Marks and Spencer 2000 Annual Report Download - page 25

The financial statements are prepared in accordance with
applicable accounting standards in the United Kingdom.
A summary of the more important Group accounting
policies, applied consistently, is given below.
Basis of accounting
The financial statements are drawn up on the historical cost
basis of accounting, modified to include the valuation of
certain United Kingdom properties at 31 March 1988 and
the valuation of investment properties. Compliance with
SSAP19, ‘Accounting for Investment Properties’ requires a
departure from the requirements of the Companies Act 1985
relating to the depreciation of investment properties as
explained below.
Basis of consolidation
The Group financial statements incorporate the financial
statements of Marks and Spencer p.l.c. and all its subsidiaries
for the year ended 31 March 2000.
Current asset investments
Current asset investments are stated at market value.
All profits and losses from such investments are included
in net interest income or in Financial Services turnover
as appropriate.
Deferred taxation
Deferred taxation is accounted for at anticipated tax rates
on differences arising from the inclusion of items of income
and expenditure in taxation computations in periods
different from those in which they are included in the
financial statements. A deferred tax asset or provision is
established to the extent that it is likely that an asset or
liability will crystallise in the foreseeable future.
Fixed assets
a Capitalised interest
Interest is not capitalised.
b Depreciation
Depreciation is provided to write off the cost or valuation
of tangible fixed assets, less residual value, by equal annual
instalments as follows:
Land: not depreciated.
Freehold and leasehold buildings over 50 years:
depreciated to their estimated residual value over their
estimated remaining economic lives (see also c below).
Leasehold land and buildings under 50 years: over the
remaining period of the lease.
Fit out: 10-25 years according to the estimated life of
the asset.
Fixtures, fittings and equipment: 3-15 years according
to the estimated life of the asset.
Depreciation is charged on all additions to or disposals of
depreciating assets in the year of purchase or disposal.
Any impairment in value is charged to the revaluation
reserve or the profit and loss account as appropriate.
c Land and buildings
The Company’s freehold and leasehold properties in the
United Kingdom were valued on the basis of open market
value for existing use in 1982. At 31 March 1988, those
same properties (excluding subsequent additions and
adjusted for disposals) were revalued. On adoption of
FRS15, the Group followed the transitional provisions to
retain the book value of land and buildings which were
revalued in 1988, but not to adopt a policy of revaluation
in the future.
These values are retained subject to the requirement to
test assets for impairment in accordance with FRS11.
d Investment properties
Investment properties are revalued annually and included in
the balance sheet at their open market value. In accordance
with SSAP19, no depreciation is provided in respect of
investment properties. This represents a departure from
the Companies Act 1985 requirements concerning the
depreciation of fixed assets. These properties are held for
investment and the directors consider that the adoption of
this policy is necessary to give a true and fair view.
Long-term assurance business
The value of the long-term assurance business consists of
the present value of surpluses expected to emerge in the
future from business currently in force, and this value is
included in prepayments and accrued income. In determining
their value, these surpluses are discounted at a risk-adjusted,
post-tax rate. Changes in the value are included in the profit
and loss account grossed up at the standard rate of
corporation tax applicable to insurance companies.
Operating leases
Costs in respect of operating leases are charged on a straight
line basis over the lease term.
23 Annual Report and Financial Statements 2000
Accounting policies