Marks and Spencer 2012 Annual Report Download - page 80

Financial statements Marks and Spencer Group plc Annual report and financial statements 2012 78
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) and IFRS
Interpretations Committee (IFRS IC) interpretations, as adopted
by the European Union, 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 37 as well as the Group’s
principal risks and uncertainties as set out on pages 46 to 47.
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.
There are no IFRS or IFRS IC interpretations that are effective
for the first time in this financial period that have had a material
impact on the Group.
The following IFRS, IFRS IC interpretations and amendments
have been issued but are not yet effective and have not been
early adopted by the Group:
IAS 19, ‘Employee benefits’ was amended in June 2011 and
is effective for periods beginning on or after 1 January 2013.
The impact will be to replace interest cost and expected return
on plan assets with a net interest amount that is calculated
by applying the discount rate to the net defined benefit liability/
asset. The Group is yet to assess the full impact of this
amendment.
There are no other IFRS or IFRS IC interpretations that are not
yet effective that would be expected to have a material impact
on the Group.
The Marks and Spencer Scottish Limited Partnership has
taken an exemption under paragraph 7 of the Partnership
(Accounts) Regulations 2008 for the requirement to prepare
and deliver financial statements 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.
Subsidiaries
Subsidiary undertakings are all entities (including special
purpose 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 are included from the date of acquisition.
The separable net assets, including property, plant and
equipment and intangible assets, of the newly acquired
subsidiary undertakings are incorporated into the consolidated
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 goods are delivered and the significant risks
and rewards of ownership have been transferred to the buyer.
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 and paid.
Pensions
Funded pension plans are in place for the Group’s UK
employees and some employees overseas.
For defined benefit pension schemes, the difference between
the fair value of the assets and the present value of the defined
benefit obligation is recognised as an asset or liability in the
statement of financial position. The defined benefit obligation
is actuarially calculated using the projected unit credit method.
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.
A credit representing the expected return on the assets of
the retirement benefit schemes during the year is included
within finance income. This is based on the market value of
the assets of the schemes at the start of the financial year.
A charge is also made within finance income representing
the expected increase in the liabilities of the retirement benefit
schemes during the year. This arises from the liabilities of
the schemes being one year closer to payment.
Actuarial gains and losses are recognised immediately in the
statement of comprehensive income.
Payments to defined contribution retirement benefit schemes
are charged as an expense as they fall due.
Intangible assets
A. Goodwill Goodwill arising on consolidation represents the
excess of the consideration transferred and the amount of any
non-controlling interest in the acquiree over the fair value of
the identifiable assets and liabilities (including intangible assets)
of the acquired entity at the date of the acquisition. Goodwill is
recognised as an asset and assessed for impairment at least
annually. Any impairment is recognised immediately in the
income statement.
B. Brands Acquired brand values are held on the statement
of financial position initially at cost. Defined life intangibles are
amortised on a straight-line basis over their estimated useful
lives. Indefinite life intangibles are tested for impairment at
least annually. Any impairment in value is recognised
immediately in the income statement.