IFRS Announcement
Debt Free Direct Group PLC
27 November 2007
DEBT FREE DIRECT GROUP PLC
('DFD' or 'The Group')
Announces
International Financial Reporting Standards
Debt Free Direct Group plc is presenting a summary of its accounts for the year
ended 30 April 2007 and half year financial statements for the period ended 31
October 2006, restated under International Financial Reporting Standards ('
IFRS') as adopted by the European Union. The change in accounting basis arises
from legislation requiring all AIM listed companies to apply IFRS in their
financial statements.
The disclosures include guidance as to the effect of IFRS on the Group's
reported results and balance sheets and comparative figures expected to be used
in the half year financial statements for the period to 31 October 2007 and
financial statements for the period to 31 December 2007.
Enquiries:
Debt Free Direct Group Plc Andrew Redmond, CEO T: 0845 296 0100
Paul Latham, Finance Director T: 0845 296 0200
Numis Securities Lee Aston T: 020 7776 1500
Financial Dynamics Ed Gascoigne-Pees T: 020 7269 7132
Nick Henderson T: 020 7269 7114
Adoption of International Financial Reporting Standards ('IFRS')
Summary of results presented under IFRS
Introduction
On 27 June 2007 DFD reported its financial results for the year ended 30 April
2007, prepared for the last time under UK Generally Accepted Accounting Practice
('UK GAAP'). Going forward the Group will prepare its consolidated financial
statements in accordance with IFRS as required for all AIM listed companies.
DFD's first reported IFRS results will be for the six months to 31 October 2007
and the Group's first audited financial statements under IFRS will be for the
period to 31 December 2007.
The impact on the reporting of our results is not significant and the underlying
performance of the business and its cash flows remain unaffected. Dividend
policy is unaffected.
This announcement describes for investors the key impacts of the conversion from
UK GAAP to IFRS on the Group's results for the year to 30 April 2007 and the key
judgements in making the transition to IFRS which are expected to form the
comparative figures for both the half year financial statements for the six
months to 31 October 2007 and those for the period to 31 December 2007.
Key financial highlights
The key financial highlights of adopting IFRS for the 30 April 2007 financial
statements are:
UK GAAP Adjustment IFRS
£000 £000 £000
Profit (loss) from operations 8,978 (980) 7,998
Profit (loss) before tax 9,122 (980) 8,142
Taxation (2,612) 294 (2,318)
Retained (loss) profit 6,510 (686) 5,824
Basic EPS (pence) 17.39 (1.82) 15.57
Diluted EPS (pence) *116.69 (1.74) *114.95
Goodwill 1,622 312 1,934
Total equity 21,422 (1,531) 19,891
*1 Calculated after potential exercise of share options of 1,566,562 shares.
The key financial highlights of adopting IFRS for the 31 October 2006 half year
financial statements are:
UK GAAP Adjustment IFRS
£000 £000 £000
Profit (loss) from operations 5,314 (12) 5,302
Profit (loss) before tax 5,415 (12) 5,403
Taxation (1,631) 3 (1,628)
Retained (loss) profit 3,784 (9) 3,775
Basic EPS (pence) 10.12 (0.02) 10.10
Diluted EPS (pence) *19.75 (0.02) *19.73
Goodwill 1,777 156 1,933
Total equity 19,671 (854) 18,817
The Group's date of transition to IFRS is 1 May 2006, being the start of the
previous period that will be presented as comparative information.
This document sets out the changes in accounting policies arising from the
adoption of IFRS and presents restated information for the opening balance sheet
at 1 May 2006, the six months ended 31 October 2006 and the year ended 30 April
2007 which were previously published under UK GAAP.
*1 Calculated after potential exercise of share options of 1,428,936 shares.
1. Explanation of transition to IFRS
The Group's financial statements for the period ending 31 December 2007 will be
the first audited financial statements that comply with IFRS. The Group will
apply IFRS 1 in preparing the half year financial statements. The last
financial statements under UK GAAP were for the year ended 30 April 2007 and the
date of transition was therefore 1 May 2006. Presented below is the
reconciliation of profit for the year ended 30 April 2007 and the
reconciliations of equity at 1 May 2006, being the start of that period ('
Transition Date') and at 30 April 2007 (date of last UK GAAP financial
statements) as required by IFRS 1. In addition, the reconciliation of equity at
31 October 2006 and the reconciliation of profit for the six months ended 31
October 2006 have been included below as required by IFRS 1 to enable a
comparison of the 2006 half year figures with those published in the
corresponding period of the previous financial year. For explanations of the
nature and effect of the changes in accounting policies as a consequence of the
transition to IFRS, refer to note 2 of this document.
