Marks and Spencer 2011 Annual Report Download - page 80

Marks and Spencer Group plc Annual report and financial statements 2011
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Notes to the financial statements
1 Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted
by the European Union, International Financial Reporting
Interpretations Committee (IFRIC) interpretations and with those
parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
In adopting the going concern basis for preparing the financial
statements, the directors have considered the business activities
as set out on pages 1 to 37 as well as the Group’s principal risks
and uncertainties as set out on pages 45 to 47. Based on the
d projections, the Board is
satisfied that the Group will be able to operate within the level of
its facilities for the foreseeable future. For this reason the Group
continues to adopt the going concern basis in preparing its
financial statements.
The following IFRSs, IFRIC interpretations and amendments have
been adopted in the financial statements for the first time in this
financial period:
–IAS 32 – ‘Financial Instruments: Presentation – Classification of
r the year ended 2 April 2011.
The amendment addresses the accounting for rights issues
denominated in a currency other than the functional currency
of the issuer. This is not currently applicable to the Group,
as it has not carried out any rights issues.
The following IFRSs, IFRIC interpretations and amendments have
been issued but are not yet effective and have not been early
adopted by the Group:
–IAS 24 (Revised 2009) – ‘Related
in July 2010. It is effective for annual periods beginning on or
after 1 January 2011. This is not currently applicable to the
Group, as it does not transact with the government or other
government related entities. The new definition of a related
party is not expected to impact the Group’s disclosures.
–IFRIC 19 – ‘Extinguishing Financial Liabilities with Equity
2010. It is effective for annual
periods beginning on or after 1 July 2010. It clarifies the
accounting when an entity renegotiates the terms of a
financial liability with its creditor resulting in the liability being
extinguished through issuing its own equity instruments to the
creditor. This is not expected to impact the results or net assets
of the Group, as it has not currently extinguished any financial
liabilities in this way.
Marks and Spencer Scottish Limited Partnership has taken
exemption under paragraph 7 of the Partnership (Accounts)
Regulations 2008 from the requirement to prepare and deliver
financial statements in accordance with the Companies Act.
A summary of the Company’s and the Group’s accounting
policies is given below:
Accounting convention
The financial statements are drawn up on the historical cost basis
of accounting, except as disclosed in the accounting policies
set out below.
Basis of consolidation
The Group financial statements incorporate the financial
statements of Marks and Spencer Group plc and all its
subsidiaries made up to the year end date. Where necessary,
adjustments are made to the financial statements of subsidiaries
to bring the accounting policies used in line with those used
by the Group.
A. Subsidiaries Subsidiary undertakings are all entities over which
the Group has the power to govern the financial and operating
policies generally accompanying a shareholding of more than one
half of the voting rights. Subsidiary undertakings acquired during
the year are recorded using the acquisition method of accounting
and their results included from the date of acquisition.
The separable net assets, both property, plant and equipment
and intangible, of the newly acquired subsidiary undertakings are
incorporated into the financial statements on the basis of the fair
value as at the effective date of control.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated.
B. Joint ventures Joint ventures are entities over which the Group
has joint control, with a third party, to govern the financial and
operating activities of that entity. The equity method is used to
account for the Group’s investments in joint ventures. Under the
equity method investments are initially recognised at cost and the
Group’s share of post-acquisition profits or losses is recognised
in the consolidated income statement within operating profit.
Losses in excess of the consolidated interest in joint ventures
are not recognised, except where the Group has made a
commitment to make good those losses.
Revenue
Revenue comprises sales of goods to customers outside the
Group less an appropriate deduction for actual and expected
returns, discounts and loyalty scheme vouchers, and is stated net
of value added tax and other sales taxes. Revenue is recognised
when the significant risks and rewards of ownership have been
transferred to the buyer. Revenue from the sale of furniture and
Dividends
Final dividends are recorded in the financial statements in
the period in which they are approved by the Company’s
shareholders. Interim dividends are recorded in the period in
which they are approved and paid.
Pensions
Funded pension plans are in place for the Group’s UK employees
and some employees overseas. The assets of these pension
plans include a property partnership interest and various equities
and bonds. The equities and bonds are managed by third-party
investment managers and are held separately in trust.
Regular valuations are prepared by independent professionally
qualified actuaries in respect of the defined benefit schemes using
the projected unit credit method. These determine the level of
contribution required to fund the benefits set out in the rules of
the plans and allow for the periodic increase of pensions in
payment. The service cost of providing retirement benefits to
employees during the year, together with the cost of any benefits
relating to past service, is charged to operating profit in the year.
A credit representing the expected return on the assets of the
retirement benefit schemes during the year is included within
finance income. This is based on the market value of the assets
of the schemes at the start of the financial year.
A charge is also made within finance income representing the
expected increase in the liabilities of the retirement benefit
schemes during the year. This arises from the liabilities of the
schemes being one year closer to payment.
The difference between the market value of the assets and the
present value of accrued pension liabilities is shown as an asset
or liability in the statement of financial position. Assets are only
recognised if they are recoverable.
Rights Issues’ is effective fo
Party Disclosures’ was issued
Instruments’ was issued in July
online sales are recorded on delivery of the goods to the customer.
Group’s cash flow forecasts an