Marks and Spencer 2016 Annual Report Download - page 92

90
MARKS AND SPENCER GROUP PLC
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
General information
The current fi nancial statements are prepared for the 53 week
period ended 2 April 2016, whereas the prior fi nancial period was
the 52 weeks ended 28 March 2015.
Basis of preparation
The fi nancial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRS IC) interpretations, as adopted by
the European Union and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS.
In adopting the going concern basis for preparing the fi nancial
statements, the directors have considered the business activities as
set out on pages 1 to 29 including the Group’s principal risks and
uncertainties as set out on pages 27 to 29. Based on the Group’s
cash fl ow forecasts and projections, the Board is satisfi ed that the
Group will be able to operate within the level of its bank facilities for
the foreseeable future. For this reason the Group continues to adopt
the going concern basis in preparing its fi nancial statements.
The Marks and Spencer Scottish Limited Partnership has taken an
exemption under paragraph 7 of the Partnership (Accounts)
Regulations 2008 for the requirement to prepare and deliver
fi nancial statements in accordance with the Companies Act.
New accounting standards adopted by the Group
There have been no signifi cant changes to accounting under IFRS
which have a ected the Group’s results. For the current fi nancial
year, the only changes to the IFRS, IFRS IC interpretations and
amendments that are e ective for the fi rst time in this fi nancial
year are the Annual Improvements to IFRSs: 2011-2013 cycle.
These have not had a material impact on the Group.
New accounting standards in issue but not yet e ective
The following IFRS have been issued but are not yet e ective:
> IFRS 16 ‘Leases’ was issued on 13 January 2016 and is e ective for
periods beginning on or after 1 January 2019. Early adoption is
permitted if IFRS 15 ‘Revenue from Contracts with Customers’
has also been applied. The standard is yet to be endorsed by
the EU. The standard represents a signifi cant change in the
accounting and reporting of leases for lessees as it provides a
single lessee accounting model, and as such, requires lessees
to recognise assets and liabilities for all leases unless the
underlying asset has a low value or the lease term is 12 months
or less. Accounting requirements for lessors are substantially
unchanged from IAS 17. The impact of the standard on the Group
is currently being assessed and it is not yet practicable to quantify
the e ect of IFRS 16 on these consolidated fi nancial statements;
> IFRS 9 ‘Financial Instruments’ replaces all phases of the
fi nancial instruments project and IAS 39 ‘Financial Instruments:
Recognition and Measurement’. The standard is e ective from
1 January 2018 and introduces: new requirements for the
classifi cation and measurement of fi nancial assets and fi nancial
liabilities; a new model based on expected credit losses for
recognising provisions; and provides for simplifi ed hedge
accounting by aligning hedge accounting more closely with an
entities risk management methodology. It is not yet practicable
to quantify the e ect of IFRS 9 on the Group. Work on the impact
of the new recognition, impairment and general hedge
accounting requirements is in its early stages and we expect
new processes and changes to the existing IT systems may be
required to aid the Group’s implementation of the standard; and
> IFRS 15 ‘Revenue from Contracts with Customers’ is e ective for
periods beginning on or after 1 January 2018 with early adoption
permitted. It has not yet been endorsed by the EU. The standard
establishes a principles based approach for revenue recognition
and is based on the concept of recognising revenue for
obligations only when they are satisfi ed and the control of
goods or ser vices is transferred. It applies to all contracts
with customers, except those in the scope of other standards.
It replaces the separate models for goods, services and
construction contracts under the current accounting standards.
Based on the Group’s preliminary assessment from work
performed to date, the Group believes that the adoption of IFRS
15 will not have a material impact on its consolidated results but
work is still ongoing to fully quantify its impact.
A summary of the Company’s and the Group’s accounting policies is
given below:
Accounting convention
The fi nancial statements are drawn up on the historical cost
basis of accounting, as modifi ed by fi nancial assets and fi nancial
liabilities (including derivative instruments) at fair value through
profi t or loss.
Basis of consolidation
The Group fi nancial statements incorporate the fi nancial
statements of Marks and Spencer Group plc and all its subsidiaries
made up to the period end date. Where necessary, adjustments are
made to the fi nancial statements of subsidiaries to bring the
accounting policies used in line with those used by the Group.
Subsidiaries
Subsidiary undertakings are all entities (including special purpose
entities) over which the Group has the power to govern the fi nancial
and operating policies. This power is generally accompanied by the
Group having 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 are included from the date of acquisition.
The separable net assets, including property, plant and equipment
and intangible assets, of the newly acquired subsidiary undertakings
are incorporated into the consolidated fi nancial statements on the
basis of the fair value as at the e ective date of control .
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated.
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 goods
are delivered to our franchise partners or customers and the
signifi cant risks and rewards of ownership have been transferred to
the buyer.
Supplier income
In line with industry practice, the Group enters into agreements
with suppliers to share the costs and benefi ts of promotional
activity and volume growth. The Group receives income from its
suppliers based on specifi c agreements in place. This supplier
income received is recognised as a deduction from cost of sales
based on the entitlement that has been earned up to the balance
sheet date for each relevant supplier agreement. Marketing
contributions, equipment hire and other non-judgemental, fi xed
rate supplier charges are not included in the Group’s defi nition of
supplier income.