National Grid 2008 Annual Report Download - page 599

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 46598
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: 77
Description: EXHIBIT 15.1
0/8273.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/273/8*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 46598
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: 77 Description: EXHIBIT 15.1
0/8273.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/273/8*
Table of Contents
Annual Report and Accounts 2007/08
85
In order to illustrate the impact that changes in assumptions
could have on our results and financial position, the followin
g
sensitivities are presented:
Accounting developments
Forthcoming changes in IFRS
The following accounting standards and interpretations have
not yet been adopted, but are expected to be adopted in
future periods.
Asset useful
lives
An increase in the useful economic lives of assets
of one year on average would reduce our annual
depreciation charge on property, plant and
equipment by £37 million (pre-tax) and our annual
amortisation charge on intangible assets by
£9 million
(p
re-tax
)
.
Revenue
accruals
A 10% change in our estimate of unbilled revenues
at 31 March 2008 would result in an increase or
decrease in our recorded net assets and profit for
the
y
ear b
y
a
pp
roximatel
y
£48 million net of tax.
Assets
carried at
fair value
A 10% change in assets and liabilities carried at
fair value would result in an increase or decrease
in the carrying value of derivative financial
instruments and commodity contract liabilities of
£109 million and £1 million res
p
ectivel
y
.
Hedge
accounting
If the gains and losses arising on derivative
financial instruments during the year ended 31
March 2008 had not achieved hedge accounting
then the profit for the year would have been
£21 million higher than that reported net of tax and
net assets would have been £21 million lower.
Pensions and
other post-
retirement
obli
g
ations
Our pension and post-retirement obligations are
sensitive to the actuarial assumptions used. A
0.1% increase in the discount rate, a 0.5% increase
in the rate of salary increases or an increase of
one year in life expectancy would result in a
change in the net obligation of £251 million,
£131 million and £588 million and a change in the
annual pension cost of £4 million, £5 million and
£4 million res
p
ectivel
y
.
Provisions
A 10% change in the estimates of future cash
flows estimated in respect of provisions for
liabilities would result in an increase or decrease
in net assets of a
pp
roximatel
y
£133 million.
Segment
reporting
IFRS 8 changes the reporting requirements for
segmental reporting and will apply with effect from
1 April 2009. If IFRS 8 had been adopted in
2007/08, there would have been no change in
business segments reported. However, we would
not have had to re
p
ort on
g
eo
g
ra
p
hical se
g
ments.
Borrowing
costs
An amendment to IAS 23 on borrowing costs will
require interest to be capitalised into the cost of
assets under construction. We already follow this
p
olic
y
and so this will have no im
p
act.
Service
concessions
IFRIC 12 on service concessions, to be adopted
from 1 April 2008, requires assets operated on
behalf of a public authority as a concession, where
the asset reverts back to the public authority at the
conclusion of the arrangement, to be recognised
as a financial or intangible asset depending on
whether income is recovered from the public
authority or from users.
We do not operate any significant concessions of
this type and so this is expected to have no
im
p
act.
Customer
loyalty
p
ro
g
rammes
IFRIC 13, effective from 1 April 2008, requires the
sale of goods or services and associated loyalty
programmes to be accounted for as multi-element
transactions. The separate elements will have to
be fair valued and consideration allocated
accordingly, which would defer recognition of an
element of revenue.
We do not have any material loyalty programmes
of this nature and so this will have no im
p
act.
Pension
assets and
minimum
fundin
g
IFRIC 14 on when net pension assets can be
recognised in the balance sheet and on how to
account for minimum funding requirements will
apply with effect from 1 April 2008. In certain
circumstances the recognition of an accounting
surplus in a pension plan as an asset on the
balance sheet may be restricted, or provision may
be required for minimum funding requirements in
excess of pension obligations recognised in the
balance sheet.
This is not expected to have a significant effect on
National Grid as the accounting surpluses that
could arise in the majority of our current pension
p
lan arran
g
ements would not be restricted.
Presentation
of financial
statements
Amendment to IAS 1, effective 1 April 2009,
changes the presentation of financial information
but does not affect the amount of reported
earnings or assets and liabilities. The principal
changes are: the statement of recognised income
and expense must immediately follow the income
statement and must include separate tax
disclosure on each gain or loss recognised
outside the income statement; the statement of
changes in equity will be presented as a primary
statement; and there will be an option to rename
the primary statements.
This will have a significant impact on the
presentation of the 2009/10 financial statements as
described above. However, there will be no impact
on our results, assets or liabilities.
Business
combinations
IFRS 3R, expected to be adopted 1 April 2010,
makes a number of changes to business
combination accounting including: consideration
payments fair valued at acquisition date;
subsequent consideration payments at fair value
through the income statement; changes to
calculation of goodwill; and all transaction costs
expensed.
IFRS 3R will be implemented prospectively and so
will affect future acquisitions, possibly materially
compared with how they would be accounted for
under current standards. However, this change will
have no impact on our current results, assets or
liabilities.
Non-controlling
interests
IAS 27R, expected to be adopted in 2010, requires
transactions with non-controlling (minority)
interests to be recorder in equity:
We do not have any material minority interests and
so this chan
g
e will have no material im
p
act.
Share-based
payments
This amendment to IFRS 2, expected to be adopted
1 April 2009, clarifies the definition of vesting
conditions and changes the accounting for
cancellations. For cancellation, rather than
reversing the previous expense any remaining
expense will be accelerated.
This will affect the way we account for our Save as
You Earn share schemes, however, due to the low
levels of cancellations by employees in the past,
we do not anticipate that this is likely to have a
material im
p
act on future results.
Financial
instrument
p
resentation
Amendments to IAS 32 and IAS 1 require certain
puttable financial instruments that impose an
obligation to deliver a pro rata share of net assets
on liquidation to be classified as liabilities.
We currently have no such instruments and so this
will have no im
p
act.