IFRS statement
John David Group (The) PLC
05 October 2005
The John David Group Plc
5th October 2005
Adoption Of International Financial Reporting Standards
Summary
The John David Group Plc (the 'Group') has today reported on its unaudited
financial results for the 52 weeks to 29 January 2005 and six months to 31 July
2004 (1) under International Financial Reporting Standards ('IFRS').
For the year to 29 January 2005, primary differences under IFRS relative to
previously reported financial results under UK GAAP are highlighted below:
• Turnover and gross profit unchanged.
• Headline PBT (2) under IFRS of £12.9 million compared to £13.7 million
under UK GAAP. The £0.8 million adjustment relates to a reduction in the
amount released for rent free periods. Under IFRS, the release is spread over
the life of the lease whereas under UK GAAP it was spread over the period to
the first rent review.
• Statutory PBT under IFRS of £3.6 million compared to £2.6 million
under UK GAAP. Although the headline PBT has reduced by £0.8 million this has
been offset by write backs of:
a) £0.8 million for goodwill amortisation (no longer applicable under IFRS).
b) £1.0 million for exceptional rent free credits released on store disposals.
• Goodwill amortisation is no longer applicable.
• Exceptional items as defined in UK GAAP under FRS 3 are no longer
applicable. As a result, the costs previously recognised as 'Loss On Disposal'
have now been reclassified within Operating Profit. However, to aid
understanding of the performance, the Operating Profit Before Financing has
been separately analysed on the face of the Consolidated Income Statement into
'Before Exceptional Items' and 'Exceptional Items'.
• Effective tax rate of 37.2% compared to 37.6% reported under UK GAAP
(calculated on profit before taxation excluding goodwill amortisation).
• Diluted EPS of 4.81p under IFRS compared to diluted EPS of 2.85p
reported under UK GAAP.
• Shareholders' funds at 29 January 2005 of £53.6 million under IFRS
compared to £55.7 million reported under UK GAAP, due to balance sheet
remeasurements under IFRS, including the reversal of £2.1 million provided for
the proposed final dividend payment under UK GAAP.
• No impact on cashflows.
International Financial Reporting Standards are subject to ongoing amendments by
the International Accounting Standards board and some standards have yet to be
endorsed by the European Commission. Further development of the interpretation
of these standards could result in changes in the basis in accounting or
presentation of certain items and accordingly this financial information is
subject to possible change.
Consolidated Income Statement For The 52 Weeks To 29 January 2005 - Unaudited
UK GAAP IFRS Adjustments IFRS
£000 £000 £000
REVENUE 471,656 - 471,656
Cost of sales (256,504) (256,504)
------------ ------------ ----------
GROSS PROFIT 215,152 - 215,152
Net operating expenses (206,796) (597) (207,393)
------------ ------------ ----------
OPERATING PROFIT 8,356 (597) 7,759
----------------------- ------------ ------------- ----------
Before exceptional items 17,891 (793) 17,098
Exceptional items (8,723) (616) (9,339)
Goodwill amortisation (812) 812 -
----------------------- ------------ ------------- ----------
OPERATING PROFIT 8,356 (597) 7,759
Loss on disposal of fixed assets (1,569) 1,569 -
------------ ------------- ----------
OPERATING PROFIT BEFORE FINANCING 6,787 972 7,759
Financial income 304 - 304
Financial expenses (4,461) - (4,461)
------------ ------------- ----------
PROFIT BEFORE TAX 2,630 972 3,602
Income tax expense (1,293) (48) (1,341)
------------ ------------- ----------
PROFIT FOR THE PERIOD 1,337 924 2,261
------------ ------------- ----------
DIVIDENDS (3) (3,119) 1,303 (1,816)
------------ ------------- ----------
Notes:
(1) During the year to 29 January 2005, the Group moved its financial calendar
from an annual basis to 4,5,4 weekly accounting periods in common with other
major retailers, with the year end being the nearest Saturday to 31 January.
(2) Headline PBT represents profit before tax excluding exceptional items and
goodwill amortisation (NB: no longer applicable under IFRS).
(3) Dividends recognised as distributions to equity holders during the period.
