Marks and Spencer 2010 Annual Report Download - page 86

Marks and Spencer Group plc Annual report and financial statements 2010 Financial statements 82
Notes to the financial statements
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 2006 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 43 as well as the Group’s principal risks and
uncertainties as set out on pages 56 and 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.
The following IFRSs, IFRIC interpretations and amendments have
been adopted in the financial statements for the first time in this
financial period:
– IFRS 8 – ‘Operating Segments’ replaces IAS 14 – ‘Segmental
Reporting’ and requires operating segments to be disclosed on
the same basis as that used for internal reporting. It has been
implemented by the Group from 29 March 2009, and has had no
impact on the results or net assets of the Group but has resulted
in revised disclosures.
– IAS 1 (Revised) – ‘Presentation of Financial Statements’ is effective
for the year ended 3 April 2010. The standard requires a change
in the format and presentation of the Group’s primary statements
but has had no impact on reported profits or equity.
– IFRS 7 – ‘Finance Instruments – Disclosures’ (amendment)
is effective for the year ended 3 April 2010. The amendment
requires enhanced disclosures about fair value measurement
and liquidity risk.
– Amendment to IAS 23 – ‘Borrowing Costs’ removes the option
of immediately expensing borrowing costs that are directly
attributable to a qualifying asset and requires such costs to be
capitalised. It has been adopted by the Group from 29 March
2009, and has had no impact on the results or net assets of
the Group.
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 3 (Revised) – ‘Business Combinations’ was issued in
January 2008. It will affect the accounting for any acquisitions
made by the Group after March 2010. Acquisitions made prior
to that date will not be affected.
– IFRIC 17 – ‘Distributions of Non-Cash Assets to Owners’ was
issued in November 2008. It is effective for annual periods
beginning on or after 1 July 2009. This is not currently applicable
to the Group, as it has not made any non-cash distributions.
– IFRIC 18 – ‘Transfers of Assets from Customers’ was issued in
January 2009. It is effective for transfer of assets received on or
after 1 July 2009. This is not relevant to the Group, as it has not
received any assets from customers.
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.
Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Revenue
Revenue comprises sales of goods to customers outside the Group
less an appropriate deduction for actual and expected returns,
discounts and loyalty scheme vouchers, and is stated net of value
added tax and other sales taxes. Revenue is recognised when the
significant risks and rewards of ownership have been transferred to
the buyer. Sales of furniture and online sales are recorded on delivery
to the customer.
Exceptional items
Exceptional income and charges are those items that are one-off
in nature and create significant volatility in reported earnings and are
therefore reported separately in the income statement. This includes
costs relating to strategy changes that are not regular running costs
of the underlying business and pension credits arising on changes
to the UK Defined Benefit Scheme.
Dividends
Final dividends are recorded in the financial statements in the period
in which they are approved by the Company’s shareholders. Interim
dividends are recorded in the period in which they are approved
Pensions
Funded pension plans are in place for the Group’s UK employees
and some employees overseas. The assets of these pension plans
include a property partnership interest and various equities and
bonds. The equities and bonds are managed by third-party
investment managers and are held separately in trust.
Regular valuations are prepared by independent professionally
qualified actuaries in respect of the defined benefit schemes using
the projected unit credit method. These determine the level of
contribution required to fund the benefits set out in the rules of the
plans and allow for the periodic increase of pensions in payment.
The service cost of providing retirement benefits to employees
during the year, together with the cost of any benefits relating
to past service, is charged to operating profit in the year.
and paid.