21. Financial Instruments and Financial Risk Management (Group and RTÉ)

Unrecognised deferred tax assets (Group and RTÉ)

Television licence fee income that RTÉ receives by way of “grant-in-aid” is subject to corporation tax with effect from 1 January 2007. The Group has trading losses forward for tax purposes of €651 million at 31 December 2022. Due to the uncertainty surrounding when the losses may ultimately be utilised, a deferred tax asset of €22.6 million only has been recognised.

(a) Overview of financial risk management

(i) Risk environment

The Group has exposure to the financial risks relating to credit, liquidity, foreign exchange, interest rate and operational risk.

The Board of RTÉ has overall responsibility for the establishment and oversight of the Group’s risk-management framework and has approved policies for the main areas of financial risk faced by the Group. Group Treasury is responsible for managing all treasury activities, in accordance with the treasury policies, including cash management, interest rate risk, liquidity risk, foreign exchange risk and counterparty credit risk.

The majority of RTÉ’s business is transacted in Ireland. Consequently, operating and investing cash flows are substantially denominated in euro. Foreign currency exposures arise primarily from payments for acquired programmes in US dollar and sterling. RTÉ’s policy is to have the majority of its committed principal foreign currency exposures commercially hedged at the beginning of each financial year by entering into US dollar and sterling forward contracts. All foreign currency forward contracts have a maturity date of less than 15 months from the 31 December 2022. These foreign currency forward contracts are not specifically designated into hedge relationships from an accounting perspective, but are nevertheless valid economic hedges.

Financial instruments are derecognised on settlement or sale.

(ii) Financial instruments classification

All financial assets and liabilities, excluding provisions and employee-related liabilities, are financial instruments carried at amortised cost, with the exception of the derivative assets/(liabilities), which are categorised as follows:

	Derivative financial instruments at fair value through Income Statement		Assets/(liabilities) held at amortised cost		Total
GROUP	2022	2021	2022	2021	2022	2021
	€’000	€’000	€’000	€’000	€’000	€’000
Non-Current Financial Assets
Financial assets	-	-	892	1,118	892	1,118
Derivative financial instruments	-	13	-	-	-	13
Total Non-Current Financial Assets	-	13	892	1,118	892	1,131
Current Financial Assets
Trade and other receivables	-	-	46,706	41,846	46,706	41,846
Liquid investments	-	-	60,772	38,892	60,772	38,892
Cash and cash equivalents	-	-	53,290	62,500	53,290	62,500
Derivative financial instruments	32	257	-	-	32	257
Total Current Financial Assets	32	257	160,768	143,238	160,800	143,495
Total Financial Assets	32	257	161,660	144,356	161,692	144,613
Non-Current Financial Liabilities
Interest-bearing loans and borrowings	-	-	(59,500)	(63,500)	(59,500)	(63,500)
Employee benefits	-	-	(7,859)	(9,436)	(7,859)	(9,436)
Capital grants	-	-	(3,632)	(4,014)	(3,632)	(4,014)
Lease Liability	-	-	(2,801)	(3,265)	(2,801)	(3,265)
Trade and other payables	-	-	(15,170)	(7,575)	(15,170)	(7,575)
Derivative financial instruments	(6)	-	-	-	(6)	-
Total Non-Current Financial Liabilities	(6)	-	(88,962)	(87,790)	(88,968)	(87,790)
Current Financial Liabilities
Trade and other payables	-	-	(91,734)	(88,291)	(91,734)	(88,291)
Interest-bearing loans and borrowings	-	-	(3,625)	(1,500)	(3,625)	(1,500)
Employee benefits	-	-	(14,935)	(14,536)	(14,935)	(14,536)
Capital grants	-	-	(382)	(394)	(382)	(394)
Lease Liability	-	-	(548)	(576)	(548)	(576)
Derivative financial instruments	(100)	(1)	-	-	(100)	(1)
Total Current Financial Liabilities	(100)	(1)	(111,224)	(105,297)	(111,324)	(105,298)
Total Financial Liabilities	(106)	(1)	(200,186)	(193,087)	(200,292)	(193,088)