Enquiries:
The John David Group Plc Tel: 0870 873 0333
Peter Cowgill, Executive Chairman
Barry Bown, Chief Executive
Brian Small, Group Finance Director
Hogarth Partnership Limited Tel: 020 7357 9477
Andrew Jaques
Edward Westropp
The John David Group Plc
Adoption Of International Financial Reporting Standards
Contents
1. Introduction
2. Explanation Of Adjustments Under IFRS
3. Restated IFRS Consolidated Financial Information
• Consolidated Income Statement For The 52 weeks To 29 January 2005
• Consolidated Balance Sheet As At 29 January 2005
• Consolidated Income Statement For The Six Months To 31 July 2004
• Consolidated Balance Sheet As At 31 July 2004
• Consolidated Balance Sheet As At 31 January 2004
4. IFRS Accounting Policies
1 INTRODUCTION
For all periods up to and including the year to 29 January 2005, The John David
Group Plc has prepared its financial statements in accordance with UK Generally
Accepted Accounting Practice (UK GAAP). For the year to 28 January 2006, The
John David Group Plc is required to prepare consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS) as endorsed
by the European Commission.
The Group's transition date to IFRS is 1 February 2004. This has been determined
in accordance with IFRS 1 'First Time Adoption of International Financial
Reporting Standards', being the start of the earliest period of comparative
information.
To explain the transition to IFRS, the unaudited financial performance and
position of the Group has been converted from UK GAAP to IFRS for the year to 29
January 2005. An explanation of the principle adjustments required by The John
David Group Plc on conversion to IFRS is set out in section 2, with summary
financial information presented in section 3. The financial information
presented includes:
• The Group's Consolidated Income Statements for the 52 weeks to 29
January 2005 and six months to 31 July 2004
• The Group's Consolidated Balance Sheets at 29 January 2005, 31 July
2004 and 31 January 2004.
This document explains all material accounting policy changes from the
accounting policies adopted in the UK GAAP financial statements for the year to
29 January 2005. A full set of IFRS accounting policies is included in Section
4.
The financial information presented in this document is unaudited.
Transitional Arrangements In IFRS 1 ('First Time Adoption Of International
Financial Reporting Standards')
In implementing the transition to IFRS, the Group has followed the requirements
of IFRS1, which in general requires IFRS accounting policies to be applied fully
retrospectively in deriving the opening balance sheet at the date of transition
(1 February 2004).
However, IFRS1 contains certain mandatory exemptions and some optional
exemptions to this principle of retrospective application. Set out below is a
description of the significant first time adoption choices made by the Group:
a) IAS 32 ('Financial Instruments: Disclosure And Presentation' / IAS 39:
'Financial Instruments: Recognition And Measurement')
The Group has taken the option to defer the implementation of IAS 32 and IAS 39
to the financial year ending 28 January 2006. Therefore, financial instruments
will continue to be accounted for and presented in accordance with UK GAAP for
the year ended 29 January 2005. To the extent that any adjustment is required,
this would be in order to reflect the movements from UK GAAP carrying values to
IAS 39 values. It is the Group's intention to apply hedge accounting where the
requirements of IAS 39 are met.
b) IFRS 3 ('Business Combinations')
The Group has elected not to apply IFRS 3 retrospectively to business
combinations that took place before the date of transition.
The goodwill arising on the acquisition of the First Sport group of companies
was reviewed at the transition date and no impairment was found necessary. As a
result, goodwill arising from the First Sport business combination at transition
remains as stated under UK GAAP at 1 February 2004 (£14,976k).
2 EXPLANATION OF ADJUSTMENTS UNDER IFRS
The format of the IFRS primary financial information contained within this
document is prepared in accordance with IAS 1 'Presentation of Financial
Statements', which differs from the UK GAAP format. Under IFRS, exceptional
items are not defined and therefore are included within Net Operating Expenses.
However, The John David Group Plc will separately analyse the Operating Profit
Before Financing on the face of the Consolidated Income Statement and provide
adjusted earnings per share to assist shareholders.
The IFRS changes set out below have no effect on cash flows.
