (3.9) (0.8) \u2014 \u2014 (4.7) ( 7.6) (1.3) \u2014 \u2014 (8.9) Foreign exchange losses 0.2 \u2014 \u2014 \u2014 0.2 (0.3) (0.6) \u2014 \u2014 (0.9) Exceptional items (note 5) \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 (3.9) \u2014 \u2014 (3.9) Operating (loss)/profit (3.7) (9.7) 2.7 (4.0) (14.7) 44.3 18.5 1.4 \u2014 64.2 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-396": {
"value": "4. Operating expenses 31 December 2022 31 December 2021 Total \u00a3m Before exceptional items \u00a3m Exceptional items\u200a\u00a3m Total \u00a3m Depreciation 5.1 5.9 \u2014 5.9 Amortisation 10.1 8.0 \u2014 8.0 Rental income and other recharges (1.0) (0.9) \u2014 (0.9) Operating lease rentals: \u2013 Land and buildings 0.3 0.1 \u2014 0.1 Employment costs (including contractors) 85.9 77.7 \u2014 77.7 Marketing costs (excluding employment costs) 38.4 46.9 \u2014 46.9 Data and technology 9.7 9.0 \u2014 9.0 Expected credit loss impairment (credit)/charge (1.5) 1.2 \u2014 1.2 Impairment of intangible and tangible assets 1.8 \u2014 3.9 3.9 Other expenses 19.4 19.5 \u2014 19.5 Total operating expenses 168.2 167.4 3.9 171.3 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-365": {
"value": "4. Operating expenses 31 December 2022 31 December 2021 Total \u00a3m Before exceptional items \u00a3m Exceptional items\u200a\u00a3m Total \u00a3m Depreciation 5.1 5.9 \u2014 5.9 Amortisation 10.1 8.0 \u2014 8.0 Rental income and other recharges (1.0) (0.9) \u2014 (0.9) Operating lease rentals: \u2013 Land and buildings 0.3 0.1 \u2014 0.1 Employment costs (including contractors) 85.9 77.7 \u2014 77.7 Marketing costs (excluding employment costs) 38.4 46.9 \u2014 46.9 Data and technology 9.7 9.0 \u2014 9.0 Expected credit loss impairment (credit)/charge (1.5) 1.2 \u2014 1.2 Impairment of intangible and tangible assets 1.8 \u2014 3.9 3.9 Other expenses 19.4 19.5 \u2014 19.5 Total operating expenses 168.2 167.4 3.9 171.3 Auditors\u2019 remuneration 31 December 2022 \u00a3m 31 December 2021 \u00a3m Audit fees \u2013 Fees payable to the Company\u2019s auditors for the audit of the Parent Company and consolidated financial statements 0.5 0.5 \u2013 Fees payable to the Company\u2019s auditors and its associates for the statutory audit of the financial statements of subsidiaries of the Company 0.3 0.3 Total audit fees 0.8 0.8 Non-audit service fees \u2013 Audit-related assurance services 0.3 0.2 \u2013 Other non-assurance services 0.1 0.1 Total non-audit service fees 0.4 0.3 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-397": {
"value": "Auditors\u2019 remuneration 31 December 2022 \u00a3m 31 December 2021 \u00a3m Audit fees \u2013 Fees payable to the Company\u2019s auditors for the audit of the Parent Company and consolidated financial statements 0.5 0.5 \u2013 Fees payable to the Company\u2019s auditors and its associates for the statutory audit of the financial statements of subsidiaries of the Company 0.3 0.3 Total audit fees 0.8 0.8 Non-audit service fees \u2013 Audit-related assurance services 0.3 0.2 \u2013 Other non-assurance services 0.1 0.1 Total non-audit service fees 0.4 0.3 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-366": {
"value": "5. Exceptional items 31 December 2022 \u00a3m 31 December 2021 \u00a3m Impairment of non-financial assets (note 11) \u2014 3.9 Total \u2014 3.9 5. Exceptional items continued Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of such significance that they merit separate presentation in order to aid the reader\u2019s understanding of the Group\u2019s financial performance. During the year to 31 December 2021 certain floors of the San Francisco office were sublet to third parties for the remainder of the term of the head lease for an amount lower than the head lease rental. As a result the sublease was determined to be a finance lease which resulted in the right-of-use asset being derecognised and a net investment in sublease recognised on the balance sheet. The difference between the carrying value of the right-of-use asset and the net investment in the sublease was \u00a33.3 million and has been recorded in the statement of comprehensive income as an impairment under exceptional items. Additionally it was determined that the fixed assets associated with the office were impaired in full as they were no longer used by the Group resulting in impairment of \u00a30.6 million. There was no cash movement in relation to the impairment. In 2020, the Group restructured the German and Dutch (Other) businesses to focus on referring loans it originates to local lenders. This restructuring resulted in one-off costs comprising redundancy costs and a related share-based payment credit and impairment on right-of-use assets. Cash payments associated with these items totalled \u00a30.8 million in the previous year ended 31 December 2021. See note 15 for movement in associated provisions and note 22 for cash flow. ",
"dimensions": {
"concept": "fundingcircle:DisclosureOfExceptionalItems",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-367": {
"value": "6. Employees The average monthly number of employees (including Directors) during the year was: 2022 Number 2021 Number UK 686 632 FlexiPay 20 2 US 177 155 Other 10 15 893 804 In addition to the employees above, the average monthly number of contractors during the year was 142 (2021: 125). Employment costs (including Directors\u2019 emoluments) during the year were: 31 December 2022 \u00a3m 31 December 2021 \u00a3m Wages and salaries 72.2 61.4 Social security costs 7.6 6.2 Pension costs 1.9 1.8 Share-based payments 4.7 8.9 86.4 78.3 Contractor costs 12.0 7.6 Less: capitalised development costs (12.5) (8.2) Employment costs net of capitalised development costs 85.9 7 7.7 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-414": {
"value": "7. Net finance income/(costs) 31 December 2022 \u00a3m 31 December 2021 \u00a3m Interest receivable 2.3 0.1 Total finance income 2.3 0.1 Interest on lease liabilities (0.9) (1.1) Total finance costs (0.9) (1.1) Net finance income/(costs) 1.4 (1.0) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-398": {
"value": "7. Net finance income/(costs) 31 December 2022 \u00a3m 31 December 2021 \u00a3m Interest receivable 2.3 0.1 Total finance income 2.3 0.1 Interest on lease liabilities (0.9) (1.1) Total finance costs (0.9) (1.1) Net finance income/(costs) 1.4 (1.0) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-368": {
"value": "7. Net finance income/(costs) 31 December 2022 \u00a3m 31 December 2021 \u00a3m Interest receivable 2.3 0.1 Total finance income 2.3 0.1 Interest on lease liabilities (0.9) (1.1) Total finance costs (0.9) (1.1) Net finance income/(costs) 1.4 (1.0) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-369": {
"value": "8. Income tax (credit)/charge The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK (losses)/profits of the Company are subject to UK income tax at the standard corporation tax rate of 19% (2021: 19%). 31 December 2022 \u00a3m 31 December 2021 \u00a3m Current tax UK Current tax on (losses)/profits for the year 0.3 2.7 Adjustment in respect of prior years (0.3) (0.1) \u2014 2.6 US and Other Current tax on (losses)/profits for the year 0.4 \u2014 Adjustment in respect of prior years 0.5 0.3 0.9 0.3 Total current tax charge 0.9 2.9 Deferred tax UK Deferred tax on (losses)/profits for the year \u2014 \u2014 Adjustment in respect of prior years \u2014 \u2014 \u2014 \u2014 US and Other Deferred tax on (losses)/profits for the year (6.9) \u2014 Adjustments in respect of prior years \u2014 \u2014 (6.9) \u2014 Total deferred tax (credit) (6.9) \u2014 Total tax (credit)/charge (6.0) 2.9 The above current tax charge represents the expected tax on the Research and Development Expenditure Credit (\u201cRDEC\u201d) receivable for 2022 and US state taxes. In the prior year, the tax charge represents the tax liability on the Group\u2019s taxable profit and the amount of tax deducted from the RDEC receivable for 2021. The deferred tax credit represents recognition of a deferred tax asset in respect of US losses previously unrecognised. The Group (credit)/charge for the year can be reconciled to the (loss)/profit before tax shown per the consolidated statement of comprehensive income as follows. Factors affecting the tax (credit)/charge for the year 31 December 2022 \u00a3m 31 December 2021 \u00a3m (Loss)/profit before taxation (12.9) 64.1 Taxation on (loss)/profit at 19% (2021: 19%) (2.4) 12.2 Effects of: Research and development 0.3 (0.6) Effect of foreign tax rates 0.3 2.6 Non-taxable/non-deductible expenses 1.0 1.8 Movement in deferred tax not recognised 5.3 (8.4) Utilisation of tax losses previously unrecognised (4.0) (5.9) Adjustment in respect of prior years 0.2 0.1 Deferred tax assets recognised (6.9) \u2014 Impairment charge and other exceptional items 0.2 1.1 Total tax (credit)/charge (6.0) 2.9 8. Income tax (credit)/charge continued The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates include the UK 19%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was (45.85%) (2021: 4.5%). The statutory UK corporation tax rate is currently 19% (effective 1 April 2020). The UK government announced on 3 March 2021 and confirmed in November 2022 that the rate of corporation tax will be increased to 25% from 1 April 2023. The Group has recognised a deferred tax asset of \u00a36.9 million in respect of \u00a332.9 million of the US federal losses. The Group has utilised tax losses in the US for the first time in 2021 and the Group\u2019s transfer pricing arrangements between the UK and US entitle the US to earn an agreed profit margin. It is probable that the US will be in a profitable position going forwards such that it could use some of its historical federal losses to offset profits. In determining the amount of losses to recognise as deferred tax assets the Group has used the forecasts applied in the Parent Company impairment testing with regards to the investment in the US business, detailed in note 1 of the Company financial statements on page 182. It has then applied probability weightings to those five-year forecasts the further out it projects to reflect greater levels of uncertainty with limited recognition beyond this point. The key assumptions are: 5 cumulative annual revenue growth rate of 15%; and 5 the impact of transfer pricing arrangements within the Group are considered. The estimated amount of deferred tax recognised is not materially sensitive to reasonably possible changes in these assumptions. The Group has recognised a deferred tax liability of \u00a32.8 million (2021: \u00a33.2 million) relating to the property, plant and equipment in the UK. The deferred tax liability is predominantly due to the accelerated capital allowances of \u00a32.8 million (2021: \u00a32.6 million) and in relation to securitisation and warehouse vehicles of the UK which are domiciled in Ireland of \u00a3nil (2021: \u00a30.6 million). A deferred tax asset relating to unrelieved tax losses of \u00a32.8 million (2021: \u00a33.3 million) has been recognised in the UK to the extent of the above mentioned deferred tax liability pursuant to IAS 12 para 74. Deferred tax has been determined using the applicable effective future tax rate that will apply in the expected period of utilisation of the recognised deferred tax assets or liabilities. Unrecognised deferred tax 31 December 2022 \u00a3m 31 December 2021 \u00a3m Property, plant and equipment 17.4 10.3 Carry forward losses 133.3 25 7.3 Deferred stock options 18.5 15.7 US R&D credit 2.3 2.1 US fair value adjustments 47.1 46.3 Other 0.3 3.7 Unrecognised deferred tax1 218.9 335.4 1. Balances presented in table above are gross timing differences and are not tax effected. Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a350.1 million (2021: \u00a392.1 million). The Group has unrelieved tax losses of \u00a3177.0 million (2021: \u00a3257.3 million) that are available for offset against future taxable profits. Of these, there are \u00a3133.3 million (2021: \u00a3257.3 million) of unrecognised tax losses for deferred tax purposes. There are \u00a381.7 million of losses carried forward in the US of which \u00a314.8 million will expire in 2035, \u00a323.7 million will expire in 2036 and the remaining balance of \u00a343.2 million have no expiry period. There are \u00a396.1 million of German losses (of which \u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade tax losses) that can no longer be used as the tax residence of the German-incorporated entities has changed to the UK. There are \u00a397.3 million losses which relate to the UK. 8. Income tax (credit)/charge continued Factors affecting the tax charge in future years Factors that may affect the Group\u2019s future tax charge include the geographic location of the Group\u2019s earnings, the tax rates in those locations, changes in tax legislation and the use of brought forward tax losses. The calculation of the Group\u2019s total tax charge involves a degree of estimation and judgement with respect to the recognition of any deferred tax asset. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-399": {
"value": "Deferred tax UK Deferred tax on (losses)/profits for the year \u2014 \u2014 Adjustment in respect of prior years \u2014 \u2014 \u2014 \u2014 US and Other Deferred tax on (losses)/profits for the year (6.9) \u2014 Adjustments in respect of prior years \u2014 \u2014 (6.9) \u2014 Total deferred tax (credit) (6.9) \u2014 Total tax (credit)/charge (6.0) 2.9 Unrecognised deferred tax 31 December 2022 \u00a3m 31 December 2021 \u00a3m Property, plant and equipment 17.4 10.3 Carry forward losses 133.3 25 7.3 Deferred stock options 18.5 15.7 US R&D credit 2.3 2.1 US fair value adjustments 47.1 46.3 Other 0.3 3.7 Unrecognised deferred tax1 218.9 335.4 1. Balances presented in table above are gross timing differences and are not tax effected. Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a350.1 million (2021: \u00a392.1 million). The Group has unrelieved tax losses of \u00a3177.0 million (2021: \u00a3257.3 million) that are available for offset against future taxable profits. Of these, there are \u00a3133.3 million (2021: \u00a3257.3 million) of unrecognised tax losses for deferred tax purposes. There are \u00a381.7 million of losses carried forward in the US of which \u00a314.8 million will expire in 2035, \u00a323.7 million will expire in 2036 and the remaining balance of \u00a343.2 million have no expiry period. There are \u00a396.1 million of German losses (of which \u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade tax losses) that can no longer be used as the tax residence of the German-incorporated entities has changed to the UK. There are \u00a397.3 million losses which relate to the UK.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-370": {
"value": "9. (Loss)/earnings per share Basic (loss)/earnings per share amounts are calculated by dividing the (loss)/profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. For diluted (loss)/earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees under the Group\u2019s share-based compensation schemes which do not have an exercise price or where the exercise price is less than the average market price of the Company\u2019s ordinary shares during the year. The following table reflects the (loss)/profit and share data used in the basic and diluted (loss)/earnings per share computations: 31 December 2022 31 December 2021 (Loss)/profit for the year (\u00a3m) (6.9) 61.2 Basic weighted average number of ordinary shares in issue (million) 348.6 351.5 Basic (loss)/earnings per share (2.0)p 17.4p (Loss)/profit for the year before exceptional items (\u00a3m) (6.9) 65.1 Basic weighted average number of ordinary shares in issue (million) 348.6 351.5 Basic (loss)/earnings per share before exceptional items (2.0)p 18.5p (Loss)/profit for the year (\u00a3m) (6.9) 61.2 Diluted weighted average number of ordinary shares in issue (million) 379.5 381.7 Diluted (loss)/earnings per share (1.8)p 16.0p (Loss)/profit for the year before exceptional items (\u00a3m) (6.9) 65.1 Diluted weighted average number of ordinary shares in issue (million) 379.5 381.7 Diluted (loss)/earnings per share before exceptional items (1.8)p 17.1p Weighted average number of ordinary shares in issue (million) 348.6 351.5 Effect of dilutive share options (million) 30.9 30.2 Diluted weighted average number of ordinary shares in issue (million) 379.5 381.7 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-371": {
"value": "10. Intangible assets Capitalised development costs \u00a3m Computer software \u00a3m Other intangibles \u00a3m Total \u00a3m Cost At 1 January 2021 45.5 0.8 1.1 47.4 Exchange differences (0.2) 0.1 0.1 \u2014 Additions 8.5 0.1 \u2014 8.6 Disposals (4.8) (0.1) \u2014 (4.9) At 31 December 2021 49.0 0.9 1.2 51.1 At 1 January 2022 49.0 0.9 1.2 51.1 Exchange differences 1.9 \u2014 \u2014 1.9 Additions 12.7 \u2014 \u2014 12.7 Disposals (8.8) (0.1) \u2014 (8.9) At 31 December 2022 54.8 0.8 1.2 56.8 Accumulated amortisation At 1 January 2021 21.3 0.7 1.0 23.0 Exchange differences (0.1) \u2014 0.2 0.1 Charge for the year 8.0 \u2014 \u2014 8.0 Disposals (4.8) (0.1) \u2014 (4.9) At 31 December 2021 24.4 0.6 1.2 26.2 At 1 January 2022 24.4 0.6 1.2 26.2 Exchange differences 1.2 \u2014 \u2014 1.2 Charge for the year 10.0 0.1 \u2014 10.1 Disposals (8.8) (0.1) \u2014 (8.9) At 31 December 2022 26.8 0.6 1.2 28.6 Carrying amount At 31 December 2022 28.0 0.2 \u2014 28.2 At 31 December 2021 24.6 0.3 \u2014 24.9 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-400": {