	Derivative financial instruments at fair value through Income Statement		Assets/(liabilities) held at amortised cost		Total
RTÉ	2022	2021	2022	2021	2022	2021
	€’000	€’000	€’000	€’000	€’000	€’000
Non-Current Financial Assets
Derivative financial instruments	-	13	-	-	-	13
Total Non-Current Financial Assets	-	13	-	-	-	13
Current Financial Assets
Trade and other receivables	-	-	41,932	37,693	41,932	37,693
Liquid investments	-	-	60,772	38,892	60,772	38,892
Cash and cash equivalents	-	-	39,816	45,537	39,816	45,537
Derivative financial instruments	32	257	-	-	32	257
Total Current Financial Assets	32	257	142,520	122,122	142,552	122,379
Total Financial Assets	32	270	142,520	122,122	142,552	122,392
Non-Current Financial Liabilities
Interest-bearing loans and borrowings	-	-	(7,000)	(8,500)	(7,000)	(8,500)
Employee benefits	-	-	(7,700)	(9,259)	(7,700)	(9,259)
Lease Liability	-	-	(1,870)	(2,180)	(1,870)	(2,180)
Trade and other payables	-	-	(15,170)	(7,575)	(15,170)	(7,575)
Derivative financial instruments	(6)	-	-	-	(6)	-
Total Non-Current Financial Liabilities	(6)	-	(31,740)	(27,514)	(31,746)	(27,514)
Current Financial Liabilities
Trade and other payables	-	-	(285,072)	(272,297)	(285,072)	(272,297)
Interest-bearing loans and borrowings	-	-	(1,125)	(1,500)	(1,125)	(1,500)
Employee benefits	-	-	(14,759)	(14,494)	(14,759)	(14,494)
Lease Liability	-	-	(393)	(346)	(393)	(346)
Derivative financial instruments	(100)	(1)	-	-	(100)	(1)
Total Current Financial Liabilities	(100)	(1)	(301,349)	(288,637)	(301,449)	(288,638)
Total Financial Liabilities	(106)	(1)	(333,089)	(316,151)	(333,195)	(316,152)

The foreign exchange forward contracts are financial instruments measured at fair value through the surplus or deficit.

(b) Credit risk

Overview

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.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

		Group carrying amount		RTÉ carrying amount
	Notes	2022	2021	2022	2021
		€’000	€’000	€’000	€’000
Trade receivables	11	46,652	41,832	41,878	37,677
Liquid investments	12	60,772	38,892	60,772	38,892
Cash and cash equivalents	13	53,290	62,500	39,816	45,537
Derivative financial instruments		32	257	32	257
		160,746	143,481	142,498	122,363

The Group has detailed procedures for monitoring and managing the credit risk related to its financial assets as outlined below.

Treasury-related credit risk

The Group is exposed to credit risk from the counterparties with whom it holds its bank accounts and transacts with in the financial markets. Liquid investments, cash and cash equivalents, and derivative financial instruments are all held by financial counterparties which have a minimum credit rating of BBB- under the Standard & Poor’s rating.

Liquid investments and cash and cash equivalents are primarily funds invested with Irish financial institutions with limits on amounts held with individual banks or institutions at any one time. Derivative financial instruments are held with Irish and UK financial institutions and the Group has not experienced any losses due to failure of such counterparties to deliver on their obligations.

Customer credit risk

The Group has credit insurance and sets credit limits for all customers. Given the nature of the advertising and other markets within which RTÉ operates, RTÉ had significant exposures to individual advertising agencies and other customers throughout the year. RTÉ’s policy is to assign limits to the aggregate amount of exposure to each individual customer. These exposures and the related limits are subject to ongoing review and monitoring.

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

	Group carrying amount		RTÉ carrying amount
	2022	2021	2022	2021
	€’000	€’000	€’000	€’000
Ireland	44,556	39,115	40,175	35,015
United Kingdom	2,043	2,830	1,721	2,708
Other regions	53	(113)	(18)	(44)
Trade Receivables	46,652	41,832	41,878	37,678

The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:

	Group carrying amount		RTÉ carrying amount
	2022	2021	2022	2021
	€’000	€’000	€’000	€’000
Non-agency debtors	10,432	10,172	6,340	7,280
Other debtors – agency	36,220	31,659	35,538	30,398
Trade Receivables	46,652	41,832	41,878	37,678

An agency debtor represents an advertising agent or agency, being a person, firm or company, which selects or books advertising space on behalf of the advertiser.

