Marks and Spencer 2002 Annual Report Download - page 32

30 Marks and Spencer Group p.l.c.
Notes to the financial statements
2. Accounting policies continued
Current asset investments
Current asset investments are stated at market value. All profits and losses from such investments are included in net
interest income or in Financial Services turnover as appropriate.
Deferred taxation
Deferred taxation is accounted for on an undiscounted basis at expected tax rates on all differences arising from the
inclusion of items of income and expenditure in taxation computations in periods different from those in which they
are included in the financial statements. A deferred tax asset is only recognised when it is more likely than not that
the asset will be recoverable in the foreseeable future out of suitable taxable profits from which the underlying timing
differences can be deducted.
Fixed assets
a Capitalised interest
Interest is not capitalised.
b Depreciation
Depreciation is provided to write off the cost or valuation of tangible fixed assets, less residual value, by equal annual
instalments as follows:
•Land: not depreciated.
•Freehold and leasehold buildings over 50 years: depreciated to their estimated residual value over their
estimated remaining economic lives (see also c below).
•Leasehold land and buildings under 50 years: over the remaining period of the lease.
•Fit out: 10-25 years according to the estimated life of the asset.
•Fixtures, fittings and equipment: 3-15 years according to the estimated life of the asset.
Depreciation is charged on all additions to or disposals of depreciating assets in the year of purchase or disposal.
Any impairment in value is charged to the profit and loss account.
c Land and buildings
The Group’s freehold and leasehold properties in the United Kingdom were valued on the basis of open market
value for existing use in 1982. At 31 March 1988, those same properties (excluding subsequent additions and
adjusted for disposals) were revalued. On adoption of FRS 15, the Group followed the transitional provisions to
retain the book value of land and buildings which were revalued in 1988, but not to adopt a policy of revaluation
in the future.
These values are retained subject to the requirement to test assets for impairment in accordance with FRS 11.
d Investment properties
Investment properties are revalued annually and included in the balance sheet at their open market value.
In accordance with SSAP19, no depreciation is provided in respect of investment properties. This represents a
departure from the Companies Act 1985 requirements concerning the depreciation of fixed assets. These properties
are held for investment and the directors consider that the adoption of this policy is necessary to give a true and
fair view.
Loans and advances to customers
Loans and advances are classified as impaired when an instalment is in excess of 30 days overdue. Specific provisions
are made against all advances identified as impaired at the balance sheet date to the extent that, in the opinion
of the directors, recovery is doubtful. Specific provisions against such exposures are calculated using a bad debt
provision model, which uses the last two years credit history to produce estimates of the likely level of asset
impairment. General provisions relate to latent bad and doubtful debts which are present in any lending portfolio but
have not been specifically identified. General provisions are calculated using the same bad debt provision model and
an evaluation of current economic and political factors.
Loans and advances are written off when there is no realistic prospect of recovery, based on a predetermined set of
criteria. Account balances written off include those where no payment has been received for a period of 12 months
since the account was identified as doubtful, and in other situations such as bankruptcy, insolvency or fraud.
Long-term assurance business
The value of the long-term assurance business consists of the present value of surpluses expected to emerge in the
future from business currently in force, and this value is included in prepayments and accrued income. In determining
their value, these surpluses are discounted at a risk-adjusted, post-tax rate. Changes in the value are included in the
profit and loss account grossed up at the standard rate of corporation tax applicable to insurance companies.
Operating leases
Costs in respect of operating leases are charged on a straight line basis over the lease term.