"value": "11. Property, plant and equipment, right-of-use assets and lease liabilities The Group has right-of-use assets which comprise property leases held by the Group. Information about leases for which the Group is a lessee is presented below. Analysis of property, plant and equipment between owned and leased assets 31 December 2022 \u00a3m 31 December 2021 \u00a3m Property, plant and equipment (owned) 2.7 2.7 Right-of-use assets 7.3 11.4 10.0 14.1 Reconciliation of amount recognised in the balance sheet Leasehold improvements \u00a3m Computer equipment \u00a3m Furniture and fixtures \u00a3m Right-of-use assets (property) \u00a3m Total \u00a3m Cost At 1 January 2021 6.1 3.6 2.8 46.8 59.3 Disposals (1.4) (1.8) (1.0) \u2014 (4.2) Additions \u2014 0.7 0.1 \u2014 0.8 Exchange differences \u2014 0.2 \u2014 (0.4) (0.2) Derecognition of right-of-use assets \u2014 \u2014 \u2014 (15.4) (15.4) At 31 December 2021 4.7 2.7 1.9 31.0 40.3 At 1 January 2022 4.7 2.7 1.9 31.0 40.3 Disposals \u2014 (0.8) \u2014 \u2014 (0.8) Additions1 0.5 1.0 0.1 0.7 2.3 Exchange differences \u2014 0.1 0.1 1.0 1.2 Derecognition of right-of-use assets \u2014 \u2014 \u2014 \u2014 \u2014 At 31 December 2022 5.2 3.0 2.1 32.7 43.0 Accumulated depreciation At 1 January 2021 3.7 3.2 1.7 22.0 30.6 Disposals (1.4) (1.8) (1.0) \u2014 (4.2) Charge for the year 0.8 0.6 0.3 4.2 5.9 Impairment (exceptional) 0.2 \u2014 0.4 3.3 3.9 Exchange differences (0.1) (0.1) 0.1 \u2014 (0.1) Derecognition of right-of-use assets \u2014 \u2014 \u2014 (9.9) (9.9) At 31 December 2021 3.2 1.9 1.5 19.6 26.2 At 1 January 2022 3.2 1.9 1.5 19.6 26.2 Disposals \u2014 (0.8) \u2014 \u2014 (0.8) Charge for the year 0.7 0.7 0.2 3.5 5.1 Impairment \u2014 \u2014 \u2014 1.8 1.8 Exchange differences \u2014 0.1 0.1 0.5 0.7 Derecognition of right-of-use assets \u2014 \u2014 \u2014 \u2014 \u2014 At 31 December 2022 3.9 1.9 1.8 25.4 33.0 Carrying amount At 31 December 2022 1.3 1.1 0.3 7.3 10.0 At 31 December 2021 1.5 0.8 0.4 11.4 14.1 1. Leasehold improvement additions in the year are non-cash in nature. Certain right-of-use assets related to the US San Francisco office have been sublet under an operating sublease. Due to a reduction in market values since inception of the sublet, the estimated cash flows expected on expiry of the existing sublet and negotiation of further sublet are lower and as a result an impairment of \u00a31.8 million was recognised in the year ended 31 December 2022. The impairment was not treated as an exceptional item. Reconciliation of amount recognised in the balance sheet continued During the previous year ended 31 December 2021, certain other right-of-use assets related to the US San Francisco office were sublet in a finance sublease. As a result the right-of-use asset was derecognised and a net investment in sublease was recognised within other receivables. During the previous year the right-of-use asset related to the Netherlands business was exited along with the corresponding head lease liability. The carrying values of the right-of-use asset and lease liability at the point of derecognition were \u00a30.4 million. See note 5 for related exceptional items. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-372": {
"value": "11. Property, plant and equipment, right-of-use assets and lease liabilities The Group has right-of-use assets which comprise property leases held by the Group. Information about leases for which the Group is a lessee is presented below. Analysis of property, plant and equipment between owned and leased assets 31 December 2022 \u00a3m 31 December 2021 \u00a3m Property, plant and equipment (owned) 2.7 2.7 Right-of-use assets 7.3 11.4 10.0 14.1 Reconciliation of amount recognised in the balance sheet Leasehold improvements \u00a3m Computer equipment \u00a3m Furniture and fixtures \u00a3m Right-of-use assets (property) \u00a3m Total \u00a3m Cost At 1 January 2021 6.1 3.6 2.8 46.8 59.3 Disposals (1.4) (1.8) (1.0) \u2014 (4.2) Additions \u2014 0.7 0.1 \u2014 0.8 Exchange differences \u2014 0.2 \u2014 (0.4) (0.2) Derecognition of right-of-use assets \u2014 \u2014 \u2014 (15.4) (15.4) At 31 December 2021 4.7 2.7 1.9 31.0 40.3 At 1 January 2022 4.7 2.7 1.9 31.0 40.3 Disposals \u2014 (0.8) \u2014 \u2014 (0.8) Additions1 0.5 1.0 0.1 0.7 2.3 Exchange differences \u2014 0.1 0.1 1.0 1.2 Derecognition of right-of-use assets \u2014 \u2014 \u2014 \u2014 \u2014 At 31 December 2022 5.2 3.0 2.1 32.7 43.0 Accumulated depreciation At 1 January 2021 3.7 3.2 1.7 22.0 30.6 Disposals (1.4) (1.8) (1.0) \u2014 (4.2) Charge for the year 0.8 0.6 0.3 4.2 5.9 Impairment (exceptional) 0.2 \u2014 0.4 3.3 3.9 Exchange differences (0.1) (0.1) 0.1 \u2014 (0.1) Derecognition of right-of-use assets \u2014 \u2014 \u2014 (9.9) (9.9) At 31 December 2021 3.2 1.9 1.5 19.6 26.2 At 1 January 2022 3.2 1.9 1.5 19.6 26.2 Disposals \u2014 (0.8) \u2014 \u2014 (0.8) Charge for the year 0.7 0.7 0.2 3.5 5.1 Impairment \u2014 \u2014 \u2014 1.8 1.8 Exchange differences \u2014 0.1 0.1 0.5 0.7 Derecognition of right-of-use assets \u2014 \u2014 \u2014 \u2014 \u2014 At 31 December 2022 3.9 1.9 1.8 25.4 33.0 Carrying amount At 31 December 2022 1.3 1.1 0.3 7.3 10.0 At 31 December 2021 1.5 0.8 0.4 11.4 14.1 1. Leasehold improvement additions in the year are non-cash in nature. Certain right-of-use assets related to the US San Francisco office have been sublet under an operating sublease. Due to a reduction in market values since inception of the sublet, the estimated cash flows expected on expiry of the existing sublet and negotiation of further sublet are lower and as a result an impairment of \u00a31.8 million was recognised in the year ended 31 December 2022. The impairment was not treated as an exceptional item. 11. Property, plant and equipment, right-of-use assets and lease liabilities continued Reconciliation of amount recognised in the balance sheet continued During the previous year ended 31 December 2021, certain other right-of-use assets related to the US San Francisco office were sublet in a finance sublease. As a result the right-of-use asset was derecognised and a net investment in sublease was recognised within other receivables. During the previous year the right-of-use asset related to the Netherlands business was exited along with the corresponding head lease liability. The carrying values of the right-of-use asset and lease liability at the point of derecognition were \u00a30.4 million. See note 5 for related exceptional items. Lease liabilities Amounts recognised on the balance sheet were as follows: 31 December 2022 \u00a3m 31 December 2021 \u00a3m Current 7.2 6.9 Non-current 12.6 17.0 Total 19.8 23.9 Amounts recognised in the statement of comprehensive income were as follows: 31 December 2022 \u00a3m 31 December 2021 \u00a3m Depreciation charge of right-of-use assets (property) 3.5 4.2 Interest expense (included in finance costs) 0.9 1.1 Expense relating to short-term leases and leases of low-value assets 0.4 0.1 The total cash outflow for leases (excluding short-term and low-value leases) in 2022 was \u00a37.3 million (2021: \u00a38.1 million). A maturity analysis illustrating the undiscounted contractual cash flows of lease liabilities is included within the liquidity risk disclosure within note 16. As at 31 December 2022 the potential future undiscounted cash outflows that have not been included in the lease liability, due to lack of reasonable certainty the lease extension options might be exercised, amounted to \u00a3nil (2021: \u00a3nil). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-401": {
"value": "Lease liabilities Amounts recognised on the balance sheet were as follows: 31 December 2022 \u00a3m 31 December 2021 \u00a3m Current 7.2 6.9 Non-current 12.6 17.0 Total 19.8 23.9 Amounts recognised in the statement of comprehensive income were as follows: 31 December 2022 \u00a3m 31 December 2021 \u00a3m Depreciation charge of right-of-use assets (property) 3.5 4.2 Interest expense (included in finance costs) 0.9 1.1 Expense relating to short-term leases and leases of low-value assets 0.4 0.1 The total cash outflow for leases (excluding short-term and low-value leases) in 2022 was \u00a37.3 million (2021: \u00a38.1 million). A maturity analysis illustrating the undiscounted contractual cash flows of lease liabilities is included within the liquidity risk disclosure within note 16. As at 31 December 2022 the potential future undiscounted cash outflows that have not been included in the lease liability, due to lack of reasonable certainty the lease extension options might be exercised, amounted to \u00a3nil (2021: \u00a3nil). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLeasesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-373": {
"value": "12. Investment in SME loans 31 December 2022 \u00a3m 31 December 2021 \u00a3m Non-current SME loans (other) \u2013 amortised cost 24.8 74.2 Investment in trusts and co-investments \u2013 FVTPL 28.7 39.1 Total non-current 53.5 113.3 Current Lines of credit \u2013 amortised cost 16.0 1.6 SME loans (other) \u2013 FVTPL 20.9 \u2014 SME loans (warehouse) \u2013 FVTPL 2.4 3.2 SME loans (securitised) \u2013 FVTPL 45.8 14 8.1 Total current 85.1 152.9 Total 138.6 266.2 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-374": {
"value": "13. Trade and other receivables 31 December 2022 \u00a3m 31 December 2021 \u00a3m Other receivables 3.4 4.1 Non-current trade and other receivables 3.4 4.1 Trade receivables 0.4 1.8 Other receivables\u00b9 5.3 10.0 Prepayments 3.7 4.8 Accrued income 4.8 6.2 Rent and other deposits 2.3 2.2 Current trade and other receivables 16.5 25.0 19.9 29.1 1. Includes \u00a3nil (2021: \u00a33.6 million) in relation to cash and liquidity reserves held in the UK securitisation vehicle. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables described earlier. No trade receivables were overdue or impaired. Included in rent and other deposits are \u00a31.3 million of rental deposits (2021: \u00a31.6 million) in respect of the Group\u2019s property leases which expire over the next five years. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-375": {
"value": "14. Trade and other payables 31 December 2022 \u00a3m 31 December 2021 \u00a3m Trade payables 2.5 3.7 Other taxes and social security costs 5.0 4.9 Other creditors 9.7 11.4 Accruals and deferred income 14.6 16.4 31.8 36.4 The Directors consider that the carrying amount of trade and other payables approximates to their fair value. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-402": {
"value": "15. Provisions and other liabilities Dilapidation \u00a3m Loan repurchase \u00a3m Restructuring\u200a1 \u00a3m Other\u200a1\u200a\u200a\u00a3m Total \u00a3m At 1 January 2021 0.9 5.2 1.1 2.7 9.9 Exchange differences \u2014 (0.3) (0.1) 0.2 (0.2) Additional provision/liability \u2014 \u2014 \u2014 1.1 1.1 Amount utilised \u2014 (2.6) (0.8) (0.2) (3.6) Amount reversed (0.3) (0.1) \u2014 (2.7) (3.1) At 31 December 2021 0.6 2.2 0.2 1.1 4.1 Exchange differences \u2014 0.1 \u2014 0.1 0.2 Additional provision/liability 0.5 \u2014 \u2014 0.5 1.0 Amount utilised \u2014 (0.9) (0.2) (0.2) (1.3) Amount reversed \u2014 (0.9) \u2014 (1.0) (1.9) At 31 December 2022 1.1 0.5 \u2014 0.5 2.1 1. Restructuring provision is in relation to reorganisation of the US, German and Dutch businesses; see note 5. Other provisions includes provisions for operational buybacks. \u00a30.3 million (2021: \u00a3nil) of expected credit loss impairment allowance related to undrawn FlexiPay lines of credit is also included within other. 15. Provisions and other liabilities continued 31 December 2022 \u00a3m 31 December 2021 \u00a3m Current provisions and other liabilities 1.0 3.4 Non-current provisions and other liabilities 1.1 0.7 2.1 4.1 The dilapidation provision represents an estimated cost for dismantling the customisation of offices and restoring the leasehold premises to its original state at the end of the tenancy period. The provision is expected to be utilised by 2025. Loan repurchase liability In certain historical circumstances, in Germany and the Netherlands, Funding Circle entered into arrangements with institutional investors to assume the credit risk on the loan investments made by the institutional investors. Under the terms of the agreements, the Group is required either to make payments when the underlying borrower fails to meet its obligation under the loan contract or buy the defaulted loan from the investors at its carrying value. In return for these commitments, the Group is entitled to the excess returns or additional income which is recorded as other fees. Under IFRS 9, the Group is required to provide for these loan repurchases under the expected credit loss (\u201cECL\u201d) model. The liability related to each loan arranged is based on the ECLs associated with the probability of default of that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable presumption per IFRS 9. The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. If the loan is bought back by the Group, at the point of buyback, the financial asset associated with the purchase meets the definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the reserve is therefore based on lifetime ECLs. After being bought back, POCI loans and associated impairment provisions are recognised within investment in SME loans (other) on the balance sheet. The Group bands each loan investment using an internal risk rating and assesses credit losses on a collective basis. Performing: 12-month ECL \u00a3m Underperforming: lifetime ECL \u00a3m Non-performing: lifetime ECL \u00a3m Total \u00a3m At 1 January 2021 2.2 1.5 1.5 5.2 Exchange differences (0.1) (0.1) (0.1) (0.3) Liability against loans transferred between stages (0.2) (0.5) 1.7 1.0 Amounts utilised \u2014 \u2014 (2.6) (2.6) Loans repaid (0.9) (0.4) (0.6) (1.9) Change in probability of default 0.4 (0.1) 0.5 0.8 At 31 December 2021 1.4 0.4 0.4 2.2 Exchange differences \u2014 0.1 \u2014 0.1 Liability against loans transferred between stages (0.1) (0.2) 0.7 0.4 Amounts utilised \u2014 \u2014 (0.9) (0.9) Loans repaid (0.9) (0.1) (0.2) (1.2) Change in probability of default (0.2) (0.1) 0.2 (0.1) At 31 December 2022 0.2 0.1 0.2 0.5 15. Provisions and other liabilities continued Loan repurchase liability continued At 31 December 2021 Expected credit loss coverage % Basis for recognition of loan repurchase liability Gross assets of external parties subject to loan repurchase liability \u00a3m Loan repurchase liability \u00a3m Performing (due in 30 days or less) 15.3 12-month ECL 8.8 1.4 Underperforming (31\u201390 days overdue) 63.6 Lifetime ECL 0.6 0.4 Non-performing (90+ days overdue) 76.5 Lifetime ECL 0.6 0.4 Total 10.0 2.2 At 31 December 2022 Expected credit loss coverage % Basis for recognition of loan repurchase liability Gross assets of external parties subject to loan repurchase liability \u00a3m Loan repurchase liability \u00a3m Performing (due in 30 days or less) 9.6 12-month ECL 2.4 0.2 Underperforming (31\u201390 days overdue) 32.6 Lifetime ECL 0.2 0.1 Non-performing (90+ days overdue) 92.9 Lifetime ECL 0.2 0.2 Total 2.8 0.5 The percentages applied above are based on the Group\u2019s past experience of delinquencies and loss trends, as well as forward-looking information in the form of macroeconomic scenarios governed by an impairment committee, which considers macroeconomic forecasts such as changes in interest rates, GDP and inflation which are incorporated into scenarios and probability weighted. Estimation is required in assessing individual loans and when applying statistical models for collective assessments, using historical trends from past performance as well as forward-looking information including macroeconomic forecasts in each market together with the impact on loan defaults. The maximum exposure the Group might have to pay at the balance sheet date if 100% of eligible loans were required to be bought back would be \u00a32.8 million (2021: \u00a310.0 million). This would be dependent on the timing of any eligible loans defaulting. Repayments of eligible loans are no longer reinvested and therefore the final loan is due to expire in December 2024, along with the associated financial guarantees. At 31 December 2022, there is only one portfolio of loans. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfProvisionsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-376": {