(i) Reconciliation of UK GAAP consolidated profit and loss
account to IFRS income statement for the six months ended 31 October 2006
Six months ended 31 October 2006
Notes UK GAAP Effect of transition IFRS Unaudited
Unaudited £000 to IFRS Unaudited £000
£000
Revenue 12,978 - 12,978
Cost of sales f (2,264) (100) (2,364)
Gross profit 10,714 (100) 10,614
Administrative expenses:
Amortisation of goodwill and intangibles a, e (156) 127 (29)
Other administrative expenses b, e (5,244) (39) (5,283)
Total administrative expenses (5,400) 88 (5,312)
Profit from operations 5,314 (12) 5,302
Finance income 105 - 105
Finance costs (4) - (4)
Profit before taxation 5,415 (12) 5,403
Taxation d (1,631) 3 (1,628)
Profit after taxation 3,784 (9) 3,775
(ii) Reconciliations of UK GAAP consolidated profit and loss account
to IFRS income statement for the year ended 30 April 2007
Year ended 30 April 2007
Notes UK GAAP Effect of transition IFRS (unaudited)
(unaudited) to IFRS (unaudited) £000
£000 £000
Revenue 26,575 - 26,575
Cost of sales f (6,041) (1,184) (7,225)
Gross profit 20,534 (1,184) 19,350
Administrative expenses:
Amortisation of goodwill and intangibles a, e (312) 232 (80)
Other administrative expenses b, e (11,244) (28) (11,272)
Total administrative expenses (11,556) 204 (11,352)
Profit from operations 8,978 (980) 7,998
Finance income 166 - 166
Finance costs (22) - (22)
Profit before taxation 9,122 (980) 8,142
Taxation d (2,612) 294 (2,318)
Profit after taxation 6,510 (686) 5,824
(iii) Reconciliation of UK GAAP consolidated profit to IFRS consolidated profit
Notes Six months ended Year ended
31 October 2006 30 April 2007
£000 £000
Profit after tax as reported under UK GAAP 3,784 6,510
Adjustments for:
Cost of sales f (100) (1,184)
Short-term employee benefits b (68) (108)
Goodwill a 156 312
Deferred tax d 3 294
Profit after tax as reported under IFRS 3,775 5,824
(iv) Reconciliations of consolidated balance sheet at 1 May 2006 from UK GAAP
to IFRS
Notes UK GAAP Effect of transition IFRS (unaudited)
(audited) to IFRS (unaudited) £000
£000 £000
ASSETS
Non Current Assets
Property, plant and equipment e 928 (192) 736
Goodwill a 1,934 - 1,934
Other intangible assets e 8 192 200
Total Non Current Assets 2,870 - 3,870
Current Assets
Trade receivables 8,152 - 8,152
Other current assets f 2,070 (285) 1,785
Cash and cash equivalents 5,367 - 5,367
Total Current Assets 15,589 (285) 15,304
Total Assets 18,459 (285) 18,174
EQUITY
Share capital 373 - 373
Share premium account 13,577 - 13,577
Other reserves - - -
Retained earnings a,b,c,d,f 2,409 (845) 1,564
Translation reserve c - - -
Total equity attributable to equity 16,359 (845) 15,514
holders of the parent
LIABILITIES
Non Current Liabilities
Long-term borrowings 25 - 25
Provisions 18 - 18
Deferred tax liability d 21 (362) (341)
Total Non Current Liabilities 64 (362) (298)
Current Liabilities
Trade and other payables b, f 1,715 922 2,637
Current tax liabilities 321 - 321
Short-term borrowings - - -
Total Current Liabilities 2,036 922 2,958
Total Liabilities 2,100 560 3,660
Total Equity and Liabilities 18,459 (285) 18,174
(v) Reconciliation of consolidated balance sheet at 30 April 2007 from UK
GAAP to IFRS
Notes UK GAAP Effect of transition IFRS (unaudited)
(unaudited) to IFRS (unaudited) £000
£000 £000
ASSETS
Non Current Assets
Property, plant and equipment e 2,900 (747) 2,153
Goodwill a 1,622 312 1,934
Other intangible assets e 27 747 774
Total Non Current Assets 4,549 312 4,861