The significant adjustments between UK GAAP and IFRS which affect the Group are
as follows:
2.1 IAS 1 'Presentation Of Financial Statements'
In the year to 29 January 2005, exceptional costs of £8.7 million were
recognised within Operating Profit principally relating to the impairment of
tangible fixed assets on loss making stores. In addition, a further £1.6 million
of costs were separately analysed after Operating Profit for Loss on Disposal of
Fixed Assets as permitted under UK GAAP.
The total exceptional costs now presented under IFRS on the face of the
Consolidated Income Statement have been reduced by £1.0 million compared to the
total of all exceptional costs under UK GAAP to reflect the release of lease
incentives on the disposal of properties where under UK GAAP the incentive had
been fully amortised (See Section 2.2).
2.2 IAS 17 'Leases' / SIC-15 'Operating Leases - Incentives'
IAS 17 'Leases' requires that the building element of leases on land and
buildings is considered separately for the purposes of determining whether the
lease is finance or operating in nature.
In response to this requirement, a review has been undertaken of the Group's
leased property portfolio to assess whether the building element of these leases
could be categorised as finance in nature. Based on this review and the
assessment of the expected useful economic life of the properties at the point
of inception of the lease, it is considered that the respective building
elements are operating in nature.
Legal fees and other costs associated with the acquisition of a leasehold
interest have been reclassified as Other Receivables within non-current assets.
Under UK GAAP, lease incentives were recognised over the period to the first
market rent review. However, under SIC-15 'Operating Leases - Incentives', lease
incentives are required to be recognised over the entire lease term.
As a result, the Group's IFRS opening balance sheet at 1 February 2004 includes
additional deferred income of £7.2 million (before a deferred tax asset of £2.2
million). There is also a reduction in operating profit for the 52 weeks ended
29 January 2005 of £0.8 million. However, this reduction has been offset by a
one off credit of £1.0 million through exceptional items for the release of
deferred income balances on the disposal of properties where the incentive had
been fully amortised under UK GAAP but a portion had to be reinstated on 1
February 2004 under IFRS.
2.3 IFRS 3 'Business Combinations' / IAS 36 'Impairment of Assets'
Under UK GAAP, goodwill was capitalised and amortised over its estimated useful
economic life and a charge of £0.8 million for amortisation was recorded in the
52 weeks to 29 January 2005.
Under IFRS 3 'Business Combinations', goodwill has been assigned an indefinite
life as at the date of transition and it is no longer amortised. The John David
Group Plc has elected to apply the exemption relating to Business Combinations
and has frozen its goodwill on the acquisition of the First Sport group of
companies at its carrying value as at 1 February 2004 (£15.0 million). All
accumulated amortisation at this point in time has been reclassified against the
cost of the goodwill.
On 15th December 2004, the Group purchased the entire share capital of RD Scott
Limited for a total consideration of £4.5 million. Goodwill with a value of £4.2
million was capitalised on this transaction. Under UK GAAP, a very small charge
was recorded in the period from acquisition to 29th January 2005. This charge
has been reversed and the goodwill restated at the acquisition level.
Under IAS 36 'Impairment of Assets', impairment reviews will be carried out on
goodwill on an annual basis and any impairment will be charged to the
Consolidated Income Statement and, if material, reported separately.
2.4 IAS 12 'Income Taxes'
Under UK GAAP, deferred tax was recognised for all timing differences (being the
difference between an entities taxable profits and its statutory results) which
are expected to reverse.
Deferred tax under IAS 12 'Income Taxes' is recognised on all taxable temporary
differences, all deductible temporary differences and unused tax losses to the
extent that it is probable there are sufficient taxable profits available in
future periods. Temporary differences are the difference between the tax base of
an asset/liability and its carrying amount in the financial statements.
As a result, the Group's opening IFRS balance sheet at 1 February 2004 includes
an additional deferred tax asset of £2.2 million in relation to the additional
deferred income on rent free releases (see 'Leases' above). At 29 January 2005,
the additional deferred tax asset in relation to this was £2.1 million.
HM Revenue and Customs have now confirmed that the adjustment in respect of the
rent free releases is allowable as a deduction in the Corporation Tax
computations for the accounting period to 28 January 2006. Accordingly, the
deferred tax asset arising on this adjustment has been transferred to current
tax in the current period.