The Group’s most significant debtor, an Irish company, accounts for €4.3 million (9%) of the trade receivables carrying amount at 31 December 2022 (2021: €3.6 million).

The ageing of trade receivables at the reporting date was:

		Group			RTÉ
	Gross	Impairment	Net	Gross	Impairment	Net
	2022	2022	2022	2022	2022	2022
	€’000	€’000	€’000	€’000	€’000	€’000
Not past due	20,656	-	20,656	19,290	-	19,290
Past due 0–30 days	23,150	(503)	22,647	19,848	(249)	19,599
Past due 31–120 days	3,372	(535)	2,837	2,798	(329)	2,469
Greater than 120 days	936	(424)	512	749	(229)	520
	48,114	(1,462)	46,652	42,685	(807)	41,878

		Group			RTÉ
	Gross	Impairment	Net	Gross	Impairment	Net
	2021	2021	2021	2021	2021	2021
	€’000	€’000	€’000	€’000	€’000	€’000
Not past due	19,278	-	19,278	17,978	-	17,978
Past due 0–30 days	20,018	(405)	19,613	17,710	(239)	17,471
Past due 31–120 days	3,468	(543)	2,924	2,646	(443)	2,203
Greater than 120 days	327	(310)	17	147	(121)	26
	43,091	(1,258)	41,832	38,481	(803)	37,678

The movement in the allowance for impairment in respect of trade receivables during the year was:

	Group		RTÉ
	2022	2021	2022	2021
	€’000	€’000	€’000	€’000
Balance at 1 January	1,258	1,251	803	798
(Released)/provided during the year	204	7	4	5
Bad debts written off in the year	-	-	-	-
Balance at 31 December	1,462	1,258	807	803

No credit exposure is perceived in relation to prepayments.

(c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. RTÉ’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its financial liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The following tables set out the contractual maturities of financial liabilities, including interest payments associated with borrowings and the undiscounted net cash flows attributable to derivative financial instruments.

The following are the contractual maturities of financial liabilities:

31-Dec-22	Carrying amount	Contractual cash flows	Within 1 year	1–2 years	2–5 years	More than 5 years
Group	€’000	€’000	€’000	€’000	€’000	€’000
Interest-bearing loans and borrowings	63,125	68,030	5,474	13,660	48,896	-
Derivative financial instruments	106	106	100	6	-	-
Trade and other payables	106,904	106,904	91,734	15,170	-	-
Employee benefits	22,794	22,847	14,935	2,662	1,540	3,710
	192,929	197,887	112,243	31,498	50,436	3,710

31-Dec-21	Carrying amount	Contractual cash flows	Within 1 year	1–2 years	2–5 years	More than 5 years
Group	€’000	€’000	€’000	€’000	€’000	€’000
Interest-bearing loans and borrowings	65,000	67,768	2,276	4,752	60,739	-
Derivative financial instruments	1	1	1	-	-	-
Trade and other payables	95,866	95,866	88,291	7,575	-	-
Employee benefits	23,972	24,024	14,536	2,766	2,902	3,820
	184,839	187,659	105,104	15,093	63,461	3,820

The following are the contractual maturities of financial liabilities:

31-Dec-22	Carrying amount	Contractual cash flows	Within 1 year	1-2 years	2-5 years	More than 5 years
RTÉ	€’000	€’000	€’000	€’000	€’000	€’000
Interest-bearing loans and borrowings	8,125	8,621	1,399	7,222	-	-
Derivative financial instruments	106	106	100	6	-	-
Trade and other payables	300,242	300,242	285,072	15,170	-	-
Employee benefits	22,459	22,509	14,759	2,653	1,536	3,561
	330,932	331,478	301,330	25,051	1,536	3,561

