Marks and Spencer 1999 Annual Report Download - page 34

ANNUAL REPORT AND FIN ANCIAL STATEMENTS 1999
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N OTES TO THE FIN AN CIAL STATEMEN TS
11.Tangible fixed assets (CO N TIN UED )
B CHANGE OF ACCOUNTING POLICY
The Group has adopted FRS15,‘Tangible Fixed Assets’ and has followed the transitional provisions to retain the book value of land and buildings, certain
of which were revalued in 1988 (see 11D below).
Adoption has resulted in two key changes:
(i) The FRS encourages the separation of assets into components where they have very different useful economic lives and states that these changes
should be dealt with as prior year adjustments.The cost of fitting out properties, which has up to now been included within the cost of buildings, has
been separately identified and disclosed together with fixtures, fittings and equipment. Fit out has previously been accounted for on a replacement basis
but under this policy will be depreciated evenly over periods ranging from 10-25 years depending on its nature.As a result, £53.2m of fit out which
had been expensed in previous years has now been capitalised as at 31 March 1998. In addition, £264.1m of accumulated depreciation has also been
recognised as at that date, being the depreciation on fit out which would have been recognised had the new policy been in place in previous years.
As a consequence of the prior year adjustment, the net book value of Group tangible fixed assets as at 31 March 1998 has been reduced by £210.9m
with a corresponding reduction in the profit and loss account reserve.The effect of this on reported profits has been an additional Group depreciation
charge in the current year of £• m (last year £28.6m) and a reduction in the charge for repairs and renewals of £• m (last year £18.3m).
(ii) In previous years the Group has stated that the useful economic lives of its freehold and long leasehold properties are so long and the residual values
are so high that any depreciation charge was immaterial.The Group agrees with the theory of ‘consumption’ and has charged depreciation against the
book value of its properties this year amounting to £• m.There is no corresponding prior year adjustment since the previous policy was to depreciate
properties at 1% or nil.
The Group has adopted FRS11,‘Impairment of Fixed Assets and Goodwill’. Included within the Group depreciation charge for fit out, fixtures, fittings and
equipment for the year of £• m is an impairment loss of £• m relating to European properties. Further details are given in note 3.
C INVESTMENT PROPERTIES
Freehold land and buildings include investment properties as follows:
THE GRO UP THE CO MPAN Y
£m £m
Cost or valuation
At 1 April 1999 284.8 284.8
Additions at cost
Revaluation surplus
At 31 March 2000
D TANGIBLE FIXED ASSETS AT COST
Gerald Eve, Chartered Surveyors, valued the Company’s freehold and leasehold properties in the United Kingdom as at 31 March 1982.This valuation was
on the basis of open market value for existing use.At 31 March 1988, the directors, after consultation with Gerald Eve, revalued those of the Company’s
properties which had been valued as at 31 March 1982 (excluding subsequent additions and adjusted for disposals).The directors’ valuation was
incorporated into the financial statements at 31 March 1988.
The Company’s freehold interests in five investment properties have been valued at open market value as at 31 March 1999 by external valuers,
Gerald Eve, Chartered Surveyors.The valuation attributed to the Company’s investment interest in the Gyle Shopping Centre is subject to the lease to the
Company of the Marks & Spencer store at a nominal fixed rent until 2117 and the occupational leases of the other parts of the centre.The valuations of
three of the remaining investment properties are based on the apportionment of larger valuations to exclude the owner-occupied Marks & Spencer store.
If the Company’s land and buildings had not been valued as set out above their net book value would have been:
1999
2000 As restated
£m £m
At valuation at 31 March 1975(1) 333.6
At cost 1,567.5
At 31 March 1,901.1
Accumulated depreciation 109.3
Net book value at 31 March 1,791.8
(1) The Company also valued its land and buildings in 1955 and in 1964. In the opinion of the directors unreasonable expense would be incurred in
obtaining the original costs of the assets valued in those years and in 1975.