"value": "15. Provisions and other liabilities Dilapidation \u00a3m Loan repurchase \u00a3m Restructuring\u200a1 \u00a3m Other\u200a1\u200a\u200a\u00a3m Total \u00a3m At 1 January 2021 0.9 5.2 1.1 2.7 9.9 Exchange differences \u2014 (0.3) (0.1) 0.2 (0.2) Additional provision/liability \u2014 \u2014 \u2014 1.1 1.1 Amount utilised \u2014 (2.6) (0.8) (0.2) (3.6) Amount reversed (0.3) (0.1) \u2014 (2.7) (3.1) At 31 December 2021 0.6 2.2 0.2 1.1 4.1 Exchange differences \u2014 0.1 \u2014 0.1 0.2 Additional provision/liability 0.5 \u2014 \u2014 0.5 1.0 Amount utilised \u2014 (0.9) (0.2) (0.2) (1.3) Amount reversed \u2014 (0.9) \u2014 (1.0) (1.9) At 31 December 2022 1.1 0.5 \u2014 0.5 2.1 1. Restructuring provision is in relation to reorganisation of the US, German and Dutch businesses; see note 5. Other provisions includes provisions for operational buybacks. \u00a30.3 million (2021: \u00a3nil) of expected credit loss impairment allowance related to undrawn FlexiPay lines of credit is also included within other. 15. Provisions and other liabilities continued 31 December 2022 \u00a3m 31 December 2021 \u00a3m Current provisions and other liabilities 1.0 3.4 Non-current provisions and other liabilities 1.1 0.7 2.1 4.1 The dilapidation provision represents an estimated cost for dismantling the customisation of offices and restoring the leasehold premises to its original state at the end of the tenancy period. The provision is expected to be utilised by 2025. Loan repurchase liability In certain historical circumstances, in Germany and the Netherlands, Funding Circle entered into arrangements with institutional investors to assume the credit risk on the loan investments made by the institutional investors. Under the terms of the agreements, the Group is required either to make payments when the underlying borrower fails to meet its obligation under the loan contract or buy the defaulted loan from the investors at its carrying value. In return for these commitments, the Group is entitled to the excess returns or additional income which is recorded as other fees. Under IFRS 9, the Group is required to provide for these loan repurchases under the expected credit loss (\u201cECL\u201d) model. The liability related to each loan arranged is based on the ECLs associated with the probability of default of that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable presumption per IFRS 9. The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. If the loan is bought back by the Group, at the point of buyback, the financial asset associated with the purchase meets the definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the reserve is therefore based on lifetime ECLs. After being bought back, POCI loans and associated impairment provisions are recognised within investment in SME loans (other) on the balance sheet. The Group bands each loan investment using an internal risk rating and assesses credit losses on a collective basis. Performing: 12-month ECL \u00a3m Underperforming: lifetime ECL \u00a3m Non-performing: lifetime ECL \u00a3m Total \u00a3m At 1 January 2021 2.2 1.5 1.5 5.2 Exchange differences (0.1) (0.1) (0.1) (0.3) Liability against loans transferred between stages (0.2) (0.5) 1.7 1.0 Amounts utilised \u2014 \u2014 (2.6) (2.6) Loans repaid (0.9) (0.4) (0.6) (1.9) Change in probability of default 0.4 (0.1) 0.5 0.8 At 31 December 2021 1.4 0.4 0.4 2.2 Exchange differences \u2014 0.1 \u2014 0.1 Liability against loans transferred between stages (0.1) (0.2) 0.7 0.4 Amounts utilised \u2014 \u2014 (0.9) (0.9) Loans repaid (0.9) (0.1) (0.2) (1.2) Change in probability of default (0.2) (0.1) 0.2 (0.1) At 31 December 2022 0.2 0.1 0.2 0.5 15. Provisions and other liabilities continued Loan repurchase liability continued At 31 December 2021 Expected credit loss coverage % Basis for recognition of loan repurchase liability Gross assets of external parties subject to loan repurchase liability \u00a3m Loan repurchase liability \u00a3m Performing (due in 30 days or less) 15.3 12-month ECL 8.8 1.4 Underperforming (31\u201390 days overdue) 63.6 Lifetime ECL 0.6 0.4 Non-performing (90+ days overdue) 76.5 Lifetime ECL 0.6 0.4 Total 10.0 2.2 At 31 December 2022 Expected credit loss coverage % Basis for recognition of loan repurchase liability Gross assets of external parties subject to loan repurchase liability \u00a3m Loan repurchase liability \u00a3m Performing (due in 30 days or less) 9.6 12-month ECL 2.4 0.2 Underperforming (31\u201390 days overdue) 32.6 Lifetime ECL 0.2 0.1 Non-performing (90+ days overdue) 92.9 Lifetime ECL 0.2 0.2 Total 2.8 0.5 The percentages applied above are based on the Group\u2019s past experience of delinquencies and loss trends, as well as forward-looking information in the form of macroeconomic scenarios governed by an impairment committee, which considers macroeconomic forecasts such as changes in interest rates, GDP and inflation which are incorporated into scenarios and probability weighted. Estimation is required in assessing individual loans and when applying statistical models for collective assessments, using historical trends from past performance as well as forward-looking information including macroeconomic forecasts in each market together with the impact on loan defaults. The maximum exposure the Group might have to pay at the balance sheet date if 100% of eligible loans were required to be bought back would be \u00a32.8 million (2021: \u00a310.0 million). This would be dependent on the timing of any eligible loans defaulting. Repayments of eligible loans are no longer reinvested and therefore the final loan is due to expire in December 2024, along with the associated financial guarantees. At 31 December 2022, there is only one portfolio of loans. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-377": {
"value": "16. Financial risk management The Board of Directors has overall responsibility for the establishment and oversight of the Group\u2019s risk management framework. The risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and ensure any limits are adhered to. The Group\u2019s activities are reviewed regularly and potential risks are considered. Risk factors The Group has exposure to the following risks from its use of financial instruments: 5 credit risk; 5 liquidity risk; and 5 market risk (including foreign exchange risk, interest rate risk and other price risk). Principal financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: 5 SME loans; 5 investments in trusts and co-investments; 5 lines of credit; 5 trade and other receivables; 5 cash and cash equivalents; 5 trade and other payables; 5 bank borrowings; 5 bonds; 5 lease liabilities; and 5 loan repurchase liabilities. Categorisation of financial assets and financial liabilities The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at 31 December 2022: Assets Fair value through profit and loss \u00a3m Amortised cost \u00a3m Other \u00a3m Total \u00a3m SME loans (other) 20.9 24.8 \u2014 45.7 SME loans (warehouse) 2.4 \u2014 \u2014 2.4 SME loans (securitised) 45.8 \u2014 \u2014 45.8 Lines of credit \u2014 16.0 \u2014 16.0 Investment in trusts and co-investments 28.7 \u2014 \u2014 28.7 Trade and other receivables \u2014 16.2 \u2014 16.2 Cash and cash equivalents 121.6 56.1 \u2014 17 7.7 219.4 113.1 \u2014 332.5 Liabilities Fair value through profit and loss \u00a3m Amortised cost \u00a3m Other \u00a3m Total \u00a3m Trade and other payables \u2014 (12.2) \u2014 (12.2) Loan repurchase liability \u2014 \u2014 (0.5) (0.5) Bank borrowings \u2014 (22.6) \u2014 (22.6) Bonds \u2014 (23.7) \u2014 (23.7) Lease liabilities \u2014 (19.8) \u2014 (19.8) \u2014 (78.3) (0.5) (78.8) 16. Financial risk management continued Principal financial instruments continued Categorisation of financial assets and financial liabilities continued The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at 31 December 2021: Assets Fair value through profit and loss \u00a3m Amortised cost \u00a3m Other \u00a3m Total \u00a3m SME loans (other) \u2014 74.2 \u2014 74.2 SME loans (warehouse) 3.2 \u2014 \u2014 3.2 SME loans (securitised) 148.1 \u2014 \u2014 14 8.1 Lines of credit \u2014 1.6 \u2014 1.6 Investment in trusts and co-investments 39.1 \u2014 \u2014 39.1 Trade and other receivables \u2014 24.3 \u2014 24.3 Cash and cash equivalents 112.1 111.9 \u2014 224.0 302.5 212.0 \u2014 514.5 Liabilities Fair value through profit and loss \u00a3m Amortised cost \u00a3m Other \u00a3m Total \u00a3m Trade and other payables \u2014 (15.2) \u2014 (15.2) Loan repurchase liability \u2014 \u2014 (2.2) (2.2) Bank borrowings \u2014 (73.2) \u2014 (73.2) Bonds (12.8) (127.5) \u2014 (140.3) Lease liabilities \u2014 (23.9) \u2014 (23.9) (12.8) (239.8) (2.2) (254.8) Financial instruments measured at amortised cost Financial instruments measured at amortised cost, rather than fair value, include cash and cash equivalents, trade and other receivables, certain SME loans (other), bank borrowings, lease liabilities, certain bonds and trade and other payables. Due to their nature, the carrying value of each of the above financial instruments approximates to their fair value. Other financial instruments Loan repurchase liabilities are measured at the amount of loss allowance determined under IFRS 9. Financial instruments measured at fair value IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy: 5 level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; 5 level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly; and 5 level 3 inputs are unobservable inputs for the assets or liabilities. The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. An assessment that the level applied to financial instruments is appropriate and whether a transfer between levels is required is undertaken at the end of each accounting period. There were no transfers between levels during the year or prior year. The Finance department of the Group performs the valuations of items required for financial reporting purposes, including level 3 fair values. This team reports to the Chief Financial Officer (\u201cCFO\u201d). Discussions of valuation processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee. 16. Financial risk management continued Financial instruments measured at fair value continued Fair value measurement using 31 December 2022 Quoted prices in active markets (level 1) \u00a3m Significant observable inputs (level 2) \u00a3m Significant unobservable inputs (level 3) \u00a3m Total \u00a3m Financial assets SME loans (warehouse) \u2014 \u2014 2.4 2.4 SME loans (securitised) \u2014 \u2014 45.8 45.8 SME loans (other) \u2014 \u2014 20.9 20.9 Investment in trusts and co-investments \u2014 \u2014 28.7 28.7 Cash and cash equivalents 121.6 \u2014 \u2014 121.6 121.6 \u2014 97.8 219.4 Financial liabilities Bonds \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 Fair value measurement using 31 December 2021 Quoted prices in active markets (level 1) \u00a3m Significant observable inputs (level 2) \u00a3m Significant unobservable inputs (level 3) \u00a3m Total \u00a3m Financial assets SME loans (warehouse) \u2014 \u2014 3.2 3.2 SME loans (securitised) \u2014 \u2014 14 8.1 14 8.1 Investment in trusts and co-investments \u2014 \u2014 39.1 39.1 Cash and cash equivalents 112.1 \u2014 \u2014 112.1 112.1 \u2014 190.4 302.5 Financial liabilities Bonds \u2014 \u2014 (12.8) (12.8) \u2014 \u2014 (12.8) (12.8) The fair value of SME loans (warehouse) has been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (warehouse) was \u00a32.4 million at 31 December 2022 (2021: \u00a33.2 million). The fair value of SME loans (securitised) represents loan assets in the securitisation vehicles and legacy loans of this nature and has been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (securitised) was \u00a345.8 million at 31 December 2022 (2021: \u00a3148.1 million). Bonds represent the unrated tranches of bond liabilities measured at fair value through profit and loss (the rated tranches of bonds are measured at amortised cost). The fair value has been estimated by discounting estimated future cash flows in relation to the bonds using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the bonds was \u00a3nil at 31 December 2022 (2021: \u00a312.8 million). Investment in trusts and co-investments represents the Group\u2019s investment in the trusts and other vehicles used to fund CBILS, RLS and certain commercial loans and is measured at fair value through profit and loss. The government-owned British Business Bank will guarantee up to 80% of the balance of CBILS loans in the event of default (and between 70% and 80% of RLS loans). The fair value has been estimated by discounting future cash flows in relation to the trusts using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the investment in trusts and co-investments was \u00a328.7 million at 31 December 2022 (2021: \u00a339.1 million). The SME loans (other) held at fair value represents loan assets temporarily funded by the Group in relation to the commercial loans and is estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (other) was \u00a320.9 million (2021: \u00a3nil). The most relevant significant unobservable inputs relate to the default rate estimate and discount rates applied to the fair value calculation, details of which are set out in note 2 for those with material estimation uncertainty. 16. Financial risk management continued Financial instruments measured at fair value continued Fair value movements on SME loans (warehouse), SME loans (securitised), SME loans (other), investments in trusts and bonds (unrated) are recognised through the profit and loss account in fair value gains/(losses). A reconciliation of the movement in level 3 financial instruments is shown as follows: SME loans (warehouse) \u00a3m SME loans (securitised) \u00a3m Bonds (unrated) \u00a3m Investment in trusts and co-investments \u00a3m SME loans (other) \u00a3m Trade and other receivables \u00a3m At 1 January 2021 221.8 279.8 (7.8) 21.2 \u2014 0.2 Additions \u2014 \u2014 \u2014 22.1 \u2014 \u2014 Transfers 0.2 \u2014 \u2014 \u2014 \u2014 (0.2) Repayments (58.6) (150.2) \u2014 (3.3) \u2014 \u2014 Disposal (176.1) \u2014 \u2014 \u2014 \u2014 \u2014 Net gain/(loss) on the change in fair value of financial instruments at fair value through profit and loss 16.3 18.2 (5.0) (0.9) \u2014 \u2014 Foreign exchange (loss)/gain (0.4) 0.3 \u2014 \u2014 \u2014 \u2014 At 31 December 2021 3.2 14 8.1 (12.8) 39.1 \u2014 \u2014 Additions \u2014 \u2014 \u2014 6.4 22.6 \u2014 Repayments (2.8) (86.8) 16.3 (10.0) (0.8) \u2014 Disposal \u2014 (39.5) \u2014 \u2014 \u2014 \u2014 Net gain/(loss) on the change in fair value of financial instruments at fair value through profit and loss 2.0 14.7 (3.5) (7.0) (1.4) \u2014 Foreign exchange gain \u2014 9.3 \u2014 0.2 0.5 \u2014 At 31 December 2022 2.4 45.8 \u2014 28.7 20.9 \u2014 Financial risk factors Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group\u2019s receivables from customers and cash and cash equivalents held at banks. The Group\u2019s maximum exposure to credit risk by class of financial asset is as follows: 31 December 2022 \u00a3m 31 December 2021 \u00a3m Non-current SME loans (other) 24.8 74.2 Investment in trusts and co-investments 28.7 39.1 Trade and other receivables: \u2013 Other receivables 3.4 4.1 Current Line of credit 16.0 1.6 SME loans (other) 20.9 \u2014 SME loans (warehouse) 2.4 3.2 SME loans (securitised) 45.8 14 8.1 Trade and other receivables: \u2013 Trade receivables 0.4 1.8 \u2013 Other receivables 5.3 10.0 \u2013 Accrued income 4.8 6.2 \u2013 Rent and other deposits 2.3 2.2 Cash and cash equivalents 177.7 224.0 Total gross credit risk exposure 332.5 514.5 Less bank borrowings and bond liabilities1 (46.3) (213.5) Total net credit risk exposure 286.2 301.0 1. Included within bank borrowings are \u00a322.6 million (2021: \u00a373.2 million) in relation to draw downs on the PPPLF. 16. Financial risk management continued Financial risk factors continued Credit risk continued In addition the Group is subject to financial guarantees it has issued to buy back loans detailed in the loan repurchase liability in note 15. The Group\u2019s maximum exposure to credit risk on financial guarantees were every eligible loan required to be bought back would be \u00a32.8 million (2021: \u00a310.0 million). An expected credit loss allowance related to undrawn lines of credit on the FlexiPay product of \u00a30.3 million (2021: \u00a3nil) is held within provisions and other liabilities. The Group\u2019s maximum exposure to credit risk on the undrawn lines of credit if they were all to be fully drawn would be \u00a341.6 million (2021: \u00a34.2 million). SME loans (warehouse) and SME loans (securitised) relate to the underlying pool of SME loans in both the warehouse and securitisation vehicles or are loans from the legacy warehouses and SPVs that have since been purchased or novated into other Funding Circle entities, but remain held at FVTPL with the business model of holding the loans for sale. Whilst there is credit risk from the loans defaulting, certain of these SME loans (securitised) and the third party bonds that remain in SPVs are held within bankruptcy remote vehicles. If the SME loans were to all default, then the bank debt or third party bonds do not receive their money back. Therefore the overall exposure to the Group for these investments is the Group\u2019s net investment in the SME loans which is after taking account of the bank debt and third party bonds. SME loans (other) includes \u00a320.9 million (2021: \u00a3nil) loans originated by the Group with the intention of selling onwards, which are held at FVTPL and are therefore disclosed as current. Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss (\u201cECL\u201d) model. The impairment related to each loan is based on the ECLs associated with the probability of default of that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable presumption per IFRS 9. The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. In some circumstances where loans are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the impairment is therefore based on lifetime ECLs. Lines of credit utilises the same default definition and probability of default under IFRS 9, however, are assessed based on 12-month probability of default at the overall available line of credit level, estimating the expected utilisation of the line of credit at the estimated point of default. The expected credit loss impairment associated with undrawn lines of credit is disclosed within other liabilities in note 15 and in note 27. SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the US government in the event of default and the loans are anticipated to be forgiven. At the point of default and subsequent collection of the guarantee or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished. SME loans (other) also includes loans which have been brought back from investors and are held at amortised cost. Lines of credit comprises \u00a316.0 million (2021: \u00a31.6 million) of drawn amounts through the FlexiPay product net of expected credit loss impairment, enabling businesses to spread UK invoices or payments over three months with the initial payment made on a borrower\u2019s behalf. The gross principal value of SME loans (other) is \u00a339.6 million (2021: \u00a389.5 million) and drawn lines of credit held at amortised cost is \u00a317.6 million (2021: \u00a31.6 million), totalling \u00a357.2 million (2021: \u00a391.1 million), and an allowance for expected credit losses of \u00a314.8 million (2021: \u00a315.3 million) and \u00a31.6 million (2021: \u00a3nil) respectively, totalling \u00a316.4 million (2021: \u00a315.3 million), is held against these loans and drawn lines of credit as detailed below. An impairment credit of \u00a30.9 million (2021: charge of \u00a31.3 million) was recognised through the statement of comprehensive income in the year to 31 December 2022 within credit/(provision) for expected credit losses in the income statement. 16. Financial risk management continued Financial risk factors continued Credit risk continued Performing: 12-month ECL \u00a3m Underperforming: Lifetime ECL \u00a3m Non-performing: Lifetime ECL \u00a3m POCI: Lifetime ECL \u00a3m Total \u00a3m At 1 January 2021 0.1 \u2014 0.4 12.2 12.7 Impairment against additions 0.1 \u2014 \u2014 2.6 2.7 Exchange differences \u2014 \u2014 \u2014 (0.6) (0.6) Impairment against loans transferred from/(to) performing \u2014 0.3 0.7 \u2014 1.0 Loans repaid (0.1) \u2014 \u2014 (0.9) (1.0) Change in probability of default or loss given default assumptions 0.5 \u2014 \u2014 \u2014 0.5 At 31 December 2021 0.6 0.3 1.1 13.3 15.3 Impairment against additions 0.1 \u2014 \u2014 1.1 1.2 Exchange differences 0.1 \u2014 0.1 1.0 1.2 Impairment against loans transferred from/(to) performing (0.1) 0.3 0.3 \u2014 0.5 Loans repaid (0.3) (0.3) (0.5) (1.2) (2.3) Change in probability of default or loss given default assumptions 0.7 \u2014 (0.1) (0.1) 0.5 At 31 December 2022 1.1 0.3 0.9 14.1 16.4 Expected credit loss coverage % Basis for recognition of expected credit loss impairment Gross lines of credit and SME loans (other) \u00a3m Provision for expected credit loss \u00a3m Net carrying amount \u00a3m As at 31 December 2021 Performing (due in 30 days or less) 0.7 12-month ECL 75.7 (0.6) 75.1 Underperforming (31\u201390 days overdue) 100.0 Lifetime ECL 0.3 (0.3) \u2014 Non-performing (90+ days overdue) 100.0 Lifetime ECL 1.1 (1.1) \u2014 POCI (90+ days overdue) 95.1 Lifetime ECL 14.0 (13.3) 0.7 Total 91.1 (15.3) 75.8 As at 31 December 2022 Performing (due in 30 days or less) 2.7 12 month ECL 39.2 (1.1) 38.1 Underperforming (31\u201390 days overdue) 36.5 Lifetime ECL 0.7 (0.3) 0.4 Non-performing (90+ days overdue) 43.1 Lifetime ECL 2.3 (0.9) 1.4 POCI (90+ days overdue) 94.2 Lifetime ECL 15.0 (14.1) 0.9 Total 57. 2 (16.4) 40.8 Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk of financial loss is deemed minimal because the counterparties are well established financial institutions. Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate, a provision for expected credit losses is recorded in the financial statements. Other receivables include net investment in subleases of offices representing the present value of future sublease payments receivable. Where appropriate, impairment is recorded where the receivable is in doubt. Individual risk limits for banks and financial institutions are set by the Group with reference to external rating agencies. The Group\u2019s treasury policy has set limits and quantities that the Group must remain within. No credit or counterparty limits were exceeded during the year. The Group\u2019s cash and cash equivalents split by S&P counterparty rating were A/A- rated: \u00a356.2 million (2021: \u00a3111.9 million), A+ or better rated: \u00a3121.5 million (2021: \u00a3112.0 million) and below A- rated: \u00a3nil (2021: \u00a30.1 million). 16. Financial risk management continued Financial risk factors continued Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient financial resources to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group\u2019s position. The Group\u2019s liquidity position is monitored and reviewed on an ongoing basis by the Directors. The amounts disclosed in the following tables are the contractual undiscounted cash flows. The liquidity requirements of the bonds are met from cash flows generated by the investment in SME loans (securitised) and the liquidity requirements of bank borrowings are met from cash flows generated by investment in SME loans (warehouse) and SME loans (other). The maturity analysis of financial instruments at 31 December 2022 and 31 December 2021 is as follows: At 31 December 2022 Less than 3 months \u00a3m Between 3 months and 1 year \u00a3m Between 1 and 5 years \u00a3m Over 5 years \u00a3m Total undiscounted cash flows \u00a3m Impact of discounting\u200a2 \u00a3m Carrying amount \u00a3m Financial liabilities Trade and other payables (12.2) \u2014 \u2014 \u2014 (12.2) \u2014 (12.2) Bank borrowings \u2014 \u2014 (22.6) \u2014 (22.6) \u2014 (22.6) Bonds (5.1) (12.5) (6.4) \u2014 (24.0) 0.3 (23.7) Loan repurchase liability 1 (0.5) \u2014 \u2014 \u2014 (0.5) \u2014 (0.5) Lease liabilities (1.7) (5.6) (13.7) \u2014 (21.0) 1.2 (19.8) (19.5) (18.1) (42.7) \u2014 (80.3) 1.5 (78.8) At 31 December 2021 Less than 3 months \u00a3m Between 3 months and 1 year \u00a3m Between 1 and 5 years \u00a3m Over 5 years \u00a3m Total undiscounted cash flows \u00a3m Impact of discounting\u200a2 \u00a3m Carrying amount \u00a3m Financial liabilities Trade and other payables (15.2) \u2014 \u2014 \u2014 (15.2) \u2014 (15.2) Bank borrowings \u2014 \u2014 (73.2) \u2014 (73.2) \u2014 (73.2) Bonds (28.8) (60.5) (60.8) (0.2) (150.3) 10.0 (140.3) Loan repurchase liability 1 (2.2) \u2014 \u2014 \u2014 (2.2) \u2014 (2.2) Lease liabilities (1.7) (5.2) (18.9) \u2014 (25.8) 1.9 (23.9) (47.9) (65.7) (152.9) (0.2) (266.7) 11.9 (254.8) 1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called. 2. Included within the impact of discounting on bonds is \u00a30.3 million of deferred bond issuance costs (2021: \u00a31.1 million). Bank borrowings consist of drawn amounts in the US of $27.3 million (2021: $98.7 million) on the PPP Liquidity Facility available from the Federal Reserve Bank at a fixed interest rate of 0.35%. 16. Financial risk management continued Financial risk factors continued Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group\u2019s market risk arises from open positions in interest-bearing assets and liabilities, to the extent that these are exposed to general and specific market movements. a) Other price risk The fair value of the SME loans which are held at fair value through profit and loss can fluctuate depending on market pricing of relative interest rates and credit risk. This is reflected in the discount rate used to derive a valuation for the loan assets. A sensitivity to the discount rates used in the valuation of the assets measured at fair value through profit and loss and which are exposed to greater estimation uncertainty is disclosed in note 2. b) Interest rate risk The Group is exposed to interest rate risk in relation to financial liabilities through drawn committed borrowing facilities and on bonds and on financial assets through investment in SME loans. Non-trading interest rate risk The Group\u2019s interest risk on financial instruments is limited to interest receivable on loan note investments, cash and cash equivalent balances and interest on bonds and bank borrowings. The maturities of financial instruments subject to interest rate risk are as follows: Less than 3 months Between 3 months and 1 year Between 1 and 5 years At 31 December 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Fixed rate SME loans (other) 2 0.9 \u2014 0.4 \u2014 44.4 74.2 Investment in trusts and co- investments \u2014 \u2014 \u2014 \u2014 28.7 39.1 Lines of credit 16.0 1.6 \u2014 \u2014 \u2014 \u2014 SME loans (warehouse)1 0.1 \u2014 0.1 0.1 2.2 3.1 SME loans (securitised)1 0.1 0.2 4.0 10.1 41.7 137.8 Bank borrowings 2 \u2014 \u2014 \u2014 \u2014 (22.6) (73.2) Bonds1 \u2014 \u2014 \u2014 \u2014 (23.7) (80.2) Floating rate Cash and cash equivalents 177.7 224.0 \u2014 \u2014 \u2014 \u2014 Bank borrowings \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 Bonds1 \u2014 \u2014 \u2014 \u2014 \u2014 (60.1) 194.8 225.8 4.5 10.2 70.7 40.7 1. The bonds, SME loans (warehouse) and SME loans (securitised) are classified as current on the balance sheet, reflecting that the position is held to sell. The above table represents the contractual maturities. 2. The fixed rate bank borrowings and SME loans (other) include the Group\u2019s drawing of the PPP Liquidity Facility in the US in order to fund PPP loan originations. These are classified as non-current on the balance sheet, and the above table represents the contractual maturities, although the PPP loans could be forgiven by the SBA and the associated liability could be repaid from the proceeds within 12 months of the balance sheet date. There are no financial assets which are held for a period of over five years. Interest rate risk sensitivity analysis \u2013 non-trading interest (fixed rate) Interest on loan note investments including SME loans (other), SME loans (warehouse), SME loans (securitised), the unleveraged investment in trusts and co-investments, lines of credit, certain bank borrowings (in the US) and bond liabilities (in the US) is fixed until the maturity of the investment, and is not impacted by market rate changes. The level of future interest rate receivable would be similar to that received in the year and the impact of movements in interest rates on the value of the assets is considered immaterial to the Group\u2019s overall performance for the year. Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk and note there have recently been significant increases in rates and expectation of future rate rises observed. The Directors believe that any reasonable increase in the base rate would not significantly impact the Group\u2019s cash or finance income. Interest on bonds (in the UK) was subject to movements in the Sterling Overnight Index Average Rate (\u201cSONIA\u201d). However, the Group had mitigated the risk of increases in interest rates through the use of interest rate caps and the bonds were fully repaid during the year. 16. Financial risk management continued Financial risk factors continued Market risk continued b) Interest rate risk continued Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) continued Some of the Group\u2019s investment in trusts are through warehouse vehicles where the Group is a minority equity investor. The senior borrowing facilities utilised in these vehicles receive interest on borrowings in priority to payments to the equity investors at SONIA plus a margin. As a result of the increase in SONIA and anticipated future increases, the increased borrowing costs have reduced the expected cash returns to the equity investors of the investment held at fair value through profit and loss. The impact is recognised in fair value gains and losses in the statement of comprehensive income. Some, but not all of the vehicles, have interest rate caps or interest rate swaps within their structures which can mitigate the impact of future rate rises. Further increases in SONIA or the expected future increases in SONIA could reduce the fair value further. A 100bps increase in projected SONIA rates over the life of the trusts would reduce the fair value of the investments in trusts at 31 December 2022 by \u00a30.1 million. Following the financial crisis, the reform and replacement of benchmark interest rates such as GBP LIBOR and other inter-bank offered rates (\u201cIBORs\u201d) has become a priority for global regulators. There remains some uncertainty around the timing and precise nature of these changes. This uncertainty will remain until the Group\u2019s contracts that reference LIBOR are amended to reference the alternative benchmark which is complete for the UK and remains ongoing for the US; however, there are no remaining material exposures to USD LIBOR at 31 December 2022. c) Sensitivity analysis IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report date showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably possible at that date. As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no sensitivity analysis for those risks has been disclosed with the exception of sensitivity to discount rates on SME loans held at fair value through profit and loss within note 2. d) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, the UK pound and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group\u2019s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. Apart from these particular cash flows, the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which income is generated and expenses are incurred. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The table below sets out the Group\u2019s currency exposures from financial assets and liabilities held by Group companies in currencies other than their functional currencies and resulting in exchange movements in the income statement and balance sheet. 31 December 2022 31 December 2021 USD \u00a3m GBP \u00a3m EUR \u00a3m Total \u00a3m USD \u00a3m GBP \u00a3m EUR \u00a3m Total \u00a3m Cash and cash equivalents 0.2 \u2014 \u2014 0.2 0.2 \u2014 2.2 2.4 Intra-group assets \u2014 \u2014 1.0 1.0 \u2014 \u2014 \u2014 \u2014 Intra-group liabilities (16.5) \u2014 (0.8) (17.3) (20.8) (0.1) (4.0) (24.9) 16. Financial risk management continued Financial risk factors continued Market risk continued d) Foreign exchange risk continued The Group assessed the sensitivity to a 10% depreciation and 10% appreciation in pound sterling against the relevant foreign currencies (2021 comparative sensitivities are presented based on 5%). While 5% is the sensitivity rate used when reporting foreign currency risk internally to senior management personnel, in light of recent fluctuations in foreign exchange rates, 10% represents management\u2019s current assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis to the income statement includes only outstanding foreign currency-denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. The sensitivity analysis illustrates the impact on the foreign currency translation reserve within equity of the retranslation of quasi-equity loans to foreign operations within the Group and net investment in foreign operations of the Group. The Group\u2019s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the Parent Company. Appreciation in pound sterling Depreciation in pound sterling At 31 December Income statement 2022 \u00a3m Equity 2022 \u00a3m Income statement 2021 \u00a3m Equity 2021 \u00a3m Income statement 2022 \u00a3m Equity 2022 \u00a3m Income statement 2021 \u00a3m Equity 2021 \u00a3m US dollars \u2014 (3.6) (1.0) (3.3) \u2014 4.4 1.1 3.6 Euros \u2014 0.6 (0.1) 0.5 \u2014 (0.7) 0.1 (0.5) \u2014 (3.0) (1.1) (2.8) \u2014 3.7 1.2 3.1 Capital management The Group considers its capital to comprise its ordinary share capital, share premium, foreign exchange reserve, share options reserve and retained earnings. Quantitative detail is shown in the consolidated statement of changes in equity. The Directors\u2019 objective when managing capital is to safeguard the Group\u2019s ability to continue as a going concern in order to provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of the budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the Group. Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures indicate the performance of the business against budget/forecast and confirm that the Group has adequate resources to meet its working capital requirements. The Group is subject to externally imposed capital requirements by the Financial Conduct Authority but these are lower than internally set requirements. During the period the Group complied with all externally imposed requirements. Sources of estimation uncertainty and critical judgements that may result in a material adjustment in future periods are outlined in note 2. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-403": {