31-Dec-21	Carrying amount	Contractual cash flows	Within 1 year	1-2 years	2-5 years	More than 5 years
RTÉ	€’000	€’000	€’000	€’000	€’000	€’000
Interest-bearing loans and borrowings	10,000	10,438	1,652	1,646	7,140	-
Derivative financial instruments	1	1	1	-	-	-
Trade and other payables	279,872	279,872	272,297	7,575	-	-
Employee benefits	23,753	23,800	14,494	2,756	2,888	3,661
	313,626	314,111	288,444	11,977	10,028	3,661

As disclosed in note 14, the Group has a term loan and revolving credit facility with Bank of Ireland and a project loan and term loan club facility with Barclays Bank PLC and Bank of Ireland. Both of these facilities have loan covenants which, if breached in the future, may require the Group, or company, to repay the loans earlier than indicated in the above tables. The interest payments in the tables above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. Except for the interest-bearing loans and borrowings, it is not expected that the cash flows included in the maturity analysis above could occur significantly earlier or at significantly different amounts.

At 31 December 2022, RTÉ had an undrawn overdraft facility of €10 million in place and an undrawn term loan of €5 million and an undrawn revolving credit facility of €10 million.

(d) Currency risk

The functional currency of all Group entities is euro. Due to the nature of certain aspects of its business, in particular acquired television programmes and rights from overseas, RTÉ is exposed to the effects of fluctuations in foreign currency exchange rates. The currencies that give rise to this risk are US dollar and sterling.

The Group and RTÉ primarily use foreign currency forward contracts to economically hedge its currency risk. Changes in the fair value of foreign currency forward contracts are recognised in the Income Statement. At 31 December 2022, the fair value of the associated derivative asset was €32,000 (2021: €257,000) and derivative liability was €106,000 (2021: €1,000).

The Group and RTÉ hedge a minimum of 60% of its budgeted foreign currency exposure in respect of acquired television programmes and rights from overseas.

The Group and Company did not have any material foreign currency denominated monetary assets at 31 December 2022 or 2021.

RTÉ had no financial liabilities denominated in foreign currencies except for those outlined in the following tables.

Breakdown of trade payables by currency

	2022	2021
	€’000	€’000
Group
Euro	4,614	3,405
GBP	251	229
USD	19	48
Other	149	-
	5,033	3,682

Breakdown of trade payables by currency

	2022	2021
	€’000	€’000
RTÉ
Euro	3,999	2,841
GBP	236	12
USD	19	48
Other	149	-
	4,403	2,901

The following significant exchange rates applied during the year:

	Average rate		Reporting date spot rate
	2022	2021	2022	2021
EUR €1 = USD $	1.0530	1.1827	1.0666	1.1326
EUR €1 = GBP £	0.8528	0.8596	0.8869	0.8403

In managing currency risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Foreign currency forward purchase contracts are used by the Group to reduce volatility arising from these foreign currency exposures. As a result, the Group mitigates significant risk of movements in foreign exchange rates.

Group

A plus or minus change of 10% in relevant foreign currency exchange rates, based on outstanding foreign currency-denominated financial liabilities at 31 December 2022, would impact the Group’s Income Statement positively or negatively by up to €40,117 (31 December 2021: €30,811).

RTÉ

A plus or minus change of 10% in relevant foreign currency exchange rates, based on outstanding foreign currency-denominated financial liabilities at 31 December 2022, would impact RTÉ’s Income Statement positively or negatively by up to €38,332 (31 December 2021: €6,672).

(e) Interest rate risk

At 31 December 2022, the Group had total borrowings of €63 million (2021: €65 million).

On 6 December 2019, RTÉ entered into a new facility agreement with Bank of Ireland (BOI) amounting to €20 million for working capital purposes. The agreement includes a €10 million revolving credit facility which was undrawn as at 31 December 2022 and a term loan facility of €8.13 million which was fully drawn as at 31 December 2022.

On 1 February 2019, the Group entered into a project loan facility agreement, through its subsidiary 2rn, with Barclays Bank Ireland PLC and Bank of Ireland amounting to €60 million in aggregate, of which €55 million was drawn at 31 December 2022.

