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94
MARKS AND SPENCER GROUP PLC
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
Basis of preparation
The fi nancial 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 fi nancial
statements, the directors have considered the business activities
as set out on pages 1 to 31 as well as the Group’s principal risks and
uncertainties as set out on pages 24 to 25. Based on the Group’s
cash fl ow forecasts and projections, the Board is satisfi ed 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 fi nancial statements.
The following IFRS, IFRS IC interpretations and amendments are
e ective for the fi rst time in this fi nancial year:
IFRS 10 ‘Consolidated Financial Statements’, IFRS 11 ‘Joint
Arrangements’ and IFRS 12 ‘Disclosure of Interests in Other
Entities’ and the amendments to IAS 27 (2011) ‘Separate Financial
Statements’ and IAS 28 (2011) ‘Investments in Associates and Joint
Ventures’. These have not had a material impact on the Group.
There are no IFRS, IFRS IC interpretations or amendments that have
been issued but are not yet e ective 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
fi nancial 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 fi nancial statements are drawn up on the historical cost basis
of accounting, as modifi ed by fi nancial assets and fi nancial liabilities
(including derivative instruments) at f air value through profi t
and loss.
Basis of consolidation
The Group fi nancial statements incorporate the fi nancial
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 fi nancial 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 fi nancial
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 fi nancial statements on the
basis of the fair value as at the e ective 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 signifi cant risks and rewards of ownership have
been transferred to the buyer.
Supplier income
In line with industry practice, the Group enters into agreements with
suppliers to share the costs and benefi ts of promotional activity
and volume growth. The Group receives income from its suppliers
based on the specifi c agreements in place. This supplier income
received is recognised as a deduction from cost of sales based
on the entitlement that has been earned up to the balance
sheet date for each relevant supplier agreement. Marketing
contributions, equipment hire and other non-judgemental, fi xed
rate supplier charges are not included in the Group’s defi nition of
supplier income.
The types of supplier income recognised by the Group and the
recognition policies are:
A. Promotional contributions: Includes supplier contributions to
promotional giveaways and pre-agreed contributions to annual
‘spend and save’ activity.
Income is recognised as a deduction to cost of sales over the
relevant promotional period. Income is calculated and invoiced
at the end of the promotional period based on actual sales or
according to fi xed contribution arrangements. Contributions
earned but not invoiced are accrued at the end of the
relevant period.
B. Volume-based rebates: Includes annual growth incentives,
seasonal contributions and contributions to share economies of
scale resulting from moving product supply.
Annual growth incentives are calculated and invoiced at the end of
the year, once earned, based on fi xed percentage growth targets
agreed for each supplier at the beginning of the year. They are
recognised as a reduction in cost of sales in the year to which they
relate. Other rebates are agreed with the supplier and spread
over the relevant season/contract period to which they relate.
Contributions earned but not invoiced are accrued at the end of
the relevant period.
Uncollected supplier income at the balance sheet date is classifi ed
within the fi nancial statements as follows:
A. Trade and other payables: The majority of income due from
suppliers is netted against amounts owed to that supplier as
the Group has the right to o set these balances. As such the
outstanding supplier income within trade and other payables
at year end is immaterial.
B. Trade and other receivables: Supplier income that has been
earned but not invoiced at the balance sheet date is recognised in
Trade and other receivables and primarily relates to volume based
rebates that run up to the period end.
In order to provide users of the accounts with greater understanding
in this area, additional balance sheet disclosure is provided in note 17
to the fi nancial statements.
Dividends
Final dividends are recorded in the fi nancial 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 defi ned benefi t pension schemes, the di erence between the
fair value of the assets and the present value of the defi ned benefi t
obligation is recognised as an asset or liabilit y in the statement
of fi nancial position. The defi ned benefi t obligation is actuarially
calculated using the projected unit credit method.
The service cost of providing retirement benefi ts to employees
during the year, together with the cost of any benefi ts relating to
past service, is charged to operating profi t in the year.