The effective tax rate for the 52 weeks to 29 January 2005 is now 37.2% compared
to 37.6% under UK GAAP (adjusted for goodwill amortisation).
2.5 IAS 10 'Events After The Balance Sheet Date'
Under UK GAAP, proposed dividends are recorded as a liability at the balance
sheet date. Under IAS 10 'Events After The Balance Sheet Date', dividends
proposed at the balance sheet date are only recorded as a liability when the
shareholders have approved their distribution.
The final dividend proposed as at 31 January 2004 of £0.8 million (excluding the
Scrip Dividend) has been reversed in the opening balance sheet and charged in
the year to 29 January 2005. The final dividend proposed as at 29 January 2005
of £2.1 million has been reversed in the Statement of Changes in Equity and will
be charged in the year to 28 January 2006.
The recognition of the charge in the Statement of Changes in Equity in relation
to dividends does not affect the timing of dividend payments or the Group's
dividend policy.
2.6 IAS 33 'Earnings Per Share'
The calculation of basic earnings per share is based on attributable profit for
the period divided by the weighted average number of Ordinary Shares in issue
during the period.
Diluted earnings per share is based on the weighted average number of Ordinary
Shares in issue during the period. In addition, account is taken of any awards
which will have dilutive effects when exercised (full vesting of all outstanding
awards is assumed).
An adjusted earnings per share to exclude exceptional items will continue to be
presented in the notes to the financial statements.
3 RESTATED IFRS CONSOLIDATED FINANCIAL INFORMATION
Consolidated Income Statement
52 Weeks Ended 29 January 2005 - unaudited
Loss
UK On Disposal Leases & Goodwill
GAAP Reclassification Incentives Amortisation Dividends IFRS
£'000 £'000 £'000 £'000 £'000 £'000
REVENUE 471,656 - - - - 471,656
Cost of sales (256,504) - - - - (256,504)
GROSS PROFIT 215,152 - - - - 215,152
Net operating expenses (206,796) (1,569) 160 812 - (207,393)
OPERATING PROFIT 8,356 (1,569) 160 812 - 7,759
Before exceptional items 17,891 - (793) - - 17,098
Exceptional items (8,723) (1,569) 953 - - (9,339)
Goodwill amortisation (812) - - 812 - -
OPERATING PROFIT 8,356 (1,569) 160 812 - 7,759
Loss on disposal of fixed (1,569) 1,569 - - - -
assets
OPERATING PROFIT BEFORE 6,787 - 160 812 - 7,759
FINANCING
Financial income 304 - - - - 304
Financial expenses (4,461) - - - - (4,461)
PROFIT BEFORE TAX 2,630 - 160 812 - 3,602
Income tax expense (1,293) - (48) - - (1,341)
PROFIT FOR THE PERIOD 1,337 - 112 812 - 2,261
DIVIDENDS (1) (3,119) - - - 1,303 (1,816)
(1) Dividends recognised as distributions to equity holders during the period.
