Experian 2007 Annual Report Download - page 72

Introduction | Business review | Governance | Financial statements
2. Basis of preparation and significant accounting policies (continued)
Deferred tax
Deferred tax is provided in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
Group financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax assets and
liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax
rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of
the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Provisions
Provisions are recognised when:
•The Group has a present legal or constructive obligation as a result of past events;
•It is more likely than not that an outflow of resources will be required to settle the obligation; and
•The amount has been reliably estimated.
Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow
with respect to any one item included in the same class of obligation may be small.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognised as an interest expense.
Wherethe Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset when the reimbursement is certain.
Leases
Finance leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases.
Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum
lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance charges, are included in other payables. The interest element of the finance cost is
charged in the Group income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases arecharged in the Group income statement on a straight line basis over the period of the lease. Incentives
from lessors are recognised as a systematic reduction of the charge over the period of the lease.
Employee benefits
Defined benefit pension arrangements
The pension liability recognised in the Group balance sheet, in respect of such arrangements, is the present value of the defined benefit obligation
at the balance sheet date less the fair value of plan assets, together with adjustments for past service costs. The defined benefit obligation is
calculated annually by independent qualified actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using market yields available at
the assessment date on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms
to maturity consistent with the estimated average term of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised immediately in the Group
statement of recognised income and expense.
Past service costs are recognised immediately in the Group income statement, unless the changes to the pension plan areconditional on the
employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight line
basis over the vesting period.
The pension cost recognised in the Group income statement comprises the cost of benefits accrued plus interest on the defined benefit obligation
less expected return on the plan assets over the year.
Defined contribution pension arrangements
The assets of defined contribution schemes are held separately from those of the Group in independently administered funds. The pension cost
recognised in the Group income statement represents the contributions paid by the Group to these funds over the year.
Notes to the Group financial statements
for the year ended 31 March 2007
70 |Experian Annual Report2007