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other comprehensive income. Profits and losses resulting from transactions
between the Group and the associate are eliminated to the extent of the
interest in the associate.After application of the equity method, the Group
determines whether it is necessary to recognise an additional impairment loss
on the Group’s investment in its associates. The Group determines at each
statement of financial position date whether there is any objective evidence
that the investment in the associate is impaired. If this is the case and there is
a resulting impairment, the amount is recognised in the income statement.
Joint Ventures
Investments in joint ventures, which are jointly controlled entities, are
included in the Financial Statements using the equity method of accounting
unless the investment is classified as held for sale.
Under the equity method, the interest in the joint venture is initially recorded
at cost and adjusted thereafter for the post-acquisition change in the Group’s
share of net assets of the joint venture. Goodwill relating to the joint venture
is included in the carrying amount of the investment and is not amortised.
The income statement reflects the share of the results of operations of the
joint venture. Where there has been a change recognised directly in the
equity of the joint venture, the Group recognises its share of any changes
and discloses this, when applicable, in the statement of changes in equity
and the statement of other comprehensive income. Profits and losses
resulting from transactions between the Group and the joint ventures are
eliminated to the extent of the interest in the joint venture.
After application of the equity method, the Group determines whether it is
necessary to recognise an additional impairment loss on the Group’s
investment in its joint ventures. The Group determines at each statement of
financial position date whether there is any objective evidence that the
investment in the joint venture is impaired. If this is the case and there is a
resulting impairment, the amount is recognised in the income statement.
2. Summary of Significant Accounting Judgments,
Estimates and Assumptions
The Group makes judgments, estimates and assumptions regarding the
future. Judgments, estimates and assumptions are continually evaluated
based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates and
assumptions. The judgments, estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
Judgments, Estimates and Assumptions
(a) Impairment of Goodwill and Indefinite Life Intangible Assets:
The
Group is required to test, on an annual basis, whether goodwill has
suffered any impairment. The recoverable amount is determined based
on value in use calculations. The use of this method requires the
estimation of future cash flows and the choice of a discount rate in order
to calculate the present value of the cash flows. Actual outcomes may
vary. More information including carrying values is included in Note 13.
(b) Useful lives of intangible assets and property, plant and equipment:
Intangible assets and property, plant and equipment are amortised or
depreciated over their useful lives. Useful lives are based on the Directors’
estimates of the period that the assets will generate revenue, which are
periodically reviewed for continued appropriateness. Changes to estimates
can result in significant variations in the carrying value and amounts
charged to the Consolidated Income Statement in specific periods. More
details including carrying values are included in Notes 12 to 14.
(c) Share-Based Payment:
The Group has equity-settled share-based remuneration schemes for
employees and Directors. Employee and Director services received, and
the corresponding increase in equity, are measured by reference to the
fair value of the equity instruments at the date of grant, excluding the
impact of any non-market vesting conditions. The fair value of share
options granted without market based vesting conditions is estimated
by using a Black-Scholes model. The fair value of share options granted
withmarket based vesting conditions is estimated by using aMonte Carlo
model. These valuations are based on certain assumptions. Those
assumptions are described in note 23 and include, among others, the
dividend yield, expected volatility, expected life of the options and number
of options expected to vest. More details are disclosed in Note 23.
(d) Determination of fair values of intangible assets acquired in
business combinations and in investments in associates and joint
ventures:
Determining the existence and the fair value of intangible assets on
business combinations and in investments in associates and joint
ventures involves judgements and estimates.
(e) Taxation:
The taxation balances are calculated making certain tax assumptions
about the tax treatment of incomes and costs, and the availability of
certain losses for Group relief. More details are disclosed in Note 8.
(f) Classification of certain vehicle leases:
Certain vehicle leases contain buyback arrangements at the end of the
initial lease term. The classification of the leases as finance leases or
operating leases in the Financial Statements requires judgement over
the risk and rewards of ownership.
3. Operating Expenses and Other Operating Income
Operating expenses are after charging / (crediting) the following:
Restated
2011
2010
£’000
£’000
Employee benefits expenses
excluding share based payments
167,123 149,092
Depreciation
18,064
15,668
Other purchases and external expenses
278,297 248,521
Operating expenses underlying
463,484 413,281
Profit before interest and tax
Depreciation of property, plant and equipment
18,064
15,668
Profit on disposal of property,
plant and equipment
(1,243)
(8,910)
Release of government grants
(123)
(302)
Operating lease expense
- Plant and machinery
16,556
15,037
- Property
15,668
14,823
Fees charged to the income statement
relating for services by Group auditors
- Statutory audit fee relating to audit
of Stobart Group Limited
75
50
- Statutory audit fee relating to
audit of subsidiaries
135
125
- Other taxation services
27
28
- Services relating to corporate
finance transactions
-
89
- Other services
27
27
264
319