"value": "Financial instruments measured at fair value IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy: 5 level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; 5 level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly; and 5 level 3 inputs are unobservable inputs for the assets or liabilities. The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. An assessment that the level applied to financial instruments is appropriate and whether a transfer between levels is required is undertaken at the end of each accounting period. There were no transfers between levels during the year or prior year. The Finance department of the Group performs the valuations of items required for financial reporting purposes, including level 3 fair values. This team reports to the Chief Financial Officer (\u201cCFO\u201d). Discussions of valuation processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee. Financial instruments measured at fair value continued Fair value measurement using 31 December 2022 Quoted prices in active markets (level 1) \u00a3m Significant observable inputs (level 2) \u00a3m Significant unobservable inputs (level 3) \u00a3m Total \u00a3m Financial assets SME loans (warehouse) \u2014 \u2014 2.4 2.4 SME loans (securitised) \u2014 \u2014 45.8 45.8 SME loans (other) \u2014 \u2014 20.9 20.9 Investment in trusts and co-investments \u2014 \u2014 28.7 28.7 Cash and cash equivalents 121.6 \u2014 \u2014 121.6 121.6 \u2014 97.8 219.4 Financial liabilities Bonds \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 Fair value measurement using 31 December 2021 Quoted prices in active markets (level 1) \u00a3m Significant observable inputs (level 2) \u00a3m Significant unobservable inputs (level 3) \u00a3m Total \u00a3m Financial assets SME loans (warehouse) \u2014 \u2014 3.2 3.2 SME loans (securitised) \u2014 \u2014 14 8.1 14 8.1 Investment in trusts and co-investments \u2014 \u2014 39.1 39.1 Cash and cash equivalents 112.1 \u2014 \u2014 112.1 112.1 \u2014 190.4 302.5 Financial liabilities Bonds \u2014 \u2014 (12.8) (12.8) \u2014 \u2014 (12.8) (12.8) The fair value of SME loans (warehouse) has been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (warehouse) was \u00a32.4 million at 31 December 2022 (2021: \u00a33.2 million). The fair value of SME loans (securitised) represents loan assets in the securitisation vehicles and legacy loans of this nature and has been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (securitised) was \u00a345.8 million at 31 December 2022 (2021: \u00a3148.1 million). Bonds represent the unrated tranches of bond liabilities measured at fair value through profit and loss (the rated tranches of bonds are measured at amortised cost). The fair value has been estimated by discounting estimated future cash flows in relation to the bonds using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the bonds was \u00a3nil at 31 December 2022 (2021: \u00a312.8 million). Investment in trusts and co-investments represents the Group\u2019s investment in the trusts and other vehicles used to fund CBILS, RLS and certain commercial loans and is measured at fair value through profit and loss. The government-owned British Business Bank will guarantee up to 80% of the balance of CBILS loans in the event of default (and between 70% and 80% of RLS loans). The fair value has been estimated by discounting future cash flows in relation to the trusts using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the investment in trusts and co-investments was \u00a328.7 million at 31 December 2022 (2021: \u00a339.1 million). The SME loans (other) held at fair value represents loan assets temporarily funded by the Group in relation to the commercial loans and is estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (other) was \u00a320.9 million (2021: \u00a3nil). The most relevant significant unobservable inputs relate to the default rate estimate and discount rates applied to the fair value calculation, details of which are set out in note 2 for those with material estimation uncertainty. Financial instruments measured at fair value continued Fair value movements on SME loans (warehouse), SME loans (securitised), SME loans (other), investments in trusts and bonds (unrated) are recognised through the profit and loss account in fair value gains/(losses). A reconciliation of the movement in level 3 financial instruments is shown as follows: SME loans (warehouse) \u00a3m SME loans (securitised) \u00a3m Bonds (unrated) \u00a3m Investment in trusts and co-investments \u00a3m SME loans (other) \u00a3m Trade and other receivables \u00a3m At 1 January 2021 221.8 279.8 (7.8) 21.2 \u2014 0.2 Additions \u2014 \u2014 \u2014 22.1 \u2014 \u2014 Transfers 0.2 \u2014 \u2014 \u2014 \u2014 (0.2) Repayments (58.6) (150.2) \u2014 (3.3) \u2014 \u2014 Disposal (176.1) \u2014 \u2014 \u2014 \u2014 \u2014 Net gain/(loss) on the change in fair value of financial instruments at fair value through profit and loss 16.3 18.2 (5.0) (0.9) \u2014 \u2014 Foreign exchange (loss)/gain (0.4) 0.3 \u2014 \u2014 \u2014 \u2014 At 31 December 2021 3.2 14 8.1 (12.8) 39.1 \u2014 \u2014 Additions \u2014 \u2014 \u2014 6.4 22.6 \u2014 Repayments (2.8) (86.8) 16.3 (10.0) (0.8) \u2014 Disposal \u2014 (39.5) \u2014 \u2014 \u2014 \u2014 Net gain/(loss) on the change in fair value of financial instruments at fair value through profit and loss 2.0 14.7 (3.5) (7.0) (1.4) \u2014 Foreign exchange gain \u2014 9.3 \u2014 0.2 0.5 \u2014 At 31 December 2022 2.4 45.8 \u2014 28.7 20.9 \u2014 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-404": {
"value": "Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group\u2019s receivables from customers and cash and cash equivalents held at banks. The Group\u2019s maximum exposure to credit risk by class of financial asset is as follows: 31 December 2022 \u00a3m 31 December 2021 \u00a3m Non-current SME loans (other) 24.8 74.2 Investment in trusts and co-investments 28.7 39.1 Trade and other receivables: \u2013 Other receivables 3.4 4.1 Current Line of credit 16.0 1.6 SME loans (other) 20.9 \u2014 SME loans (warehouse) 2.4 3.2 SME loans (securitised) 45.8 14 8.1 Trade and other receivables: \u2013 Trade receivables 0.4 1.8 \u2013 Other receivables 5.3 10.0 \u2013 Accrued income 4.8 6.2 \u2013 Rent and other deposits 2.3 2.2 Cash and cash equivalents 177.7 224.0 Total gross credit risk exposure 332.5 514.5 Less bank borrowings and bond liabilities1 (46.3) (213.5) Total net credit risk exposure 286.2 301.0 1. Included within bank borrowings are \u00a322.6 million (2021: \u00a373.2 million) in relation to draw downs on the PPPLF. Credit risk continued In addition the Group is subject to financial guarantees it has issued to buy back loans detailed in the loan repurchase liability in note 15. The Group\u2019s maximum exposure to credit risk on financial guarantees were every eligible loan required to be bought back would be \u00a32.8 million (2021: \u00a310.0 million). An expected credit loss allowance related to undrawn lines of credit on the FlexiPay product of \u00a30.3 million (2021: \u00a3nil) is held within provisions and other liabilities. The Group\u2019s maximum exposure to credit risk on the undrawn lines of credit if they were all to be fully drawn would be \u00a341.6 million (2021: \u00a34.2 million). SME loans (warehouse) and SME loans (securitised) relate to the underlying pool of SME loans in both the warehouse and securitisation vehicles or are loans from the legacy warehouses and SPVs that have since been purchased or novated into other Funding Circle entities, but remain held at FVTPL with the business model of holding the loans for sale. Whilst there is credit risk from the loans defaulting, certain of these SME loans (securitised) and the third party bonds that remain in SPVs are held within bankruptcy remote vehicles. If the SME loans were to all default, then the bank debt or third party bonds do not receive their money back. Therefore the overall exposure to the Group for these investments is the Group\u2019s net investment in the SME loans which is after taking account of the bank debt and third party bonds. SME loans (other) includes \u00a320.9 million (2021: \u00a3nil) loans originated by the Group with the intention of selling onwards, which are held at FVTPL and are therefore disclosed as current. Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss (\u201cECL\u201d) model. The impairment related to each loan is based on the ECLs associated with the probability of default of that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable presumption per IFRS 9. The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. In some circumstances where loans are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the impairment is therefore based on lifetime ECLs. Lines of credit utilises the same default definition and probability of default under IFRS 9, however, are assessed based on 12-month probability of default at the overall available line of credit level, estimating the expected utilisation of the line of credit at the estimated point of default. The expected credit loss impairment associated with undrawn lines of credit is disclosed within other liabilities in note 15 and in note 27. SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the US government in the event of default and the loans are anticipated to be forgiven. At the point of default and subsequent collection of the guarantee or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished. SME loans (other) also includes loans which have been brought back from investors and are held at amortised cost. Lines of credit comprises \u00a316.0 million (2021: \u00a31.6 million) of drawn amounts through the FlexiPay product net of expected credit loss impairment, enabling businesses to spread UK invoices or payments over three months with the initial payment made on a borrower\u2019s behalf. The gross principal value of SME loans (other) is \u00a339.6 million (2021: \u00a389.5 million) and drawn lines of credit held at amortised cost is \u00a317.6 million (2021: \u00a31.6 million), totalling \u00a357.2 million (2021: \u00a391.1 million), and an allowance for expected credit losses of \u00a314.8 million (2021: \u00a315.3 million) and \u00a31.6 million (2021: \u00a3nil) respectively, totalling \u00a316.4 million (2021: \u00a315.3 million), is held against these loans and drawn lines of credit as detailed below. An impairment credit of \u00a30.9 million (2021: charge of \u00a31.3 million) was recognised through the statement of comprehensive income in the year to 31 December 2022 within credit/(provision) for expected credit losses in the income statement. Credit risk continued Performing: 12-month ECL \u00a3m Underperforming: Lifetime ECL \u00a3m Non-performing: Lifetime ECL \u00a3m POCI: Lifetime ECL \u00a3m Total \u00a3m At 1 January 2021 0.1 \u2014 0.4 12.2 12.7 Impairment against additions 0.1 \u2014 \u2014 2.6 2.7 Exchange differences \u2014 \u2014 \u2014 (0.6) (0.6) Impairment against loans transferred from/(to) performing \u2014 0.3 0.7 \u2014 1.0 Loans repaid (0.1) \u2014 \u2014 (0.9) (1.0) Change in probability of default or loss given default assumptions 0.5 \u2014 \u2014 \u2014 0.5 At 31 December 2021 0.6 0.3 1.1 13.3 15.3 Impairment against additions 0.1 \u2014 \u2014 1.1 1.2 Exchange differences 0.1 \u2014 0.1 1.0 1.2 Impairment against loans transferred from/(to) performing (0.1) 0.3 0.3 \u2014 0.5 Loans repaid (0.3) (0.3) (0.5) (1.2) (2.3) Change in probability of default or loss given default assumptions 0.7 \u2014 (0.1) (0.1) 0.5 At 31 December 2022 1.1 0.3 0.9 14.1 16.4 Expected credit loss coverage % Basis for recognition of expected credit loss impairment Gross lines of credit and SME loans (other) \u00a3m Provision for expected credit loss \u00a3m Net carrying amount \u00a3m As at 31 December 2021 Performing (due in 30 days or less) 0.7 12-month ECL 75.7 (0.6) 75.1 Underperforming (31\u201390 days overdue) 100.0 Lifetime ECL 0.3 (0.3) \u2014 Non-performing (90+ days overdue) 100.0 Lifetime ECL 1.1 (1.1) \u2014 POCI (90+ days overdue) 95.1 Lifetime ECL 14.0 (13.3) 0.7 Total 91.1 (15.3) 75.8 As at 31 December 2022 Performing (due in 30 days or less) 2.7 12 month ECL 39.2 (1.1) 38.1 Underperforming (31\u201390 days overdue) 36.5 Lifetime ECL 0.7 (0.3) 0.4 Non-performing (90+ days overdue) 43.1 Lifetime ECL 2.3 (0.9) 1.4 POCI (90+ days overdue) 94.2 Lifetime ECL 15.0 (14.1) 0.9 Total 57. 2 (16.4) 40.8 Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk of financial loss is deemed minimal because the counterparties are well established financial institutions. Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate, a provision for expected credit losses is recorded in the financial statements. Other receivables include net investment in subleases of offices representing the present value of future sublease payments receivable. Where appropriate, impairment is recorded where the receivable is in doubt. Individual risk limits for banks and financial institutions are set by the Group with reference to external rating agencies. The Group\u2019s treasury policy has set limits and quantities that the Group must remain within. No credit or counterparty limits were exceeded during the year. The Group\u2019s cash and cash equivalents split by S&P counterparty rating were A/A- rated: \u00a356.2 million (2021: \u00a3111.9 million), A+ or better rated: \u00a3121.5 million (2021: \u00a3112.0 million) and below A- rated: \u00a3nil (2021: \u00a30.1 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCreditRiskExplanatory",
"language": "en",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-405": {
"value": "Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient financial resources to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group\u2019s position. The Group\u2019s liquidity position is monitored and reviewed on an ongoing basis by the Directors. The amounts disclosed in the following tables are the contractual undiscounted cash flows. The liquidity requirements of the bonds are met from cash flows generated by the investment in SME loans (securitised) and the liquidity requirements of bank borrowings are met from cash flows generated by investment in SME loans (warehouse) and SME loans (other). The maturity analysis of financial instruments at 31 December 2022 and 31 December 2021 is as follows: At 31 December 2022 Less than 3 months \u00a3m Between 3 months and 1 year \u00a3m Between 1 and 5 years \u00a3m Over 5 years \u00a3m Total undiscounted cash flows \u00a3m Impact of discounting\u200a2 \u00a3m Carrying amount \u00a3m Financial liabilities Trade and other payables (12.2) \u2014 \u2014 \u2014 (12.2) \u2014 (12.2) Bank borrowings \u2014 \u2014 (22.6) \u2014 (22.6) \u2014 (22.6) Bonds (5.1) (12.5) (6.4) \u2014 (24.0) 0.3 (23.7) Loan repurchase liability 1 (0.5) \u2014 \u2014 \u2014 (0.5) \u2014 (0.5) Lease liabilities (1.7) (5.6) (13.7) \u2014 (21.0) 1.2 (19.8) (19.5) (18.1) (42.7) \u2014 (80.3) 1.5 (78.8) At 31 December 2021 Less than 3 months \u00a3m Between 3 months and 1 year \u00a3m Between 1 and 5 years \u00a3m Over 5 years \u00a3m Total undiscounted cash flows \u00a3m Impact of discounting\u200a2 \u00a3m Carrying amount \u00a3m Financial liabilities Trade and other payables (15.2) \u2014 \u2014 \u2014 (15.2) \u2014 (15.2) Bank borrowings \u2014 \u2014 (73.2) \u2014 (73.2) \u2014 (73.2) Bonds (28.8) (60.5) (60.8) (0.2) (150.3) 10.0 (140.3) Loan repurchase liability 1 (2.2) \u2014 \u2014 \u2014 (2.2) \u2014 (2.2) Lease liabilities (1.7) (5.2) (18.9) \u2014 (25.8) 1.9 (23.9) (47.9) (65.7) (152.9) (0.2) (266.7) 11.9 (254.8) 1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called. 2. Included within the impact of discounting on bonds is \u00a30.3 million of deferred bond issuance costs (2021: \u00a31.1 million). Bank borrowings consist of drawn amounts in the US of $27.3 million (2021: $98.7 million) on the PPP Liquidity Facility available from the Federal Reserve Bank at a fixed interest rate of 0.35%. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-406": {