Consolidated Balance Sheet
As at 29 January 2005 - unaudited
UK Leases & Goodwill Onerous
GAAP Incentives Amortisation Dividends Leases IFRS
£'000 £'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 18,318 - 812 - - 19,130
Property, plant and equipment 56,789 (2,715) - - - 54,074
Other receivables - 2,715 - - - 2,715
TOTAL NON-CURRENT ASSETS 75,107 - 812 - - 75,919
Current assets
Inventories 53,857 - - - - 53,857
Income tax receivable - - - - - -
Trade and other receivables 11,707 - - - - 11,707
Cash and cash equivalents 6,531 - - - - 6,531
TOTAL CURRENT ASSETS 72,095 - - - - 72,095
TOTAL ASSETS 147,202 - 812 - - 148,014
LIABILITIES
Current Liabilities
Bank overdraft (1,800) - - - - (1,800)
Interest bearing loans and borrowings (9,000) - - - - (9,000)
Trade and other payables (46,740) 614 - 2,085 - (44,041)
Provisions - - - - (674) (674)
Income tax liabilities (1,417) - - - - (1,417)
TOTAL CURRENT LIABILITIES (58,957) 614 - 2,085 (674) (56,932)
Non-current liabilities
Interest bearing loans and borrowings (25,500) - - - - (25,500)
Other payables (3,153) (7,699) - - - (10,852)
Provisions (1,614) - - - 674 (940)
Deferred tax liabilities (2,315) 2,125 - - - (190)
TOTAL NON-CURRENT LIABILITIES (32,582) (5,574) - - 674 (37,482)
TOTAL LIABILITIES (91,539) (4,960) - 2,085 - (94,414)
TOTAL ASSETS LESS TOTAL LIABILITIES 55,663 (4,960) 812 2,085 - 53,600
EQUITY
Issued ordinary share capital 2,364 - - - - 2,364
Share premium account 9,042 - - - - 9,042
Retained earnings 44,257 (4,960) 812 2,085 - 42,194
TOTAL EQUITY ATTRIBUTABLE TO EQUITY 55,663 (4,960) 812 2,085 - 53,600
SHAREHOLDERS
Consolidated Income Statement
For The Six Months Ended 31 July 2004 - unaudited
Loss
UK On Disposal Leases & Goodwill
GAAP Reclassification Incentives Amortisation Dividends IFRS
£'000 £'000 £'000 £'000 £'000 £'000
REVENUE 212,079 - - - - 212,079
Cost of sales (114,530) - - - - (114,530)
GROSS PROFIT 97,549 - - - - 97,549
Net operating expenses (100,489) (1,314) (242) 393 - (101,652)
OPERATING LOSS (2,940) (1,314) (242) 393 - (4,103)
Before exceptional items 2,170 - (317) - - 1,853
Exceptional items (4,717) (1,314) 75 - - (5,956)
Goodwill amortisation (393) - - 393 - -
OPERATING LOSS (2,940) (1,314) (242) 393 - (4,103)
Loss on disposal of fixed (1,314) 1,314 - - - -
assets
OPERATING LOSS BEFORE (4,254) - (242) 393 - (4,103)
FINANCING
Financial income 170 - - - - 170
Financial expenses (2,285) - - - - (2,285)
LOSS BEFORE TAX (6,369) - (242) 393 - (6,218)
Income tax credit 2,654 - 73 - - 2,727
LOSS FOR THE PERIOD (3,715) - (169) 393 - (3,491)
DIVIDENDS (1) (1,063) - - - 281 (782)
(1) Dividends recognised as distributions to equity holders during the period.
Consolidated Balance Sheet
As at 31 July 2004 - unaudited
UK Leases & Goodwill Onerous
GAAP Incentives Amortisation Dividends Leases IFRS
£'000 £'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 14,583 - 393 - - 14,976
Property, plant and equipment 61,669 (3,231) - - - 58,438
Other receivables - 3,231 - - - 3,231
TOTAL NON-CURRENT ASSETS 76,252 - 393 - - 76,645
Current assets
Inventories 72,113 - - - - 72,113
Income tax receivable 3,561 - - - - 3,561
Trade and other receivables 10,623 - - - - 10,623
Cash and cash equivalents 24,583 - - - - 24,583
TOTAL CURRENT ASSETS 110,880 - - - - 110,880
TOTAL ASSETS 187,132 - 393 - - 187,525
LIABILITIES
Current Liabilities
Bank overdraft - - - - - -
Interest bearing loans and (8,000) - - - - (8,000)
borrowings
Trade and other payables (56,438) 718 - 1,063 - (54,657)
Provisions - - - - (845) (845)
Income tax liabilities - - - - - -
TOTAL CURRENT LIABILITIES (64,438) 718 - 1,063 (845) (63,502)
Non-current liabilities
Interest bearing loans and (62,000) - - - - (62,000)
borrowings
Other payables (2,991) (8,205) - - - (11,196)
Provisions (1,012) - - - 845 (167)
Deferred tax liabilities (4,175) 2,246 - - - (1,929)
TOTAL NON-CURRENT LIABILITIES (70,178) (5,959) - - 845 (75,292)
