Note 1 and 2
1. Basis of presentation
The accounts have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules modified to include the revaluation of certain land and buildings.
Under Section 230 (4) of the Companies Act 1985 the Company is exempt from the requirement to present its own profit and loss account.
Under FRS 1 the Company is exempt from the requirement to present a cash flow statement on the grounds that this is included in the Group consolidated accounts.
The financial instruments disclosures required by FRS 25 are not included in these accounts as the information is disclosed in the Group accounts.
2. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the accounts.
In these accounts the following new standards have been adopted for the first time:
FRS 20 Share Based Payments
FRS 21 Events After The Balance Sheet Date
FRS 23 The Effects of Changes in Foreign Exchange Rates
FRS 25 Financial Instruments: Presentation and Disclosure
FRS 26 Financial Instruments: Measurement
The accounting policies under these new standards are set out below. The adoption of FRS 23, 25 and 26 has had no material effect on the Company’s accounts.
The corresponding amounts in these financial statements been restated in accordance with the new policies, other than those covered by the exception permitted by FRS 25 which allows corresponding amounts not to be restated and the Company has adopted this approach.
Fixed assets and depreciation
Depreciation is provided to write off the cost or valuation of the relevant assets less the estimated residual value of tangible fixed assets by equal annual amounts over their expected useful economic lives. No depreciation is provided on freehold land. Other fixed assets are depreciated as follows:
| Freehold buildings |
2.5% – 5% on cost or valuation |
| Short leasehold property |
over the remaining period of the lease |
| Motor vehicles |
25% – 33.3% on cost |
| Equipment, fixtures & fittings |
10% – 33.3% on cost |
Fixed assets are stated at cost except that, as allowed under FRS 15 ‘Tangible Fixed Assets’, on adoption of that Standard in the year ending 31 December 2000 when the book amounts of revalued land and buildings were retained. These book values are based on the previous revaluation on 31 March 1989 and have not been subsequently revalued.
Foreign currencies
Transactions in foreign currencies are recorded using the monthly average rate of exchange ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account.
Leases
Rentals under operating leases are charged to the profit and loss account on a straight-line basis.
Post-retirement benefits
The company participates in a UK group pension scheme providing benefits based on both final pensionable salary and on contributions paid. The assets of the scheme are held separately from those of the Company. The Company is unable to identify its share of the underlying assets and liabilities of the scheme on a consistent and reasonable basis and therefore, as required by FRS 17 Retirement Benefits accounts for the scheme as if it were a defined contribution scheme. As a result, the amount charged to the profit and loss accounts represents the contributions payable to the scheme in the year.
Taxation
The charge for taxation is based on the loss for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes.
Employee share schemes
The share option programme allows employees to acquire shares of the Company. The fair value of options granted is recognised an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. Options’ fair values are calculated using Black-Scholes or Monte Carlo simulation models.
For cash settled share based payment transactions the fair value of the amount payable to the employee is recognised as an expense with a corresponding increase in liabilities. The fair value is measured at grant date and spread over the period during which employees became unconditionally entitled to the payments.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Investments
Fixed asset investments are stated individually at cost less, where appropriate, provision for impairment in value.
Financial instruments
Financial instruments have been recognised in accordance with Group accounting policies. Derivative financial instruments have had no financial impact on these accounts due to equal and opposite internal instruments written with certain of the Company’s operating subsidiaries.
Derivatives are recognised initially at cost, and subsequent to initial recognition at fair value. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. The fair value of ‘simple’ option contracts is their quoted market price at the balance sheet date.
Derivatives are de-recognised when they mature or are sold.
The gain or loss on re-measurement to fair value is recognised immediately in the income statement unless the derivatives qualify for hedge accounting.
Hedge of Monetary Assets and Liabilities
Where a derivative is used to hedge economically the foreign exchange exposure of a recognised monetary asset or liability, no hedge accounting is applied and any gain or loss on the hedging instrument is recognised in the income statement.
Hedge of a Net Investment in a Foreign Operation
The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognised directly in equity. The ineffective portion is recognised immediately in the income statement. The effective portion will be recycled into the income statement when the foreign operation will be sold.
Previous Accounting Policy
Prior to 1 January 2005, the Company accounted for derivatives in accordance with UK GAAP. Derivatives were only recognised when they were used to hedge the foreign exchange exposure of a recognised monetary asset or liability, and any gain or loss on the hedging instrument was recognised directly in the income statement.
Information correct at 04/05/2006