"value": "Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group\u2019s market risk arises from open positions in interest-bearing assets and liabilities, to the extent that these are exposed to general and specific market movements. a) Other price risk The fair value of the SME loans which are held at fair value through profit and loss can fluctuate depending on market pricing of relative interest rates and credit risk. This is reflected in the discount rate used to derive a valuation for the loan assets. A sensitivity to the discount rates used in the valuation of the assets measured at fair value through profit and loss and which are exposed to greater estimation uncertainty is disclosed in note 2. b) Interest rate risk The Group is exposed to interest rate risk in relation to financial liabilities through drawn committed borrowing facilities and on bonds and on financial assets through investment in SME loans. Non-trading interest rate risk The Group\u2019s interest risk on financial instruments is limited to interest receivable on loan note investments, cash and cash equivalent balances and interest on bonds and bank borrowings. The maturities of financial instruments subject to interest rate risk are as follows: Less than 3 months Between 3 months and 1 year Between 1 and 5 years At 31 December 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m 2022 \u00a3m 2021 \u00a3m Fixed rate SME loans (other) 2 0.9 \u2014 0.4 \u2014 44.4 74.2 Investment in trusts and co- investments \u2014 \u2014 \u2014 \u2014 28.7 39.1 Lines of credit 16.0 1.6 \u2014 \u2014 \u2014 \u2014 SME loans (warehouse)1 0.1 \u2014 0.1 0.1 2.2 3.1 SME loans (securitised)1 0.1 0.2 4.0 10.1 41.7 137.8 Bank borrowings 2 \u2014 \u2014 \u2014 \u2014 (22.6) (73.2) Bonds1 \u2014 \u2014 \u2014 \u2014 (23.7) (80.2) Floating rate Cash and cash equivalents 177.7 224.0 \u2014 \u2014 \u2014 \u2014 Bank borrowings \u2014 \u2014 \u2014 \u2014 \u2014 \u2014 Bonds1 \u2014 \u2014 \u2014 \u2014 \u2014 (60.1) 194.8 225.8 4.5 10.2 70.7 40.7 1. The bonds, SME loans (warehouse) and SME loans (securitised) are classified as current on the balance sheet, reflecting that the position is held to sell. The above table represents the contractual maturities. 2. The fixed rate bank borrowings and SME loans (other) include the Group\u2019s drawing of the PPP Liquidity Facility in the US in order to fund PPP loan originations. These are classified as non-current on the balance sheet, and the above table represents the contractual maturities, although the PPP loans could be forgiven by the SBA and the associated liability could be repaid from the proceeds within 12 months of the balance sheet date. There are no financial assets which are held for a period of over five years. Interest rate risk sensitivity analysis \u2013 non-trading interest (fixed rate) Interest on loan note investments including SME loans (other), SME loans (warehouse), SME loans (securitised), the unleveraged investment in trusts and co-investments, lines of credit, certain bank borrowings (in the US) and bond liabilities (in the US) is fixed until the maturity of the investment, and is not impacted by market rate changes. The level of future interest rate receivable would be similar to that received in the year and the impact of movements in interest rates on the value of the assets is considered immaterial to the Group\u2019s overall performance for the year. Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk and note there have recently been significant increases in rates and expectation of future rate rises observed. The Directors believe that any reasonable increase in the base rate would not significantly impact the Group\u2019s cash or finance income. Interest on bonds (in the UK) was subject to movements in the Sterling Overnight Index Average Rate (\u201cSONIA\u201d). However, the Group had mitigated the risk of increases in interest rates through the use of interest rate caps and the bonds were fully repaid during the year. Market risk continued b) Interest rate risk continued Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) continued Some of the Group\u2019s investment in trusts are through warehouse vehicles where the Group is a minority equity investor. The senior borrowing facilities utilised in these vehicles receive interest on borrowings in priority to payments to the equity investors at SONIA plus a margin. As a result of the increase in SONIA and anticipated future increases, the increased borrowing costs have reduced the expected cash returns to the equity investors of the investment held at fair value through profit and loss. The impact is recognised in fair value gains and losses in the statement of comprehensive income. Some, but not all of the vehicles, have interest rate caps or interest rate swaps within their structures which can mitigate the impact of future rate rises. Further increases in SONIA or the expected future increases in SONIA could reduce the fair value further. A 100bps increase in projected SONIA rates over the life of the trusts would reduce the fair value of the investments in trusts at 31 December 2022 by \u00a30.1 million. Following the financial crisis, the reform and replacement of benchmark interest rates such as GBP LIBOR and other inter-bank offered rates (\u201cIBORs\u201d) has become a priority for global regulators. There remains some uncertainty around the timing and precise nature of these changes. This uncertainty will remain until the Group\u2019s contracts that reference LIBOR are amended to reference the alternative benchmark which is complete for the UK and remains ongoing for the US; however, there are no remaining material exposures to USD LIBOR at 31 December 2022. c) Sensitivity analysis IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report date showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably possible at that date. As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no sensitivity analysis for those risks has been disclosed with the exception of sensitivity to discount rates on SME loans held at fair value through profit and loss within note 2. d) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, the UK pound and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group\u2019s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. Apart from these particular cash flows, the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which income is generated and expenses are incurred. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The table below sets out the Group\u2019s currency exposures from financial assets and liabilities held by Group companies in currencies other than their functional currencies and resulting in exchange movements in the income statement and balance sheet. 31 December 2022 31 December 2021 USD \u00a3m GBP \u00a3m EUR \u00a3m Total \u00a3m USD \u00a3m GBP \u00a3m EUR \u00a3m Total \u00a3m Cash and cash equivalents 0.2 \u2014 \u2014 0.2 0.2 \u2014 2.2 2.4 Intra-group assets \u2014 \u2014 1.0 1.0 \u2014 \u2014 \u2014 \u2014 Intra-group liabilities (16.5) \u2014 (0.8) (17.3) (20.8) (0.1) (4.0) (24.9) Market risk continued d) Foreign exchange risk continued The Group assessed the sensitivity to a 10% depreciation and 10% appreciation in pound sterling against the relevant foreign currencies (2021 comparative sensitivities are presented based on 5%). While 5% is the sensitivity rate used when reporting foreign currency risk internally to senior management personnel, in light of recent fluctuations in foreign exchange rates, 10% represents management\u2019s current assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis to the income statement includes only outstanding foreign currency-denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. The sensitivity analysis illustrates the impact on the foreign currency translation reserve within equity of the retranslation of quasi-equity loans to foreign operations within the Group and net investment in foreign operations of the Group. The Group\u2019s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the Parent Company. Appreciation in pound sterling Depreciation in pound sterling At 31 December Income statement 2022 \u00a3m Equity 2022 \u00a3m Income statement 2021 \u00a3m Equity 2021 \u00a3m Income statement 2022 \u00a3m Equity 2022 \u00a3m Income statement 2021 \u00a3m Equity 2021 \u00a3m US dollars \u2014 (3.6) (1.0) (3.3) \u2014 4.4 1.1 3.6 Euros \u2014 0.6 (0.1) 0.5 \u2014 (0.7) 0.1 (0.5) \u2014 (3.0) (1.1) (2.8) \u2014 3.7 1.2 3.1 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfMarketRiskExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-407": {
"value": "Capital management The Group considers its capital to comprise its ordinary share capital, share premium, foreign exchange reserve, share options reserve and retained earnings. Quantitative detail is shown in the consolidated statement of changes in equity. The Directors\u2019 objective when managing capital is to safeguard the Group\u2019s ability to continue as a going concern in order to provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of the budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the Group. Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures indicate the performance of the business against budget/forecast and confirm that the Group has adequate resources to meet its working capital requirements. The Group is subject to externally imposed capital requirements by the Financial Conduct Authority but these are lower than internally set requirements. During the period the Group complied with all externally imposed requirements. Sources of estimation uncertainty and critical judgements that may result in a material adjustment in future periods are outlined in note 2. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-378": {
"value": "17. Share capital 31 December 2022 Number 31 December 2022 \u00a3 31 December 2021 Number 31 December 2021 \u00a3 Called up, allotted and fully paid Ordinary shares of \u00a30.001 361,303,143 361,303 356,619,718 356,620 During 2022, the Company issued 4,683,425 ordinary shares of \u00a30.001 (2021: \u00a30.001) ranking pari passu with ordinary shares in issue (2021: 3,675,743) in connection with employee share schemes, giving rise to a total share premium of \u00a30.1 million (2021: \u00a30.4 million). Included in the total number of ordinary shares outstanding are 16,726,515 (2021: 283,786) shares held by the Group\u2019s Employee Benefit Trust, which includes 16,471,239 shares (2021: nil) that were purchased during the year (17,660,340 purchased and 1,189,101 utilised to satisfy employee share option plans) and 5,539,201 (2021: 2,984,437) shares held by the Group\u2019s Share Incentive Plan Trust. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-379": {
"value": "18. Share premium account 2022 \u00a3m 2021 \u00a3m At 1 January 293.0 292.6 Exercise of options \u2013 proceeds received 0.1 0.4 At 31 December 293.1 293.0 ",
"dimensions": {
"concept": "fundingcircle:DisclosureOfSharePremiumAccount",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-380": {
"value": "19. Foreign exchange reserve \u00a3m At 1 January 2021 9.7 Exchange difference on translating the net assets of foreign operations 1.4 At 31 December 2021 11.1 Exchange difference on translating the net assets of foreign operations 5.8 At 31 December 2022 16.9 Exchange differences relating to the translation of the net assets of the Group\u2019s subsidiaries from their functional currency into the Company\u2019s functional currency are recognised directly in the foreign exchange reserves within equity. ",
"dimensions": {
"concept": "fundingcircle:DisclosureOfForeignExchangeReserve",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-381": {
"value": "20. Accumulated losses \u00a3m At 1 January 2021 (98.6) Transfer of share option costs 1.8 Profit for the year 61.2 At 31 December 2021 (35.6) Transfer of share option costs 2.6 Purchase of own shares (8.7) Loss for the year (6.9) At 31 December 2022 (48.6) The transfer of share option costs is in relation to the exercise of share options during the year and their associated costs in the share options reserve which are transferred to (accumulated losses)/retained earnings. During the year ended 31 December 2022, \u00a38.7 million (2021: \u00a3nil) of ordinary shares were purchased by the EBT for the purposes of satisfying employee share option plans. The number of shares purchased was 17.6 million and the average purchase price was \u00a30.50. All shares have a nominal value of \u00a30.001. ",
"dimensions": {
"concept": "fundingcircle:DisclosureOfAccumulatedLosses",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-382": {
"value": "21. Share-based payment The Company operates share schemes for all employees of the Group. The terms of the main current schemes from which the Group\u2019s employees benefit are set out below. Post-IPO employee share plans Since the Company\u2019s admission on the London Stock Exchange to the year ended 31 December 2019, the Company operated a single discretionary share-based long-term incentive plan (\u201cLTIP\u201d). In November 2020, the Company introduced a Share Incentive Plan (\u201cSIP\u201d) approved by HMRC, which includes free shares, partnership shares and matching shares. This plan is only relevant for UK-based employees; the LTIP will continue to make awards for non-UK-based employees and employees in senior management positions. The main features of the LTIP and SIP are set out below. Post-IPO \u2013 LTIP Form of LTIP Awards The Board grants awards in the form of restricted stock units at no cost or options to acquire shares at no cost (a nil-cost option). Performance conditions LTIP Awards are not currently subject to performance conditions with the exception of LTIP Awards granted to Executive Directors which are subject to performance conditions. Refer to the Remuneration Report for further details. Any performance condition may be amended or substituted if one or more events occur which cause the Board to reasonably consider that an amended or substituted performance condition would be more appropriate and would not be materially less difficult to satisfy than originally intended. Vesting and release of LTIP Awards LTIP Awards granted to employees, excluding Executive Directors, currently vest subject to continued service only (\u201cTime-Based Vesting\u201d) in accordance with a vesting schedule set at grant. LTIP Awards granted to Executive Directors vest at the end of three years subject to achievement of performance conditions. Further details are shown in the Remuneration Report. The Board may determine at grant that an LTIP Award is subject to an additional holding period following vesting (a \u201cHolding Period\u201d). LTIP Options will be exercisable from the date of vesting or, if applicable, the end of the Holding Period until the tenth anniversary of the grant date, or such earlier date as the Board determines. 21. Share-based payment continued Post-IPO employee share plans continued Post-IPO \u2013 LTIP continued Cessation of employment LTIP Options may normally be exercised to the extent vested for a period of six months after ceasing employment or 12 months after death (or such other period as the Board may determine). Post-IPO \u2013 SIP Form of SIP awards The Board grants awards in the form of free shares, partnership shares and matching shares. Performance conditions There are no performance conditions attached to free shares, partnership shares and matching shares. Free shares Under the SIP, UK employees are eligible to receive up to a maximum of \u00a33,600, or 10% of annual salary if less, of free shares per tax year. Free shares will be awarded annually with a forfeiture period of two years and a holding period of three years. Matching shares UK employees are invited to buy partnership shares from pre-tax salary with a maximum investment in each tax year of \u00a31,800, or 10% of annual salary if less. Partnership shares are purchased every month. Employees can withdraw partnership shares from the SIP at any time although there are tax advantages if the shares are retained in the SIP for at least three years. Participants are awarded one matching share for every one partnership share they purchase. There are tax advantages if the matching shares are retained in the SIP for at least three years. Whilst employed by the Company, a participant will forfeit a corresponding number of matching shares if they choose to transfer partnership shares out of the SIP within three years of the date of purchase. Under normal circumstances, if a participant leaves the Company before the second anniversary of the date of award, they will forfeit their matching shares. If they leave between two and three years of the date of award, they retain their matching shares but those shares must be removed from the SIP and any tax advantages are lost. If a participant leaves under special circumstances, they will retain all of their matching shares, regardless of how long they have been held in the SIP. Pre-IPO employee share plans EMI Options Prior to June 2014, the Company issued options to UK subsidiary undertakings\u2019 employees under the EMI Options Scheme. Since then, the Company is not eligible to issue under the scheme. Unapproved Options The Company has an Unapproved Options Scheme for all employees of the Group. In accordance with standard vesting terms, the full award will vest four years after the vesting start date, with 25% vesting on the first anniversary of the vesting date and 6.25% every three months thereafter. If the options remain unexercised after a period of ten years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest. US Options Scheme 2 Options granted under the \u201cUS Options Scheme 2\u201d are Unapproved Options granted to US employees as either non-qualifying options or incentive stock options. The US Options Scheme 2 has the same vesting period as Unapproved Options. If the options remain unexercised after a period of ten years from the date of grant, the options expire. Unvested options are forfeited if the employee leaves the Group before the options vest. Growth Shares with \u201cshadow\u201d Unapproved Options Growth Shares were an upfront award of B, D or E ordinary shares with a nominal value of \u00a30.00001 per share where the ability to receive dividends and a capital return from the shares was conditional on the achievement of a performance target (namely, the growth of the enterprise value of the business beyond a hurdle). According to the terms and conditions, the performance target differed depending on the underlying share. If this performance target was met, the participants would profit from the whole of the value of the business, not just the growth from the date of the award, on the same basis as the ordinary shares. The Growth Shares were each issued in conjunction with a \u201cshadow\u201d Unapproved Option. The Unapproved Option could be exercised if the applicable enterprise value hurdle is not met upon an exit event. Both the Growth Shares and the \u201cshadow\u201d Unapproved Options vested according to the Company\u2019s standard vesting terms, as discussed in the description of Unapproved Options above. All share-based incentives are subject to service conditions. Such conditions are not taken into account in the fair value of the service received. The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted. The estimate of the fair value of the share-based incentives is measured using market prices. When market prices do not exist for shares or rights to shares with similar characteristics, fair value is determined by using a valuation technique (either the Monte Carlo or Black-Scholes pricing model as is most appropriate for each scheme). 