TOTAL LIABILITIES (134,616) (5,241) - 1,063 - (138,794)
TOTAL ASSETS LESS TOTAL LIABILITIES 52,516 (5,241) 393 1,063 - 48,731
EQUITY
Issued ordinary share capital 2,338 - - - - 2,338
Share premium account 8,917 - - - - 8,917
Retained earnings 41,261 (5,241) 393 1,063 - 37,476
TOTAL EQUITY ATTRIBUTABLE TO EQUITY 52,516 (5,241) 393 1,063 - 48,731
SHAREHOLDERS
Consolidated Balance Sheet
As at 31 January 2004 - unaudited
UK Leases & Goodwill
GAAP Incentives Amortisation Dividends IFRS
£'000 £'000 £'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 14,976 - - - 14,976
Property, plant and equipment 68,183 (3,284) - - 64,899
Other receivables - 3,284 - - 3,284
TOTAL NON-CURRENT ASSETS 83,159 - - - 83,159
Current assets
Inventories 65,727 - - - 65,727
Income tax receivable 611 - - - 611
Trade and other receivables 14,452 - - - 14,452
Cash and cash equivalents 4,934 - - - 4,934
TOTAL CURRENT ASSETS 85,724 - - - 85,724
TOTAL ASSETS 168,883 - - - 168,883
LIABILITIES
Current Liabilities
Bank overdraft - - - - -
Interest bearing loans and borrowings (8,000) - - - (8,000)
Trade and other payables (48,278) 964 - 782 (46,532)
Provisions - - - - -
Income tax liabilities - - - - -
TOTAL CURRENT LIABILITIES (56,278) 964 - 782 (54,532)
Non-current liabilities
Interest bearing loans and borrowings (48,000) - - - (48,000)
Other payables (3,555) (8,209) - - (11,764)
Provisions - - - - -
Deferred tax liabilities (3,756) 2,173 - - (1,583)
TOTAL NON-CURRENT LIABILITIES (55,311) (6,036) - - (61,347)
TOTAL LIABILITIES (111,589) (5,072) - 782 (115,879)
TOTAL ASSETS LESS TOTAL LIABILITIES 57,294 (5,072) - 782 53,004
EQUITY
Issued ordinary share capital 2,338 - - - 2,338
Share premium account 8,917 - - - 8,917
Retained earnings 46,039 (5,072) - 782 41,749
TOTAL EQUITY ATTRIBUTABLE TO EQUITY 57,294 (5,072) - 782 53,004
SHAREHOLDERS
4 IFRS ACCOUNTING POLICIES
Basis Of Preparation
European Union ('EU') law (IAS Regulation EC 1606/2002) requires that the next
annual consolidated financial statements of The John David Group Plc ('The
Group'), those covering the 52 weeks ending 28 January 2006, are prepared in
accordance with International Financial Reporting Standards ('IFRS') adopted for
use in the E.U..
The Group has adopted IFRS with effect from 30 January 2005. The transition date
is 1 February 2004, being the start date of the earliest period for which full
comparative information in the 2006 Annual Report and Accounts will be
presented.
The financial information presented in this conversion statement which is
unaudited has been prepared on the basis of the recognition and measurement
requirements of IFRS in issue that either are endorsed by the EU and effective
(or available for early adoption) at 28 January 2006 or are expected to be
endorsed and effective (or available for early adoption) at 28 January 2006, the
Group's first annual reporting date at which it is required to use endorsed
IFRS. Based on these endorsed IFRS, the directors have made assumptions about
the accounting policies expected to be applied when the first annual IFRS
financial statements are prepared for the 52 weeks ending 28 January 2006.
Furthermore, the adopted IFRS that will be effective (or available for early
adoption) in the annual financial statements for the 52 weeks ending 28 January
2006 are still subject to change and to additional interpretations and therefore
cannot be determined with certainty. Accordingly, the accounting policies for
that annual period will be determined finally only when the annual financial
statements are prepared for the 52 weeks ending 28 January 2006.
The comparative figures for the 52 weeks ended 29 January 2005 do not constitute
the Group's statutory accounts for that financial period. Those accounts, which
were prepared under UK GAAP, have been reported on by the Group's auditor and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain statements under section 237 (2) or (3) of the
Companies Act 1985.
The financial statements are presented in pounds sterling, rounded to the
nearest thousand.
The preparation of financial statements in conformity with IFRS requires
management to make judgments, 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 judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The accounting policies set out below have been applied consistently to all
periods presented in this consolidated financial report and in preparing an
opening IFRS balance sheet at 1 February 2004 for the purposes of the transition
to IFRS.
The accounting policies have been applied consistently by all Group entities.
Basis Of Consolidation
I. Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the
Company 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 are
taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the
date that control ceases.
II. Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses
arising from intragroup transactions, are eliminated in preparing the
consolidated financial statements.
Property, Plant And Equipment
I. Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items.
II. Leased assets
Assets funded through finance leases are capitalised as property, plant and
equipment. The resulting lease obligations are included in liabilities net of
finance charges. Interest costs on finance leases are charged to the
Consolidated Income Statement.
All other leases are accounted for as operating leases and the rental charges
are charged to the Consolidated Income Statement on a straight line basis over
the life of the lease.
Legal fees and other costs associated with the acquisition of a leasehold
interest are capitalised as Other Receivables within non-current assets. These
costs are amortised over the life of the lease.
Lease incentives are credited to the Consolidated Income Statement on a straight
line basis over the life of the lease.
III. Depreciation
Depreciation is charged to the Consolidated Income Statement over the estimated
useful lives of each part of an item of property, plant and equipment. The
estimated useful lives are as follows:
• Plant and equipment 3 - 6 years on a straight line basis
• Fixtures and fittings 10 years, or length of lease if shorter, on a
straight line basis
Intangible Assets
All business combinations are accounted for by applying the purchase method.
Goodwill represents the difference between the cost of the acquisition and the
fair value of the net identifiable assets acquired, or the deemed cost on
transition to IFRS.
Goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses.
Inventories
Inventories are stated at the lower of cost and net realisable value. Provisions
are made for obsolescence, mark downs and shrinkage.
Trade Receivables
Trade receivables are recognised initially at their nominal value. A provision
for the impairment of trade receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to
the original terms. The movement in the provision is recognised in the
Consolidated Income Statement.
Cash And Cash Equivalents / Net Debt
Cash and cash equivalents comprise cash balances and call deposits with an
original maturity of three months or less. Bank overdrafts that are repayable on
demand are included as a component of cash and cash equivalents for the purpose
of the Consolidated Statement of Cash Flows.
Net debt consists of cash and cash equivalents together with other net
borrowings from loan notes and finance leases.
Trade And Other Payables
Trade and other payables are stated at cost.
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.
Revenue
Revenue represents the amounts receivable by the Group for goods supplied to
customers net of discounts, returns and VAT.
Exceptional Items
Items that are both material in size, unusual and infrequent in nature are
presented as exceptional items in the Consolidated Income Statement. The
directors are of the opinion that the separate recording of exceptional items
provides helpful information about the Group's underlying business performance.
Financial Income
Financial Income comprises interest receivable on funds invested. Financial
Income is recognised in the Consolidated Income Statement.
Financial Expenses
Financial expenses comprise interest payable on borrowings. Financial Expenses
are recognised in the Consolidated Income Statement.
Income Tax
I. Current income tax
Current income tax expense is recognised based on management's best estimates of
the average income tax rate expected for the full financial year.
II. Deferred taxation
Provision is made for deferred taxation using the liability method on temporary
differences between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. The deferred income tax is
determined using tax rates that have been enacted by the balance sheet date and
are expected to apply when the deferred income tax asset or liability
crystallises.
Impairment
The carrying amounts of the Group's assets are reviewed annually to determine
whether there is any indication of impairment. If any such impairment exists
then the asset's recoverable amount is estimated. Impairment losses are
recognised in the Consolidated Income Statement.
The goodwill was tested for impairment at 29 January 2005.
An impairment loss is reversed if there has been a change in the estimates used
to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
Employee Benefits
The Group only operates defined contribution pension schemes, the assets of
which are held separately from those of the Group in independently administered
funds. Obligations for contributions to the defined contribution schemes are
recognised as an expense in the Consolidated Income Statement as incurred.
This information is provided by RNS
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