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Financial Statements
receivables), but also incorporate other types of contractual monetary asset.
They are initially recognised at fair value plus transaction costs that are directly
attributable to the acquisition or issue and subsequently carried at amortised
cost using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such
as significant financial difficulties on the part of the counterparty or default
or significant delay in payment) that the Group will be unable to collect all of
the amounts due under the terms receivable, the amount of such a provision
being the difference between the net carrying amount and the present value
of the future expected cash flows associated with the impaired receivable.
For trade receivables, which are reported net, such provisions are recorded
in a separate allowance account with the loss being recognised within
operating expenses in the income statement. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
Financial Liabilities
Unless otherwise indicated, the carrying amounts of the Group’s financial
liabilities are a reasonable approximation of their fair values.
Loans, borrowings and the Group’s income shares are initially recognised
at fair value net of any transaction costs directly attributable to the issue
of the instrument. Such interest bearing liabilities are subsequently
measured at amortised cost using the effective interest rate method, which
ensures that any interest expense over the period to repayment is at a
constant rate on the balance of the liability carried in the Consolidated
Statement of Financial Position.
Trade payables and other short-term monetary liabilities are initially
recognised at fair value and subsequently carried at amortised cost using the
effective interest method.
Share Capital
Financial instruments issued by the Group are treated as equity only to the
extent that they do not meet the definition of a financial liability. The Group’s
income shares include a contractual obligation on the Company to deliver
cash in the form of the annual preference dividend and, in the absence of
any other terms that would indicate an equity element, have been classified
wholly as a financial liability (see ‘Income Shares’ below). The Group’s
ordinary shares are classified as equity instruments.
Own shares held by EBT
Stobart Group shares held by the Group are designated as own shares held,
classified in shareholders’ equity and recognised at cost. Consideration
received for the sale of such shares is also recognised in equity, with any
difference between the proceeds from sale and original cost taken to
retained earnings.
Income Shares
Income Shares, which exhibit characteristics of liabilities, are recognised as
liabilities in the Consolidated Statement of Financial Position in accordance
with IAS32. Income Shares are initially recognised at fair value less issue costs.
After initial recognition, Income Shares are subsequently measured at
amortised cost using the effective interest method. The corresponding
distributions on these shares are charged as interest expense in the
Consolidated Income Statement over the term of these shares. These income
shares were all redeemed or converted in the year.
Retirement Benefits: Defined Contribution Schemes
Contributions to defined contribution pension schemes are charged to the
consolidated income statement in the year to which they relate.
Share-Based Payments
Where equity-settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated income statement
over the vesting period. Non-market vesting conditions are taken into account
by adjusting the number of equity instruments expected to vest at each statement
of financial position date so that, ultimately, the cumulative amount recognised
over the vesting period is based on the number of options that eventually vest.
Market vesting conditions are factored into the fair value of the options granted.
As long as all other vesting conditions are satisfied, a charge is made irrespective
of whether the market vesting conditions are satisfied. The cumulative expense
is not adjusted for failure to achieve a market vesting condition.
At each statement of financial position date before vesting, the cumulative
expense is calculated, representing the extent to which the vesting period has
expired and management’s best estimate of the achievement or otherwise
of non-market conditions and of the number of equity instruments that will
ultimately vest or, in the case of an instrument subject to a market condition,
be treated as vesting as described above. The movement in cumulative
expense since the previous statement of financial position date is recognised
in the income statement, with a corresponding entry in equity.
The Group has a share based Long Term Incentive Plan accounted for as set
out above.
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 are recorded in the statement of financial position as tangible
assets, initially at fair value or, if lower, at the present value of the minimum
lease payments and depreciated over their estimated useful lives as detailed
in the depreciation policy below. The interest element of leasing payments
represents a constant proportion of the capital balance outstanding and is
charged to the income statement over the period of the lease.
Where substantially all of the risks and rewards incidental to ownership are
not transferred to the Group (an "operating lease"), the total rentals payable
under the lease are charged to the consolidated income statement on a
straight line basis over the lease term. The aggregate benefit of lease
incentives is recognised as a reduction of the rental expense over the lease
term on a straight line basis.
The land and buildings elements of property leases are considered separately
for the purposes of lease classification.
Separately Disclosed Items
The Group presents separately on the face of the income statement material
items of income and expense, which because of their nature, infrequency or
occurrence, or the events giving rise to them, merit separate presentation to
allow shareholders to better understand the financial performance of the year.
Externally Acquired Intangible Assets (excluding Goodwill)
Externally acquired intangible assets are initially recognised at cost and
subsequently amortised on a straight line basis over their useful lives. The
amortisation expense is included within the operating expenses line in the
consolidated income statement.
Intangible assets are recognised on business combinations if they are
separable from the acquired entity or give rise to other contractual/legal
rights. The amounts ascribed to such intangibles are arrived at by using
appropriate valuation techniques (see section related to significant
accounting estimates, judgments and assumptions below).
The significant intangibles recognised by the Group and their useful
economic lives are as follows:
Intangible asset Useful life
Brands Indefinite
Where there is no foreseeable limit to the period over which a brand is
expected to generate cash flows for the Group it will be considered to have
an indefinite life.
Current Taxation
Current tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the statement of
financial position date.
Deferred Taxation
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the statement of financial position differs to its tax
base, except for differences arising on:
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The initial recognition of goodwill;
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The initial recognition of an asset or liability in a transaction which is not
a business combination and at the time of the transaction affects neither
accounting or taxable profit; and