21. Share-based payment continued Charge for the year Included in operating expenses of the Group is a charge for share-based payments and associated social security costs of \u00a34.7 million (2021: \u00a38.9 million) that arises from transactions accounted for as equity-settled share-based payment transactions. Movements in share plans Details of movements in the share schemes during the year are as follows: EMI Options Unapproved Options Free shares and matching shares LTIP Awards US Options Scheme Total Number and WAEP\u200a1 Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Outstanding at 1 January 2021 306,312 0.027 6,292,089 0.300 2,499,297 \u2014 14,515,220 \u2014 3,654,855 0.424 27,267,7 73 0.14 0 Granted during the year \u2014 \u2014 \u2014 \u2014 1,340,578 \u2014 8,680,546 \u2014 \u2014 \u2014 10,021,124 \u2014 Exercised during the year \u2014 \u2014 (1,108,496) 0.200 (31,582) \u2014 (982,792) \u2014 (709,527) 0.367 (2,832,397) 0.170 Forfeited during the year (7,312) 0.027 (41,509) 0.850 (950,520) \u2014 (2,872,931) \u2014 (126,048) 0.598 (3,998,320) 0.028 Outstanding at 31 December 2021 299,000 0.027 5,142,084 0.317 2,857,773 \u2014 19,340,043 \u2014 2,819,280 0.431 30,458,180 0.106 EMI Options Unapproved Options Free shares and matching shares LTIP Awards US Options Scheme Total Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number and WAEP Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Number \u00a3 Outstanding at 1 January 2022 299,000 0.027 5,142,084 0.317 2,857,773 \u2014 19,340,043 \u2014 2,819,280 0.431 30,458,180 0.106 Granted during the year \u2014 \u2014 \u2014 \u2014 3,131,344 \u2014 11, 817,920 \u2014 \u2014 \u2014 14,949,264 \u2014 Exercised during the year (152,700) 0.027 (129,399) 0.417 \u2014 \u2014 (3,121,272) \u2014 (2,383) 0.410 (3,405,754) 0.017 Forfeited during the year (5,000) 0.027 (2,789) 1.682 (1,155,891) \u2014 (8,175,973) \u2014 (625) 0.440 (9,340,278) 0.001 Outstanding at 31 December 2022 141,300 0.026 5,009,896 0.314 4,833,226 \u2014 19,860,718 \u2014 2,816,272 0.431 32,661,412 0.097 1. Weighted average exercise price. The following table summarises information about the share awards outstanding at 31 December 2022: EMI Options Unapproved Options Free shares and matching shares LTIP Awards US Options Total Range of exercise prices Number and WARCL\u200a1 Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number Years Number Years Number Years Number Years Number Years Number Years \u00a30\u2013\u00a30.008 \u2014 \u2014 2,260,017 5.4 4,833,226 \u2014 19,860,718 7.9 \u2014 \u2014 26,953,961 6.2 \u00a30.009\u2013\u00a30.176 141,300 0.8 214,142 0.5 \u2014 \u2014 \u2014 \u2014 24,302 1.4 379,744 0.6 \u00a30.177\u2013\u00a30.471 \u2014 \u2014 2,167,099 4.3 \u2014 \u2014 \u2014 \u2014 2,193,087 2.8 4,360,186 3.5 \u00a30.472\u2013\u00a31.75 \u2014 \u2014 368,638 5.5 \u2014 \u2014 \u2014 \u2014 598,883 5.4 967, 521 5.4 141,300 0.8 5,009,896 4.7 4,833,226 \u2014 19,860,718 7.9 2,816,272 3.3 32,661,412 5.8 The following table summarises information about the share awards outstanding at 31 December 2021: EMI Options Unapproved Options Free shares and matching shares LTIP Awards US Options Total Range of exercise prices Number and WARCL 1 Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number and WARCL Number Years Number Years Number Years Number Years Number Years Number Years \u00a30\u2013\u00a30.008 \u2014 \u2014 2,260,017 6.4 2,857,773 \u2014 19,340,043 7.5 \u2014 \u2014 24,457,833 6.6 \u00a30.009\u2013\u00a30.176 299,000 1.3 214,299 1.5 \u2014 \u2014 \u2014 \u2014 24,385 2.4 5 37,68 4 1.4 \u00a30.177\u2013\u00a30.471 \u2014 \u2014 2,305,977 5.5 \u2014 \u2014 \u2014 \u2014 2,196,012 3.8 4,501,989 4.7 \u00a30.472\u2013\u00a31.75 \u2014 \u2014 361,791 6.5 \u2014 \u2014 \u2014 \u2014 598,883 6.4 960,674 6.4 299,000 1.3 5,142,084 5.8 2,857,773 \u2014 19,340,043 7.5 2,819,280 4.4 30,458,180 6.2 1. Weighted average remaining contractual life. 21. Share-based payment continued Unapproved Options Scheme There have been no Unapproved Options granted since IPO in 2018. The weighted average fair values of options granted under the Unapproved Options Scheme and the US Options Scheme ranged between \u00a30.73 and \u00a31.80 per option respectively in the previous year. These values were determined using the Black-Scholes valuation model. The significant inputs into the model are as follows: Unapproved Options Scheme 31 December 2018 Share price (various times during the year) \u00a31.89 Exercise price \u00a3nil\u2013\u00a30.44 Expected life 4 years Expected volatility 48% Risk-free interest rate (between) 0.93%\u20131.02% Dividend yield Nil Forward exchange rate \u2013 US Options (between) 0.769 LTIP Awards Since all LTIP Awards were made post-IPO, the Company has used its share price at grant date as the fair value of the LTIP Awards granted during the year to employees. In the prior financial year, the only exception to this was for awards made to the former Chief Financial Officer, who departed prior to the end of this financial year (these awards have therefore lapsed). These awards contained market-based performance conditions and the fair value at grant date was calculated using a Black-Scholes model. The incumbent Chief Financial Officer\u2019s LTIP Awards do not contain market-based performance conditions but do include non-market performance conditions (refer to the Remuneration Report for further detail) and, therefore, the Company\u2019s share price at grant date is the fair value used, with the likelihood of achieving the non-market performance conditions factored into the accounting charge. In line with IFRS 2, the likelihood will be reassessed at the end of each reporting period. Free shares and matching shares The Company has used its share price at grant date as the fair value of free shares and matching shares granted during the year to employees. ",
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"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-383": {
"value": "22. Notes to the consolidated statement of cash flows Cash (outflow)/inflow from operating activities 31 December 2022 \u00a3m 31 December 2021 (re-presented) 1 \u00a3m (Loss)/profit before taxation (12.9) 64.1 Adjustments for Depreciation of property, plant and equipment 5.1 5.9 Amortisation of intangible assets 10.1 8.0 Impairment of intangible and tangible assets (prior year exceptional item) 1.8 3.9 Interest receivable (2.3) (0.1) Interest payable 0.9 1.1 Non-cash employee benefits expense \u2013 share-based payments and associated social security costs 4.7 8.5 Fair value gains (4.8) (28.6) Movement in restructuring provision (prior year exceptional item) (0.2) (0.9) Movement in loan repurchase liability (1.8) (3.0) Movement in other provisions (0.1) (1.9) Share of gains of associates (0.4) (0.9) Other non-cash movements 1.4 (0.7) Changes in working capital Movement in trade and other receivables 8.8 46.4 Movement in trade and other payables (3.7) 1.4 Tax paid (1.0) (3.1) Originations of lines of credit 1 (59.6) (3.6) Cash receipts from lines of credit 1 43.6 2.0 Net cash (outflow)/inflow from operating activities (10.4) 98.5 1. As disclosed in note 1, FlexiPay drawn lines of credit have been re-presented within \u201cOrigination of/cash receipts from lines of credit\u201d within cash flows from operating activities and were previously presented within \u201cOrigination of/ cash receipts from SME loans (other)\u201d in cash flows from investing activities in the year ended 31 December 2021. 22. Notes to the consolidated statement of cash flows continued Cash and cash equivalents 31 December 2022 \u00a3m 31 December 2021 \u00a3m Cash and cash equivalents 17 7.7 224.0 The cash and cash equivalents balance is made up of cash and money market funds. The carrying amount of these assets is approximately equal to their fair value. Included within cash and cash equivalents above is a total of \u00a312.1 million (2021: \u00a324.6 million) in cash which is restricted in use. Of this \u00a31.1 million (2021: \u00a31.0 million) is restricted in use in the event of rental payment defaults and cash held in the securitisation SPVs of \u00a32.9 million (2021: \u00a314.4 million) which has been collected for on-payment to bond holders and is therefore restricted in its use. A further \u00a38.1 million (2021: \u00a39.2 million) of cash is held which is restricted in use to repaying investors in CBILS and RLS loans and paying CBILS and RLS-related costs to the UK government. At 31 December 2022, money market funds totalled \u00a3121.6 million (2021: \u00a3112.1 million). Analysis of changes in liabilities from financing activities 1 January 2021 \u00a3m Cash flow \u00a3m Exchange movements \u00a3m Other non-cash movements \u00a3m 31 December 2021 \u00a3m Bank borrowings (195.5) 123.1 (0.8) \u2014 (73.2) Bonds (294.3) 160.6 (1.6) (5.0) (140.3) Lease liabilities (30.8) 8.1 (0.1) (1.1) (23.9) Liabilities from financing activities (520.6) 291.8 (2.5) (6.1) (237.4) 1 January 2022 \u00a3m Cash flow \u00a3m Exchange movements \u00a3m Other non-cash movements \u00a3m 31 December 2022 \u00a3m Bank borrowings (73.2) 57.9 (7.3) \u2014 (22.6) Bonds (140.3) 129.1 (8.1) (4.4) (23.7) Lease liabilities (23.9) 7.3 (1.6) (1.6) (19.8) Liabilities from financing activities (237.4) 194.3 (17.0) (6.0) (66.1) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-408": {
"value": "Cash and cash equivalents 31 December 2022 \u00a3m 31 December 2021 \u00a3m Cash and cash equivalents 17 7.7 224.0 The cash and cash equivalents balance is made up of cash and money market funds. The carrying amount of these assets is approximately equal to their fair value. Included within cash and cash equivalents above is a total of \u00a312.1 million (2021: \u00a324.6 million) in cash which is restricted in use. Of this \u00a31.1 million (2021: \u00a31.0 million) is restricted in use in the event of rental payment defaults and cash held in the securitisation SPVs of \u00a32.9 million (2021: \u00a314.4 million) which has been collected for on-payment to bond holders and is therefore restricted in its use. A further \u00a38.1 million (2021: \u00a39.2 million) of cash is held which is restricted in use to repaying investors in CBILS and RLS loans and paying CBILS and RLS-related costs to the UK government. At 31 December 2022, money market funds totalled \u00a3121.6 million (2021: \u00a3112.1 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
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"fact-384": {
"value": "23. Operating lease arrangements As disclosed in notes 1 and 11, leases of low-value items or short-term leases continue to be treated as operating leases. 31 December 2022 \u00a3m 31 December 2021 \u00a3m Lease payments under operating leases recognised as an expense in the year 0.3 0.1 At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases of \u00a30.7 million (2021: \u00a3nil). Operating lease payments represent payments for lease assets that are individually considered low value. ",
"dimensions": {
"concept": "fundingcircle:DisclosureOfOperatingLeaseArrangements",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-385": {
"value": "24. Dividends per share No ordinary dividends were declared or paid in the current or previous financial years. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-386": {
"value": "25. Related party transactions Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Compensation of key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The Group\u2019s key management personnel comprises the Global Leadership Team (\u201cGLT\u201d), which is made up of the Executive Directors and other senior management as defined in note 3 as the chief operating decision maker (\u201cCODM\u201d) and the Non-Executive Directors of the Group. 31 December 2022 \u00a3m 31 December 2021 \u00a3m Salaries and short-term benefits 5.1 4.2 Equity-based compensation 1.3 1.9 Post-employment benefits 0.1 0.1 6.5 6.2 Further details on Directors\u2019 remuneration are disclosed in the Remuneration Report in the Corporate Governance section of the Annual Report and Accounts on pages 100 to 115. Transactions with other related parties During the year the Group invested \u00a3nil (2021: \u00a3nil) into entities accounted for as associates, received capital redemptions of \u00a35.1 million (2021: \u00a33.9 million) and received dividends of \u00a30.3 million (2021: \u00a3nil). During the year the Group received service fees from loans held by Knightrider Lending Designated Activity Company of \u00a30.1 million (2021: \u00a30.2 million) and from Throgmorton Lending Designated Activity Company of \u00a30.4 million (2021: \u00a30.7 million). These entities are subsidiaries of the Group\u2019s associates, as detailed in note 29. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
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"fact-409": {
"value": "Compensation of key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The Group\u2019s key management personnel comprises the Global Leadership Team (\u201cGLT\u201d), which is made up of the Executive Directors and other senior management as defined in note 3 as the chief operating decision maker (\u201cCODM\u201d) and the Non-Executive Directors of the Group. 31 December 2022 \u00a3m 31 December 2021 \u00a3m Salaries and short-term benefits 5.1 4.2 Equity-based compensation 1.3 1.9 Post-employment benefits 0.1 0.1 6.5 6.2 Further details on Directors\u2019 remuneration are disclosed in the Remuneration Report in the Corporate Governance section of the Annual Report and Accounts on pages 100 to 115. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-387": {
"value": "26. Ultimate controlling party In the opinion of the Directors, the Group does not have a single ultimate controlling party. ",
"dimensions": {
"concept": "fundingcircle:DisclosureOfUltimateControllingParty",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-389": {
"value": "27. Contingent liabilities and commitments As part of the ongoing business, the Group has operational requirements with its investors. At any point in time, it is possible that a particular investor may expect the Group to buy back their loan if they did not believe that the terms of business had been fully complied with. Where a loan is bought back it is presented within Investment in SME loans (other) on the face of the consolidated balance sheet and held at amortised cost under IFRS 9. In common with other businesses, the Group is involved from time to time in disputes in the ordinary course of business. There are no active cases expected to have a material adverse financial impact on the Group. The Group has commitments related to undrawn amounts on issued FlexiPay lines of credit. At 31 December 2022 there were undrawn commitments of \u00a341.6 million (2021: \u00a34.2 million). An expected credit loss impairment allowance is held within other provisions by the Group of \u00a30.3 million (2021: \u00a3nil) in relation to the estimated credit losses the Group may be exposed to on these undrawn lines of credit. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-388": {
"value": "28. Subsequent events Subsequent to the 31 December 2022, an agreement was signed in February 2023 to sell loans valued at \u00a319.8m at 31 December 2022 and presented within SME loans (other) to a third party investor. The sale did not give rise to a material gain or loss. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory",
"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"fact-390": {
