Marks and Spencer 2009 Annual Report Download - page 85

Notes to the financial statements
81
1 Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union, International Financial Reporting Interpretations
Committee (IFRIC) interpretations and with those parts of the
Companies Act 1985 applicable to companies reporting under IFRS.
In adopting the going concern basis for preparing the financial
statements, the directors have considered the business activities
as set out on pages 1 to 49 as well as the Group’s principal risks and
uncertainties as set out on pages 56 to 57. Based on the Group’s
cash flow forecasts and projections, the Board is satisfied that the
Group will be able to operate within the level of its facilities
for the foreseeable future. For this reason the Group continues
to adopt the going concern basis in preparing its financial
statements.
Following a review of the definition of net debt, a non-GAAP
measure, the directors believe that it is appropriate to include the
fair value of derivatives which are directly related to debt instruments
within debt. The comparative net debt figure has been restated to
reflect this change – see note 29.
The following IFRSs, IFRIC interpretations and amendments have
been adopted in the financial statements for the first time in this
financial period:
IFRIC 13 – ‘Customer Loyalty Programmes’ was issued in June
2007. It explains how entities that grant loyalty award credits should
account for their obligations to provide free or discounted goods
or services to customers who redeem such award credits. It was
implemented by the Group from 30 March 2008 and has had no
impact on the results or net assets of the Group.
Amendment to International Accounting Standard (IAS) 38 –
‘Intangible Assets’ was issued in May 2008. It clarifies the timing of
the recognition of expenditure on advertising and promotion
activities. It was implemented by the Group from 30 March 2008 and
has had no material impact on the results or net assets of the Group.
Amendment to IFRS 2 – ‘Share-Based Payments’ was issued
in January 2008. It clarifies the terms ‘vesting conditions’ and
‘cancellations’. It was implemented by the Group from 30 March
2008 and has led to a £12.4m charge to the income statement
in the current year.
The following IFRSs, IFRIC interpretations and amendments have
been issued but are not yet effective and have not been early
adopted by the Group:
IFRS 8 – ‘Operating Segments’ was issued in November 2006.
It replaces IAS 14 – ‘Segmental Reporting’ and requires operating
segments to be disclosed on the same basis as that used for internal
reporting. It is required to be implemented by the Group from
29 March 2009, and will have no impact on the results or net
assets of the Group but management is still considering the impact
on disclosures.
IFRIC 16 – ‘Hedges of a Net Investment in a Foreign Operation’ was
issued in July 2008. It provides clarification on the accounting for net
investment hedges. It is required to be implemented by the Group
from 29 March 2009 and is not expected to have a material impact
on the results or net assets of the Group.
The International Accounting Standards Board (IASB)’s annual
improvements project was published in May 2008 and is effective
from 29 March 2009. The project makes minor amendments to a
number of standards on topics including investments in associates,
intangible assets, borrowing costs and impairment of assets.
Amendment to IAS 39 – ‘Financial Instruments: Recognition and
Measurement’ was issued in July 2008. It prohibits designating
inflation as a hedgeable component of a fixed rate debt and the
inclusion of time value in the one-sided hedged risk when designating
options as hedges. It is required to be implemented retrospectively
by the Group from 4 April 2010.
Amendment to IAS 32 – ‘Financial Instruments: Presentation and
IAS 1 Presentation of Financial Statements – Puttable Financial
Instruments and Obligations Arising on Liquidation’ was issued in
February 2008. It addresses the liability versus equity classification
of certain puttable financial instruments and instruments, or
components thereof, which impose upon an entity an obligation
to deliver a pro rata share of net assets on liquidation. It is required
to be implemented by the Group from 29 March 2009.
Marks and Spencer Scottish Limited Partnership has taken
exemption under paragraph 7 of the Partnership and Unlimited
Companies (Accounts) Regulations 1993 (SI 1993/1820) from the
requirement to prepare and deliver accounts in accordance with
the Companies Act.
A summary of the Company’s and the Group’s accounting policies
is given below:
Accounting convention
The financial statements are drawn up on the historical cost basis
of accounting, except as disclosed in the accounting policies set
out below.
Basis of consolidation
The Group financial statements incorporate the financial statements
of Marks and Spencer Group plc and all its subsidiaries made up to
the year end date. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring the accounting policies
used in line with those used by the Group.
Subsidiary undertakings are all entities over which the Group has
the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting
rights. Subsidiary undertakings acquired during the year are recorded
using the acquisition method of accounting and their results included
from the date of acquisition.
The separable net assets, both tangible and intangible, of the newly
acquired subsidiary undertakings are incorporated into the financial
statements on the basis of the fair value as at the effective date
of control.
Results of subsidiary undertakings disposed of during the financial
year are included in the financial statements up to the effective date
of disposal. Where a business component representing a separate
major line of business is disposed of, or classified as held-for-sale,
it is classified as a discontinued operation. The post-tax profit or
loss of the discontinued operation is shown as a single amount on
the face of the income statement, separate from the other results
of the Group.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated.