Marks and Spencer 2013 Annual Report Download - page 84

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Financial statements Marks and Spencer Group plc Annual report and financial statements 2013 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) 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 year 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’ has been revised and was
endorsed by the EU in June 2012. It is effective for periods
beginning on or after 1 January 2013. The revised standard will
change the amounts recognised in the income statement and in
other comprehensive income. The expected return on plan
assets and the interest cost on liabilities are replaced by a new
component of the income statement charge – interest on the
net retirement benefit asset/liability calculated by applying the
discount rate to the net defined benefit asset/liability. The revised
standard has retrospective application. Had the revised
standard been applied to the 2012/13 results the underlying
profit for the year would have been £17m lower, with a
compensating credit in other comprehensive income.
IFRS 13, ‘Fair value measurement’, aims to improve consistency
and reduce complexity by providing a precise definition of fair
value and a single source of fair measurement and disclosure
requirements for use across IFRS. The requirements, which are
largely aligned between IFRS and US GAAP, do not extend the
use of fair value accounting but provide guidance on how it
should be applied where its use is already required or permitted
by other standards. IFRS 13 is not expected to have a material
impact on the Group.
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, as modified by financial assets and financial
liabilities (including derivative instruments) at fair value through
profit and loss.
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.