"value": "29. Interests in other entities Investments in subsidiaries The Group had the following subsidiaries, all of which have been included in these consolidated financial statements. The proportion of the voting rights in subsidiary undertakings held directly by the Company does not differ from the proportion of ordinary shares held. Subsidiary undertakings Place of incorporation Proportion of ownership interest Directly/ indirectly held Registered office address Funding Circle Ltd UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Asset Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle BB Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Eclipse Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Focal Point Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Global Partners Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Midco Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Property Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Trustee Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Made To Do More Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Horizon Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Polaris Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle USA, Inc. USA 100% Directly 85 Second Street, 4th Floor, San Francisco, California 94105 Funding Circle Notes Program, LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 FC Marketplace, LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 Funding Circle Investor Funds, LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 FC Depositor US LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 Funding Circle CE GmbH Germany 100% Directly Rheinstra\u00dfe 11, 14513 Teltow Funding Circle Deutschland GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow Funding Circle Connect GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow FC Forderungsmanagement GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow Funding Circle Espana S.L. Spain 100% Indirectly Calle Claudio Coello n\u00famero 91, 3a planta, 28006 Madrid Funding Circle Nederland B.V. Netherlands 100% Indirectly Atrium, Strawinskylaan 3075, 4th Floor, 1077 ZX Amsterdam 29. Interests in other entities continued Investments in associates Set out below are the associates of the Group as at 31 December 2022 which, in the opinion of the Directors, are material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held. Associate entity name Place of incorporation Proportion of ownership interest Directly/ indirectly held Registered office address Funding Circle European SME Direct Lending Fund I\u00b9 Ireland 24% Indirectly 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland Funding Circle UK SME Direct Lending Fund I\u00b9 Ireland 8% Indirectly 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland 1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address of 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland. The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered to be related parties of the Group. Other related party name Place of incorporation Relationship % ownership by associate Immediate parent entity Registered office address Knightrider Lending Designated Activity Company 1 Ireland Subsidiary of associate 100% Funding Circle European SME Direct Lending Fund I 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland Throgmorton Lending Designated Activity Company Ireland Subsidiary of associate 100% Funding Circle UK SME Direct Lending Fund I 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland 1. Knightrider Lending Designated Activity Company is in liquidation, having appointed a liquidator on 16 December 2022. The tables below provide summarised financial information for those associates that are material to the Group. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and not Funding Circle Holdings plc\u2019s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including modifications for differences in accounting policy. While the Group holds less than 20% ownership in Funding Circle UK SME Direct Lending Fund I the Group considers that it has significant influence over the entity through representation on its Board and so continues to account for it as an associate instead of a trade investment. The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk with respect to the performance of the underlying loans in the associates, to the extent that the share of profit from associate may diminish. The table below illustrates the Group\u2019s maximum exposure to the investment in associate which represents the value on the Group balance sheet. The value of the investment is derived from net asset value statements from the sub-funds; however, being private these are not from observable market data, and therefore the fair value is considered to be aligned to the carrying value. In July 2022 an agreement was signed by Funding Circle European Private Fund DAC I to sell the loans held by the fund as part of its strategy to return capital to shareholders in a cost effective manner. The Group received \u00a32.6 million in cash in August 2022 as a final capital distribution and the corresponding investment in associate held by the Group was reduced by this distribution to \u00a3nil. There was no impact on the statement of comprehensive income from the transaction. Summarised balance sheet (Group\u2019s share) Funding Circle European SME Direct Lending Fund I 31 December 2022 \u00a3m Funding Circle UK SME Direct Lending Fund I 31 December 2022 \u00a3m Funding Circle European SME Direct Lending Fund I 31 December 2021 \u00a3m Funding Circle UK SME Direct Lending Fund I 31 December 2021 \u00a3m Non-current assets \u2014 2.4 3.1 3.7 Current assets \u2014 0.3 0.6 0.5 Current liabilities \u2014 \u2014 \u2014 \u2014 Non-current liabilities \u2014 \u2014 \u2014 \u2014 Net assets \u2014 2.7 3.7 4.2 29. Interests in other entities continued Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements Funding Circle European SME Direct Lending Fund I 2022 \u00a3m Funding Circle UK SME Direct Lending Fund I 2022 \u00a3m Funding Circle European SME Direct Lending Fund I 2021 \u00a3m Funding Circle UK SME Direct Lending Fund I 2021 \u00a3m Opening net assets as at 1 January 2022 15.5 51.3 26.3 6 4.1 (Loss)/profit for the year (0.7) 3.2 2.0 3.1 Exchange differences 0.3 \u2014 (1.6) \u2014 Other comprehensive income \u2014 \u2014 \u2014 \u2014 Capital redemptions in the year (15.1) (18.1) (11.2) (15.4) Dividends paid in the year \u2014 (3.9) \u2014 (0.5) Closing net assets as at 31 December 2022 \u2014 32.5 15.5 51.3 Group\u2019s share in % 23.6% 8.3% 23.6% 8.3% Group\u2019s share of net assets as at 31 December \u2014 2.7 3.7 4.2 Accounting policy alignment \u2014 \u2014 (0.2) (0.1) Group\u2019s carrying amount \u2014 2.7 3.5 4.1 Summarised statement of comprehensive income (Group\u2019s share) Funding Circle European SME Direct Lending Fund I 2022 \u00a3m Funding Circle UK SME Direct Lending Fund I 2022 \u00a3m Funding Circle European SME Direct Lending Fund I 2021 \u00a3m Funding Circle UK SME Direct Lending Fund I 2021 \u00a3m Gross income 0.1 0.3 0.5 0.5 Profit for the year \u2014 0.4 0.6 0.3 Other comprehensive income \u2014 \u2014 \u2014 \u2014 Total comprehensive income \u2014 0.4 0.6 0.3 Dividends received from associates \u2014 0.3 \u2014 \u2014 Capital redemptions received from associates 3.6 1.5 2.6 1.3 Interest in other entities Stichting Derdengelden Funding Circle is not a direct or indirect subsidiary of Funding Circle Holdings plc but is an independent special purpose foundation which is required in the Netherlands to safeguard borrower and investor funds and is consolidated as it is controlled by the Group. The registered office address is Atrium, Strawinskylaan 3075, 4th Floor, 1077 ZX Amsterdam. The Funding Circle Holdings Employee Benefit Trust was established on 14 September 2018. The purpose of the trust is to facilitate the acquisition of shares in the Company by, or for the benefit of, existing and future employees of the Company and Group subsidiaries and is consolidated as it is controlled by the Group. Consolidated structured entities: Small Business Origination Loan Trust 2019-3 DAC, Great Trinity Lending 1 DAC, Small Business Lending Trust 2019-A, Small Business Lending Grantor Trust 2019-A, Small Business Lending Trust 2020-A and Small Business Lending Grantor Trust 2020-A are consolidated structured warehouse and securitisation entities which either hold SME loan assets in a warehouse or hold the portfolio of SME loans and issue bonds after securitisation has occurred. The entities are bankruptcy remote special purpose vehicles and as such there is no requirement for the Group to provide financial support to the entities. The entities\u2019 activities are not governed by voting rights and the Group has assessed that it has power over the entities based on the purpose and design of the entity and ability to direct the relevant activities of the entity, the nature of the relationship with the entity and the size of its exposure to the variability of the returns from each entity. As explained in note 16 the Group experiences credit risk and prepayment risk in relation to the SME loan assets net of bond liabilities, and interest rate risk in relation to the warehouse loan facilities and floating rate bond liabilities which is partially mitigated through the use of derivative financial instruments. 29. Interests in other entities continued Interest in other entities continued The principal activities of the Group\u2019s most significant subsidiary undertakings are set out below. These are considered significant in the context of the Group\u2019s business, results and financial position. Subsidiary undertakings Principal activity Funding Circle Ltd Acts as facilitator and performs intermediary services in respect of all loans made through the Funding Circle platform in the UK. Funding Circle USA, Inc. The US operating subsidiary of Funding Circle. Acts as the administrator of the Funding Circle platform in the US. FC Marketplace, LLC Acts as originator and servicer of all loans made through the Funding Circle platform in the US. FC Marketplace, LLC sells each loan it originates, on a servicing retained basis, to third party institutional investors or to affiliates (e.g. Funding Circle Notes Program, LLC) on an arm\u2019s length basis. Funding Circle Notes Program, LLC A special purpose bankruptcy remote entity which issues loan payment dependent debt securities to accredited investors. It uses the proceeds to purchase a specific corresponding loan made through the Funding Circle platform from FC Marketplace, LLC. The entity retains the contractual rights to receive the cash flows from the loan assets it has purchased, but has assumed a contractual obligation to pay those cash flows to the holders of the debt securities. The eligibility criteria have been met to derecognise the loan assets and associated issued debt securities as a pass-through arrangement under IFRS 9. Funding Circle Focal Point Lending Limited Subsidiary via which CBILS loans are originated and which holds legal title to loans which are held via trust structures for the beneficial ownership of institutional investors. Funding Circle Eclipse Lending Limited Subsidiary via which RLS loans are originated and which holds legal title to loans which are held via trust structures for the beneficial ownership of institutional investors. Funding Circle Deutschland GmbH Operates the Funding Circle platform in Germany and services loans. Funding Circle Nederland B.V. Operates the Funding Circle platform in the Netherlands and services loans.",
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"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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},
"fact-410": {
"value": "Investments in subsidiaries The Group had the following subsidiaries, all of which have been included in these consolidated financial statements. The proportion of the voting rights in subsidiary undertakings held directly by the Company does not differ from the proportion of ordinary shares held. Subsidiary undertakings Place of incorporation Proportion of ownership interest Directly/ indirectly held Registered office address Funding Circle Ltd UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Asset Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle BB Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Eclipse Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Focal Point Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Global Partners Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Midco Limited UK 100% Directly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Property Finance Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Trustee Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Made To Do More Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Horizon Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle Polaris Lending Limited UK 100% Indirectly 71 Queen Victoria Street, London EC4V 4AY Funding Circle USA, Inc. USA 100% Directly 85 Second Street, 4th Floor, San Francisco, California 94105 Funding Circle Notes Program, LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 FC Marketplace, LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 Funding Circle Investor Funds, LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 FC Depositor US LLC USA 100% Indirectly 85 Second Street, 4th Floor, San Francisco, California 94105 Funding Circle CE GmbH Germany 100% Directly Rheinstra\u00dfe 11, 14513 Teltow Funding Circle Deutschland GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow Funding Circle Connect GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow FC Forderungsmanagement GmbH Germany 100% Indirectly Rheinstra\u00dfe 11, 14513 Teltow Funding Circle Espana S.L. Spain 100% Indirectly Calle Claudio Coello n\u00famero 91, 3a planta, 28006 Madrid Funding Circle Nederland B.V. Netherlands 100% Indirectly Atrium, Strawinskylaan 3075, 4th Floor, 1077 ZX Amsterdam ",
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"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-411": {
"value": "Investments in associates Set out below are the associates of the Group as at 31 December 2022 which, in the opinion of the Directors, are material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held. Associate entity name Place of incorporation Proportion of ownership interest Directly/ indirectly held Registered office address Funding Circle European SME Direct Lending Fund I\u00b9 Ireland 24% Indirectly 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland Funding Circle UK SME Direct Lending Fund I\u00b9 Ireland 8% Indirectly 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland 1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address of 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland. The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered to be related parties of the Group. Other related party name Place of incorporation Relationship % ownership by associate Immediate parent entity Registered office address Knightrider Lending Designated Activity Company 1 Ireland Subsidiary of associate 100% Funding Circle European SME Direct Lending Fund I 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland Throgmorton Lending Designated Activity Company Ireland Subsidiary of associate 100% Funding Circle UK SME Direct Lending Fund I 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland 1. Knightrider Lending Designated Activity Company is in liquidation, having appointed a liquidator on 16 December 2022. The tables below provide summarised financial information for those associates that are material to the Group. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and not Funding Circle Holdings plc\u2019s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including modifications for differences in accounting policy. While the Group holds less than 20% ownership in Funding Circle UK SME Direct Lending Fund I the Group considers that it has significant influence over the entity through representation on its Board and so continues to account for it as an associate instead of a trade investment. The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk with respect to the performance of the underlying loans in the associates, to the extent that the share of profit from associate may diminish. The table below illustrates the Group\u2019s maximum exposure to the investment in associate which represents the value on the Group balance sheet. The value of the investment is derived from net asset value statements from the sub-funds; however, being private these are not from observable market data, and therefore the fair value is considered to be aligned to the carrying value. In July 2022 an agreement was signed by Funding Circle European Private Fund DAC I to sell the loans held by the fund as part of its strategy to return capital to shareholders in a cost effective manner. The Group received \u00a32.6 million in cash in August 2022 as a final capital distribution and the corresponding investment in associate held by the Group was reduced by this distribution to \u00a3nil. There was no impact on the statement of comprehensive income from the transaction. Summarised balance sheet (Group\u2019s share) Funding Circle European SME Direct Lending Fund I 31 December 2022 \u00a3m Funding Circle UK SME Direct Lending Fund I 31 December 2022 \u00a3m Funding Circle European SME Direct Lending Fund I 31 December 2021 \u00a3m Funding Circle UK SME Direct Lending Fund I 31 December 2021 \u00a3m Non-current assets \u2014 2.4 3.1 3.7 Current assets \u2014 0.3 0.6 0.5 Current liabilities \u2014 \u2014 \u2014 \u2014 Non-current liabilities \u2014 \u2014 \u2014 \u2014 Net assets \u2014 2.7 3.7 4.2 Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements Funding Circle European SME Direct Lending Fund I 2022 \u00a3m Funding Circle UK SME Direct Lending Fund I 2022 \u00a3m Funding Circle European SME Direct Lending Fund I 2021 \u00a3m Funding Circle UK SME Direct Lending Fund I 2021 \u00a3m Opening net assets as at 1 January 2022 15.5 51.3 26.3 6 4.1 (Loss)/profit for the year (0.7) 3.2 2.0 3.1 Exchange differences 0.3 \u2014 (1.6) \u2014 Other comprehensive income \u2014 \u2014 \u2014 \u2014 Capital redemptions in the year (15.1) (18.1) (11.2) (15.4) Dividends paid in the year \u2014 (3.9) \u2014 (0.5) Closing net assets as at 31 December 2022 \u2014 32.5 15.5 51.3 Group\u2019s share in % 23.6% 8.3% 23.6% 8.3% Group\u2019s share of net assets as at 31 December \u2014 2.7 3.7 4.2 Accounting policy alignment \u2014 \u2014 (0.2) (0.1) Group\u2019s carrying amount \u2014 2.7 3.5 4.1 Summarised statement of comprehensive income (Group\u2019s share) Funding Circle European SME Direct Lending Fund I 2022 \u00a3m Funding Circle UK SME Direct Lending Fund I 2022 \u00a3m Funding Circle European SME Direct Lending Fund I 2021 \u00a3m Funding Circle UK SME Direct Lending Fund I 2021 \u00a3m Gross income 0.1 0.3 0.5 0.5 Profit for the year \u2014 0.4 0.6 0.3 Other comprehensive income \u2014 \u2014 \u2014 \u2014 Total comprehensive income \u2014 0.4 0.6 0.3 Dividends received from associates \u2014 0.3 \u2014 \u2014 Capital redemptions received from associates 3.6 1.5 2.6 1.3 ",
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"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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"fact-5": {
"value": "71 Queen Victoria Street London EC4V 4AY",
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"language": "en",
"entity": "scheme:2138003EK6UAINBBUS19",
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}