A 1% movement in the interest rate would have a positive or negative effect of €1.1 million on the Income Statement.

At the reporting date, the interest rate profile of RTÉ’s interest-bearing financial assets was:

	Carrying amount
Group	2022	2021
	€’000	€’000
Fixed Rate Instruments
Financial assets	70,772	45,892
Variable Rate Instruments
Financial assets	43,290	55,500

	Carrying amount
RTÉ	2022	2021
	€’000	€’000
Fixed Rate Instruments
Financial assets	70,772	45,892
Variable Rate Instruments
Financial assets	29,816	38,537

A 1% movement in the interest rate on RTÉ’s interest-bearing financial assets would have a positive or negative effect on the Income Statement of €1.0 million (net of tax).

(f) Fair values

The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Group 1	Carrying amount 2022 €’million	Fair value level 2 2022 €’million	Carrying amount 2021 €’million	Fair value level 2 2021 €’million
Financial assets measured at fair value
Forward exchange contracts	0.0	0.0	0.3	0.3
Financial liabilities measured at fair value
Forward exchange contracts	0.1	0.1	-	-
Financial liabilities not measured at fair value
Interest-bearing loans and borrowings	63.1	63.1	65.0	65.0

RTÉ 1	Carrying amount 2022 €’million	Fair value level 2 2022 €’million	Carrying amount 2021 €’million	Fair value level 2 2021 €’million
Financial assets measured at fair value
Forward exchange contracts	0.0	0.0	0.3	0.3
Financial liabilities measured at fair value
Forward exchange contracts	0.1	0.1	-	-
Financial liabilities not measured at fair value
Interest-bearing loans and borrowings	8.1	8.1	10.0	10.0

1 The Group and RTÉ have not disclosed the fair values for financial instruments such as trade receivables, payables and employee benefits as their carrying amounts disclosed on page 156 and 157 are a reasonable approximation of fair values.

The fair value of derivative financial instruments was based on the fair value hierarchy. The fair value for foreign exchange forward contracts and the interest rate swap were calculated using the following valuation method:

Level 2: inputs, other than unadjusted quoted prices in active markets for identical assets and liabilities, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

The Level 2 valuation method and instruments valued using the method has not changed during this or the previous reporting period. There has been no transfer between levels in the fair value hierarchy.

The following tables show the valuation techniques used in measuring Level 2 fair values, as well as the significant unobservable inputs used.

Financial instruments measured at fair value

Type	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Derivative financial instruments	Market comparison technique: the fair values are based on quotes for similar contracts traded in an active market.	Not applicable	Not applicable

Financial instruments not measured at fair value

Type	Valuation technique	Significant unobservable inputs
Interest-bearing loans and borrowings	Discounted cash flows based on borrower quoted interest rates.	Not applicable

(g) Derivative financial instruments

The contractual cash flows associated with the derivative financial instruments are outlined below:

31-Dec-22	Carrying amount	Contractual cash flows	Within 1 year	1–2 years	2–5 years
	€’000	€’000	€’000	€’000	€’000
Group
Net derivative liabilities
Foreign exchange forward contracts (outflows)	(74)	(74)	(68)	(6)	-

31-Dec-22	Carrying amount	Contractual cash flows	Within 1 year	1–2 years	2–5 years
	€’000	€’000	€’000	€’000	€’000
RTÉ
Net derivative liabilities
Foreign exchange forward contracts (outflows)	(74)	(74)	(68)	(6)	-

31-Dec-21	Carrying amount	Contractual cash flows	Within 1 year	1–2 years	2–5 years
	€’000	€’000	€’000	€’000	€’000
Group
Net derivative assets
Foreign exchange forward contracts (outflows)	270	270	257	13	-

31-Dec-21	Carrying amount	Contractual cash flows	Within 1 year	1–2 years	2–5 years
	€’000	€’000	€’000	€’000	€’000
RTÉ
Net derivative assets
Foreign exchange forward contracts (outflows)	270	270	257	13	-

Any gains or losses arising from changes in the fair value of foreign exchange forward contracts are taken directly to the Income Statement.