Current Assets
Trade receivables 13,896 - 13,896
Other current assets f 7,099 (1,469) 5,630
Cash and cash equivalents 373 - 373
Total Current Assets 21,368 (1,469) 19,899
Total Assets 25,917 (1,157) 24,760
EQUITY
Share capital 376 - 376
Share premium account 13,777 - 13,777
Other reserves 45 - 45
Retained earnings a,b,c,d,f 7,224 (1,519) 5,705
Translation reserve c - (12) (12)
Total equity attributable to equity 21,422 (1,531) 19,891
holders of the parent
LIABILITIES
Non Current Liabilities
Long-term borrowings 972 - 972
Deferred tax liability d 97 (656) (559)
Total Non Current Liabilities 1,069 (656) 510
Current Liabilities
Trade and other payables b, f 1,997 1,030 3,027
Current tax liabilities 700 - 700
Short-term borrowings 729 - 729
Total Current Liabilities 3,426 1,030 3,800
Total Liabilities 4,495 374 4,869
Total Equity and Liabilities 25,917 (1,157) 24,760
(vi) Reconciliation of consolidated balance sheet as at 31 October 2006 from
UK GAAP to IFRS
Notes UK GAAP Effect of transition IFRS
(unaudited) to IFRS (unaudited) (unaudited) £000
£000 £000
ASSETS
Non Current Assets
Property, plant and equipment e 2,339 (380) 1,959
Goodwill a 1,777 156 1,933
Other intangible assets e 27 380 407
Total Non Current Assets 4,143 156 4,299
Current Assets
Trade receivables 9,344 - 9,344
Other current assets f 5,794 (385) 5,409
Cash and cash equivalents 3,996 - 3,996
Total Current Assets 19,134 (385) 18,749
Total Assets 23,277 (229) 23,048
EQUITY
Share capital 374 - 374
Share premium account 13,644 - 13,644
Other reserves 22 - 22
Retained earnings a,b,c,d,f 5,631 (854) 4,777
Translation reserve c - - -
Total equity attributable to equity 19,671 (854) 18,817
holders of the parent
LIABILITIES
Non Current Liabilities
Long-term borrowings 11 - 11
Deferred tax liability d 21 (365) (344)
Total Non Current Liabilities 32 (365) (333)
Current Liabilities
Trade and other payables b,f 1,597 990 2,587
Current tax liabilities 1,977 - 1,977
Short-term borrowings - - -
Total Current Liabilities 3,574 990 4,564
Total Liabilities 3,606 625 4,231
Total Equity and Liabilities 23,277 (229) 23,048
(vii) Reconciliation of consolidated equity from UK GAAP to IFRS
Notes 1 May 2006 31 October 2006 30 April 2007
£000 £000 £000
Total equity as reported under UK GAAP 16,359 19,671 21,422
Adjustments for:
Cost of sales f (1,001) (1,101) (2,185)
Short-term employee benefits b (206) (274) (314)
Goodwill a - 156 312
Deferred tax d 362 365 656
Total equity as reported under IFRS 15,514 18,817 19,891
2. Explanation of adjustments to equity at 30 April 2007, 31 October 2006
and 1 May 2006 and to profit for the year ended 30 April 2007 and for the six
months ended 31 October 2007
The transition to IFRS resulted in the following changes:
a. Goodwill
Goodwill is not amortised under IFRS but is measured at cost less impairment
losses. Under UK GAAP, goodwill was amortised on a straight-line basis over the
time that the Group was estimated to benefit from it. The change does not
affect equity at 1 May 2006 because, as permitted by IFRS 1, goodwill arising on
acquisitions before 1 May 2006 (date of transition to IFRS) has been frozen at
the UK GAAP amounts subject to being tested for impairment at that date, the
results of which assessment indicated no such impairment. The adjustments
increase profits for the six months to 31 October 2006 by £156,000 and for the
year to 30 April 2007 by £312,000 with corresponding increases in retained
earnings.
