National Grid 2008 Annual Report Download - page 638

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 1576
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: 111
Description: EXHIBIT 15.1
0/1307.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/307/1*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 1576
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: 111 Description: EXHIBIT 15.1
0/1307.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/307/1*
Table of Contents
Annual Report and Accounts 2007/08
119
Chan
g
es in the fair value of derivatives that do not qualify for
hedge accounting are recognised in the income statement
as they arise, within finance costs.
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, exercised, or no
longer qualifies for hedge accounting. At that time, any
cumulative gains or losses relating to cash flow hedges
recognised in equity are initially retained in equity and
subsequently recognised in the income statement in the
same periods in which the previously hedged item affects
net profit or loss. Amounts deferred in equity with respect to
net investment hedges are subsequently recognised in the
income statement in the event of the disposal of the
overseas operations concerned. For fair value hedges, the
cumulative adjustment recorded to the carrying value of the
hedged item at the date hedge accounting is discontinued is
amortised to the income statement using the effective
interest rate method.
If a hedged forecast transaction is no longer expected to
occur, the net cumulative gain or loss recognised in equity is
transferred to the income statement immediately.
S. Share-based payments
The Company issues equity-settled, share-based payments
to certain employees of the Company’s subsidiary
undertakings.
Equity-settled, share-based payments are measured at fair
value at the date of grant. The fair value determined at the
grant date of the equity-settled, share-based payments is
expensed on a straight-line basis over the vesting period,
based on an estimate of the number of shares that will
eventually vest.
T. Business performance and exceptional
items, remeasurements and stranded cost
recoveries
Our financial performance is analysed into two components:
business performance, which excludes exceptional items,
remeasurements, stranded cost recoveries and amortisation
of acquisition-related intangibles; and exceptional items,
remeasurements, stranded cost recoveries and amortisation
of acquisition-related intangibles. Business performance is
used by management to monitor financial performance as it
is considered that it improves the comparability of our
reported financial performance from year to year. Business
performance subtotals, which exclude exceptional items,
remeasurements, stranded cost recoveries and amortisation
of acquisition-related intangibles are presented on the face
of the income statement or in the notes to the financial
statements.
Exceptional items, remeasurements, stranded cost
recoveries and amortisation of acquisition-related intan
g
ibles
are items of income and expenditure that, in the judgement
of mana
g
ement, should be disclosed separately on the basis
that they are material, either by their nature or their size, to
an understanding of our financial performance and
si
g
nificantly distort the comparability of financial performance
between periods.
Items of income or expense that are considered by
management for designation as exceptional items include
such items as significant restructurings, write-downs or
impairments of non-current assets, significant changes in
environmental or decommissioning provisions, integration of
acquired businesses, restructurin
g
costs and
g
ains or losses
on disposals of businesses or investments.
Costs arising from restructuring programmes primarily relate
to redundancy costs. Redundancy costs are charged to the
income statement in the year in which an irrevocable
commitment is made to incur the costs and the main
features of the restructuring plan have been announced to
affected employees.
Remeasurements comprise gains or losses recorded in the
income statement arising from changes in the fair value of
commodity contracts and of derivative financial instruments
to the extent that hedge accounting is not achieved or is not
effective.
Stranded cost recoveries represent the recovery of historical
generation-related costs in the US related to generation
assets that are no longer owned. Such costs are being
recovered from customers as permitted by regulatory
agreements.
Acquisition-related intangibles comprise intangible assets,
principally customer relationships, that are only recognised
as a consequence of accounting required for a business
combination. The amortisation of acquisition-related
intangibles distorts the comparison of financial performance
of acquired businesses with non-acquired businesses.
Prior year business performance subtotals have been
adjusted to reflect the exclusion of stranded cost recoveries,
consistent with the current year classification.
U. Other operating income
Other operating income primarily relates to profits or losses
arising on the disposal of properties by our property
management business, which is considered to be part of
normal recurring operating activities.
V. Emission allowances
Emission allowances, principally relating to the emissions of
carbon dioxide in the UK and sulphur and nitrous oxides in
the US, are recorded as an intangible asset within current
assets and are initially recorded at cost and subsequently at
the lower of cost and net realisable value. For allocations of
emission allowances
g
ranted by the relevant authorities, cost
is deemed to be equal to the fair value at the date of
allocation. Receipts of such grants are treated as deferred
income and are reco
g
nised in the income statement over the
period to which they relate. A provision is recorded in
respect of the obligation to deliver emission allowances and
charges are recognised in the income statement in the
period in which carbon dioxide emissions are made.
Income from emission allowances which are sold is reported
as part of other operating income.