Marks and Spencer 2012 Annual Report Download - page 81

Financial statements Marks and Spencer Group plc Annual report and financial statements 2012 79
Overview Strategic review Financial review Governance Financial statements and other information
1 Accounting policies continued
C. Software intangibles Where computer software is not
an integral part of a related item of computer hardware, the
software is treated as an intangible asset. Capitalised software
costs include external direct costs of goods, services and
payroll related costs for employees who are directly associated
with the project.
Capitalised software development costs are amortised on
a straight-line basis over their expected economic lives,
normally between three and ten years. Computer software
under development is held at cost less any recognised
impairment loss.
Any impairment in value is charged to the income statement.
Property, plant and equipment
The Group’s policy is to state property, plant and equipment
at cost less accumulated depreciation and any recognised
impairment loss. Property is not revalued for accounting
purposes. Assets in the course of construction are held at
cost less any recognised impairment loss. Cost includes
professional fees and, for qualifying assets, borrowing costs.
Depreciation is provided to write off the cost of tangible
non-current assets (including investment properties), less
estimated residual values, by equal annual instalments
as follows:
–freehold land – not depreciated;
–freehold and leasehold buildings with a remaining lease term
over 50 years – depreciated to their residual value over their
estimated remaining economic lives;
–leasehold buildings with a remaining lease term of less than
50 years – over the remaining period of the lease; and
–fixtures, fittings and equipment – 3 to 25 years according to
the estimated life of the asset.
Residual values and useful economic lives are reviewed annually.
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 income statement.
Leasing
Where assets are financed by leasing agreements and the
risks and rewards are substantially transferred to the Group
(finance leases) the assets are treated as if they had been
purchased outright, and the corresponding liability to the
leasing company is included as an obligation under finance
leases. Depreciation on leased assets is charged to the
income statement on the same basis as owned assets, unless
the term of the lease is shorter. Leasing payments are treated
as consisting of capital and interest elements and the interest
is charged to the income statement.
All other leases are operating leases and the costs in respect
of operating leases are charged on a straight-line basis over
the lease term. The value of any lease incentive received to
take on an operating lease (for example, a rent free period)
is recognised as deferred income and is released over the life
of the lease.
Leasehold prepayments
Payments made to acquire leasehold land are included
in prepayments at cost and are amortised over the life of
the lease.
Cash and cash equivalents
Cash and cash equivalents includes short-term deposits with
banks and other financial institutions, with an initial maturity of
three months or less and credit card payment received within
48 hours.
Inventories
Inventories are valued at the lower of cost and net realisable
value using the retail method, which is computed on the basis
of selling price less the appropriate trading margin. All
inventories are finished goods.
Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that
the Group will be required to settle that obligation. Provisions
are measured at the best estimate of the expenditure required
to settle the obligation at the end of the reporting period, and
are discounted to present value where the effect is material.
Share-based payments
The Group issues equity-settled share-based payments to
certain employees. A fair value for the equity-settled share
awards is measured at the date of grant. The Group measures
the fair value of each award using the Black-Scholes model
where appropriate.
The fair value of each award is recognised as an expense over
the vesting period on a straight-line basis, after allowing for an
estimate of the share awards that will eventually vest. The level
of vesting is reviewed annually; and the charge is adjusted to
reflect actual and estimated levels of vesting.
Foreign currencies
The results of overseas subsidiaries are translated at the
weighted average of monthly exchange rates for revenue
and profits. The statements of financial position of overseas
subsidiaries are translated at year end exchange rates. The
resulting exchange differences are dealt with through
reserves and reported in the consolidated statement of
comprehensive income.
Transactions denominated in foreign currencies are translated
at the exchange rate at the date of the transaction. Foreign
currency monetary assets and liabilities held at the end of the
reporting period are translated at the closing balance sheet
rate. The resulting exchange gain or loss is recognised within
the income statement.
Taxation
Tax expense comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent it
relates to items recognised in other comprehensive income or
directly in equity, in which case the related tax is also recognised
in other comprehensive income or directly in equity.
Deferred tax is accounted for using a temporary difference
approach, and is the tax expected to be payable or
recoverable on temporary differences between the carrying
amount of assets and liabilities in the statement of financial
position and the corresponding tax bases used in the
computation of taxable profit. Deferred tax is calculated based
on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, applying tax rates
and laws enacted or substantively enacted at the end of the
reporting period.