b. Short-term employee benefits
IAS 19 Employee benefits requires the expense of services rendered that increase
employees' entitlement to future compensated absence (i.e. paid holiday) to be
recognised in the period. Therefore, the cost of holidays earned but not taken
at the balance sheet date has been accrued for. The adjustments decrease
profits for the six months to 31 October 2006 by £68,000 and for the year to 30
April 2007 by £108,000; retained earnings are reduced by £206,000 at 1 May 2006,
£274,000 at 31 October 2006 and £314,000 at 30 April 2007.
c. Other reserves
The foreign exchange differences arising after that date on consolidation have
been credited to the translation reserve within equity rather than to retained
earnings. The adjustments are £nil for the six months to 31 October 2006 and
£12,000 for the year to 30 April 2007.
d. Deferred tax
Differences in timing between the recognition of accounting for tax charges
under IAS and the deduction of amounts in the corporation tax computations now
create temporary differences resulting in deferred tax rather than permanent
differences under UK GAAP on which no deferred tax balances were recognised.
The reversal of goodwill amortisation has resulted in the creation of a deferred
tax liability and the recognition of holiday pay accruals under IAS and the
restatement of cost of sales has resulted in a deferred tax asset.
IAS 12 applies to all share based payments and is not time restricted to those
issued post 7 November 2002. Under IAS 12 the deferred tax recognised through
the profit and loss account cannot exceed 30% of the share-based payment charge
on a cumulative basis; the balance is therefore adjusted to equity.
The adjustments increase profits for the six months to 31 October 2006 by £3,000
and for the year to 30 April 2007 by £294,000; retained earnings are increased
by £294,000 at 1 May 2006 , £365,000 at 31 October 2006 and £656,000 at 30 April
2007.
e. Capitalised software
Under UK GAAP, the cost of capitalised software is classified within property,
plant and equipment. Under IAS 38 these costs are classified as intangible
assets. The balance sheet impact of the reclassification is to increase
intangible assets and decrease property, plant and equipment by £192,000 at 1
May 2006; £380,000 at 31 October 2006 and £747,000 at 30 April 2007. The UK GAAP
depreciation charge in respect of capitalised software is replaced with an equal
amortisation charge under IAS 38 and consequently there is no net impact on the
income statement, however there has been a movement of £29,000 for the six
months to 31 October 2006 and £80,000 for the year to 30 April 2007 from other
administrative expenses to amortisation.
f. Cost of sales
Under UK GAAP, marketing and related expenditures are permitted to be recognised
over the period in which separately identifiable revenue was generated. Under
IAS 18, marketing costs are recognised at the point that services are delivered.
The adjustments decrease profits for the six months to 31 October 2006 by
£100,000 and for the year to 30 April 2007 by £1,184,000. Retained earnings are
reduced by £1,001,000 at 1 May 2006, which is split between an increase of
£716,000 in trade and other payables and a decrease of £285,000 in other current
assets; £1,101,000 at 31 October 2006, which is split between an increase of
£716,000 in trade and other payables and a decrease of £385,000 in other current
assets and £2,185,000 at 30 April 2007, which is split between an increase of
£716,000 in trade and other payables and a decrease of £1,469,000 in other
current assets.
g. Exemptions
IFRS 1 First-time Adoption of International Financial Reporting Standards sets
out the transition rules, which must be applied, when IFRS is adopted for the
first time. The standard sets out certain mandatory exemptions to retrospective
application and certain optional exemptions. The most significant optional
exemptions available and taken by the Group are as follows:
(i) Business combinations: the Group has adopted the exemption under IFRS
1 relating to business combinations which occurred before the date of
transition, 1 May 2006. The goodwill arising from combinations before that date
therefore remains at the amount shown under UK GAAP at 1 May 2006, subject to
any subsequent impairment.
(ii) Share-based transactions: The Group adopted the exemption in IFRS 1
which allows a first-time adopter to apply the standard only to share options
and equity instruments granted after 7 November 2002 that have not vested by 1
May 2006.
Basis of preparation
The half year financial statements to be announced on 27 November 2007, will be
prepared in accordance with the accounting policies the Group expects to adopt
in its 31 December 2007 audited financial statements. These accounting policies
are based on the IAS, IFRS and IFRIC interpretations that the Group expects to
be applicable at that time. The IFRS and IFRIC interpretations that will be
applicable at 31 December 2007, including those that will be applicable on an
optional basis, are not known with certainty at the time of preparing the half
year financial statements, although the International Accounting Standards Board
has stated that it will not issue any further statements during 2007.
The Group's consolidated financial statements were prepared in accordance with
UK GAAP until 30 April 2007. The Group has applied those IAS, IFRS and IFRIC
interpretations expected to be applicable in the 31 December 2007 audited
financial statements to the half year financial statements. Reconciliations
between previously reported financial statements prepared under UK GAAP and the
IFRS equivalents are presented for profit for the year ended 30 April 2007and
the six months ended 31 October 2006 and total equity as at 30 April 2007, 31
October 2006 and 1 May 2006 in note 2 of this document.
IFRS 1 provides certain optional exemptions from full retrospective application
of all accounting standards effective at the Group's reporting date. As
discussed in more detail in the relevant sections above, the Group has taken
advantage of the exemptions relating to: business combinations, cumulative
translation differences and share-based payment transactions. The Group has not
taken advantage of the available optional exemption relating to fair value
measurement of financial assets and financial liabilities at initial
recognition.
The comparatives for the full year ended 30 April 2007 are not the Group's
statutory accounts for that year. A copy of the statutory accounts for that
year, which were prepared under UK GAAP, have been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified, did not
include references to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain a statement under
Section 237(2)-(3) of the Companies Act 1985.
This document is unaudited.
3. Summary of significant accounting policies
The significant accounting policies which the Group will be applying to its half
year financial statements for the six months to 31 October 2007 and which it
expects to apply in its full financial statements for the period ending 31
December 2007 are set out below.
Principles of consolidation
The consolidated half year financial statements incorporate the half year
financial statements of the Group and all group undertakings. Intra-group
transactions, including sales, profits, receivables and payables, have been
eliminated on the Group consolidation. The subsidiary undertakings accounts are
adjusted, where appropriate, to conform to Group accounting policies.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the
Group has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries
are included from the date that control commences until the date that control
ceases.
Business combinations
The results of subsidiaries acquired in the period are included in the income
statement from the date they are acquired. On acquisition, all of the
subsidiaries' assets and liabilities that exist at the date of acquisition are
recorded at their fair values reflecting their condition at that date.
Goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill represents the excess of the fair value of the consideration paid on
acquisition of a business over the fair value of the assets, including any
intangible assets identified, liabilities and contingent liabilities acquired.
Goodwill is not amortised but is measured at cost less impairment losses. In
determining the fair value of consideration, the fair value of equity issued is
the market value of equity at the date of completion, and the fair value of
contingent consideration is based upon the extent to which the directors believe
performance conditions will be met and thus whether any further consideration
will be payable.
As permitted by IFRS 1, goodwill arising on acquisitions before 1 May 2006 (date
of transition to IFRS) has been frozen at the UK GAAP amounts subject to being
tested for impairment at that date. Goodwill is tested for impairment at least
annually. The Group performs its impairment reviews at the cash-generating unit
level. Any impairment is recognised immediately in the income statement and is
not subsequently reversed.
On disposal of a subsidiary, the attributable net book value of goodwill is
included in the determination of the profit or loss on disposal.
Amortisation
Amortisation is charged to the income statement on a systematic basis over the
estimated useful lives of intangible assets unless such lives are indefinite.
Goodwill and intangible assets with an indefinite life are systematically tested
for impairment at each balance sheet date. Other intangible assets are
amortised from the date they are available for use. The useful lives for
trademarks are estimated to be ten years and capitalised software estimated to
be four years.
Impairment charges
The Group considers at each reporting date whether there is any indication that
non-current assets are impaired. If there is such an indication, the Group
carries out an impairment test by measuring an asset's recoverable amount, which
is the higher of its fair value less costs to sell and its value in use
(effectively the expected cash to be generated from using the asset in the
business). 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 is less
than the carrying amount an impairment loss is recognised, and the asset is
written down to its recoverable amount.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) 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 (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately.
