National Grid 2008 Annual Report Download - page 597

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 43657
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 75
Description: EXHIBIT 15.1
0/5271.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/271/5*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 43657
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 75 Description: EXHIBIT 15.1
0/5271.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/271/5*
Table of Contents
Annual Report and Accounts 2007/08
83
Segmental reporting
In addition to presenting the consolidated financial results
and financial position in the financial statements, we provide
a breakdown of those results and balances into our business
se
g
ments. The presentation of se
g
ment information is based
on management responsibilities that existed at 31 March
2008 and the external and regulatory environments in which
we operate. Our business se
g
ments are Transmission UK,
Transmission US, Gas Distribution UK, Gas Distribution US,
Electricity Distribution & Generation US, with our non-
regulated businesses, other operations and corporate
activities, includin
g
business development, bein
g
a
gg
re
g
ated
within other activities. Our
g
eo
g
raphical se
g
ments reflect our
principal activities in the UK and the US.
Discontinued operations comprise the Ravenswood
generation station in New York City, KeySpan
Communications and KeySpan Engineering Associates, the
sales of which we expect to complete within one year of their
acquisition date, together with our wireless infrastructure
operations in the UK and the US, and the Basslink electricity
interconnector in Australia which were sold on 3 April, 15
August and 31 August 2007 respectively.
Discontinued results in prior years also include the results of
the four gas distribution networks sold on 1 June 2005,
which had previously been part of our Gas Distribution UK
segment.
The business segments presented are different from those
presented in the 2006/07 Annual Report in that the Electricity
Distribution US segment has changed its name to Electricity
Distribution & Generation US, and stranded cost recoveries
have been included within the Electricity Distribution &
Generation US segment in line with our management
structure. However, management performance for that
se
g
ment is based on operatin
g
profit excludin
g
stranded cost
recoveries (in addition to excluding exceptional items and
remeasurements) and so stranded cost recoveries are still
separately identified within the financial statements given
their importance in understanding our financial performance.
The activities of both the Gas Distribution US and Electricity
Distribution & Generation US segments have expanded
since last year as a consequence of the acquisition of
KeySpan. Gas Distribution US now incorporates gas
distribution activities in New York City, Long Island,
Massachusetts and New Hampshire in addition to our
existing upstate New York and Rhode Island gas distribution
networks. Electricity Distribution & Generation US (formerly
Electricity Distribution US) now incorporates the generation
of power on Long Island, together with the operation of the
Long Island electricity transmission and distribution network
on behalf of the Long Island Power Authority.
Critical accounting policies
The application of accounting principles requires us to make
estimates, judgements and assumptions that may affect the
reported amounts of assets, liabilities, revenue and
expenses and the disclosure of contingent assets and
liabilities in the accounts. On an ongoing basis, we evaluate
our estimates using historical experience, consultation with
experts and other methods that we consider reasonable in
the particular circumstances to ensure compliance with
IFRS. Actual results may differ significantly from our
estimates, the effect of which will be reco
g
nised in the period
in which the facts that give rise to the revision become
known.
Certain accounting policies have been identified as critical
accounting policies, as these policies involve particularly
complex or subjective decisions or assessments. The
discussion of critical accounting policies below should be
read in conjunction with the description of our accounting
policies set out in our consolidated financial statements.
Our critical accounting policies and accounting treatments
are considered to be:
Estimated
economic
lives of
property,
plant and
e
q
ui
p
ment
The reported amounts for depreciation of property,
plant and equipment and amortisation of non-
current intangible assets can be materially
affected by the judgements exercised in
determining their estimated economic lives.
Depreciation and amortisation in 2007/08 for
continuing operations amounted to £940 million
and £54 million respectively (2006/07: £830 million
and £41 million, 2005/06: £844 million and
£44 million
)
.
Carrying value
of assets and
potential for
im
p
airments
The carrying value of assets recorded in the
consolidated balance sheet could be materially
reduced if an impairment were to be assessed as
being required. Our total assets at 31 March 2008
were £37,822 million, including £24,333 million of
property, plant and equipment, £3,838 million of
goodwill and £272 million of other intangible
assets (31 March 2007: £28,389 million including
£18,895 million, £1,480 million and £144 million
respectively).
Impairment reviews are carried out either when a
change in circumstance is identified that indicates
an asset might be impaired or, in the case of
goodwill, annually. An impairment review involves
calculating either or both of the fair value or the
value in use of an asset or group of assets and
comparing with the carrying value in the balance
sheet.
These calculations involve the use of assumptions
as to the price that could be obtained for, or the
future cash flows that will be generated by, an
asset or group of assets, together with an
appropriate discount rate to apply to those cash
flows.
Revenue
Revenue includes an assessment of energy and
accruals for transportation services, supplied to
customers between the date of the last meter
reading and the year end. Changes to the estimate
of the energy or transportation services supplied
during this period would have an impact on our
reported results.
Our estimates of unbilled revenues at 31 March
2008 amounted to £511 million in the US and
£243 million in the UK compared with £200 million
and £246 million res
p
ectivel
y
at 31 March 2007.