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32 National Grid Gas plc Annual Report and Accounts 2010/11
V. Areas of judgement and key sources of
estimation uncertainty
The preparation of financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent
assets and liabilities and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ
from these estimates. Information about such judgements and
estimation is contained in the accounting policies or the notes to
the financial statements, and the key areas are summarised
below.
Areas of judgement that have the most significant effect on the
amounts recognised in the financial statements:
The categorisation of certain items as exceptional items
and remeasurements and the definition of adjusted
earnings – note 4.
The exemptions adopted on transition to IFRS on 1 April
2004.
The recognition of defined benefit pension costs as if the
National Grid UK Pension Scheme was a defined
contribution scheme – accounting policy L.
Hedge accounting – accounting policy O.
Key sources of estimation uncertainty that have a significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year:
Review of residual lives, carrying values and impairment
charges for intangible assets and property, plant and
equipment – accounting policies D, E and F.
Valuation of financial instruments and derivatives – notes
12, 15 and 27.
Revenue recognition and assessment of unbilled revenue
– accounting policy J.
Environmental provisions – note 21.