Turnover
The turnover shown in the Group profit and loss account represents amounts in
respect of the provision of financial solutions to individuals experiencing
personal debt problems. Turnover is largely derived from IVA fees which result
from individual voluntary arrangements (IVA's). These fees are recognised as
follows:
IVA fees:
Fees are recognised following approval at the Meeting of Creditors. Turnover is
recorded to recognise revenue during the life of the IVA, based upon the fair
value of the service provided rather than on invoicing. Fair value for this
purpose is based upon that proportion of the anticipated revenue on a case which
is represented by the value of work done to date as a function of the total
value of anticipated work.
The Group also receives commission income from the referral of both Scottish and
self employed IVAs and customers who wish to remortgage their property. The
income is recognised as follows:
IVA commission: IVA referral income is recorded at the date at which the IVA is
approved at the Meeting of Creditors.
Remortgaging commission: Remortgage commission is recorded at the date on which
approval is obtained.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. The Group
considers all highly liquid investments with original maturity dates of three
months or less to be cash equivalents. Bank overdrafts that are repayable on
demand and form an integral part of the Group's cash management system are
included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
Tangible fixed assets
The cost of items of property, plant and equipment is its purchase cost,
together with any incidental costs of acquisition.
Depreciation is calculated so as to write off, on a reducing balance basis over
the expected useful economic lives of the asset concerned, the cost of property,
plant and equipment, less estimated residual values, which are adjusted, if
appropriate, at each balance sheet date. The principal economic lives used for
this purpose are:
• Fixtures and fittings Four years
• Computer equipment Four years
Provision is made against the carrying value of items of property, plant and
equipment where impairment in value is deemed to have occurred.
Leased assets
Leases in terms of which the Group assumes substantially all the risks and
rewards of ownership are classified as finance leases. Assets held under
finance leases and hire purchase contracts are capitalised in the balance sheet
and disclosed under tangible fixed assets at their fair value. The capital
element of the future payments is treated as a liability and the interest is
charged to the Group profit and loss account on a straight line basis.
All other leases are regarded as operating leases and the payments made under
them are charged to the income statement on a straight-line basis over the lease
term.
Foreign currency translation
Transactions in foreign currencies are recorded at the rate of exchange at the
date of the transaction or, if hedged, at the forward contract rate. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet
date are reported at the rates of exchange prevailing at that date or, if
appropriate, at the forward contract rate.
The results of overseas operations are translated at the average rates of
exchange during the year and the balance sheet is translated into sterling at
the rate of exchange ruling at the balance sheet date. Exchange differences
which arise from the translation of the opening net assets and results of
foreign subsidiary undertakings are taken to equity. Such translation
differences are recognised as income or as expenses in the period in which the
operation is disposed of.
Financial instruments
Financial assets and financial liabilities are recognised at fair value on the
Group's balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated irrecoverable amounts.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs.
Finance charges are accounted for on an accrual basis to the income statement
using the effective interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they
arise.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, except where the Group is
able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Pension contributions
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement as incurred. The Group has no
defined benefit arrangements in place.
Investment income
Investment income relates to interest income, which is accrued on a time basis,
by reference to the principal outstanding and at the effective interest rate
applicable.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
Provisions are measured at the Directors' best estimate of the expenditure
required to settle the obligation at the balance sheet date, and are discounted
to present value where the effect is material.
Provisions are reviewed on a regular basis and released to profit and loss
account where changes in circumstances indicate that a provision is no longer
required.
Profit from operations
Profit from operations is stated after charging all operating costs including
those separately disclosed by virtue of their size or unusual nature or to
facilitate a more helpful understanding of the group's results. It is stated
before investment income and finance costs.
Key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates. The key
sources of estimation that have a significant impact on the carrying value of
assets and liabilities are discussed below:
Valuation of intangibles acquired in business combinations
Determining the fair value of intangibles acquired in business combinations
requires estimation of the value of the cashflows related to the identified
intangibles and a suitable discount rate in order to calculate the present
value.
Impairment of goodwill and other intangibles
Determining whether goodwill is impaired requires an estimation of the value in
use of the cash generating units to which goodwill has been allocated. The
value in use calculation requires an entity to estimate the future cash flows
expected to arise from the cash generating unit and a suitable discount rate in
order to calculate present value. An impairment review has been performed at
the adoption date and no impairment has been identified.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 2 hours ago Urban Logistics Reit
- 2 hours ago Ocado Group
- 2 hours ago AJ Bell
- 2 hours ago Foresight Enterprise VCT
- 2 hours ago Mitie Group