Peachtree 2012 Annual Report Download - page 87

Overview
Performance
Governance
Group accounting policies continued
When a foreign operation is partially disposed of or sold, exchange differences
that were recorded in other comprehensive income are recycled in the income
statement as part of the gain or loss on sale, with the exception of exchange
differences recorded in equity prior to the transition to IFRS on 1 October
2004, in accordance with IFRS 1, “First-time Adoption of International Financial
Reporting Standards”.
t Borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost with any difference between
cost and redemption value being recognised in the Consolidated income
statement over the period of borrowing on an effective interest basis.
u Leasing
Assets held under finance leases are initially recognised as assets of the
Group at their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding
liability to the lessor is included in the balance sheet as a finance lease
obligation. Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant rate of interest
on the remaining balance of the liability.
Finance charges are charged directly as finance costs to the income statement.
The property, plant and equipment acquired under finance leases are
depreciated over the shorter of the asset’s useful life and the lease term.
Rentals payable under operating leases are charged to income on a
straight-line basis over the term of the relevant lease. Benefits received and
receivable as an incentive to enter into an operating lease are also spread on
a straight-line basis over the lease term.
v Post-employment benefits
The Group operates money purchase pension schemes (defined contribution
schemes) for certain of its employees. The contributions are charged to the
income statement as incurred.
The Group also operates a small defined benefit pension scheme and other
post-employment benefit schemes. The assets of these schemes are held
separately from the assets of the Group. The costs of providing benefits
under these schemes are determined using the projected unit credit actuarial
valuation method.
The current service cost and gains and losses on settlements and curtailments
are included in selling and administrative expenses in the income statement.
Past service costs are similarly included where the benefits have vested,
otherwise they are amortised on a straight-line basis over the vesting period.
The expected return on assets of funded defined benefit pension schemes and
the imputed interest on pension plan liabilities comprise the pension element
of the net finance cost/income in the income statement.
Differences between the actual and expected return on assets, changes
in the post-employment benefit obligation due to experience and changes in
actuarial assumptions are included in the statement of comprehensive income
in full in the period in which they arise.
The liability recognised in the balance sheet in respect of the defined benefit
pension scheme is the present value of the defined benefit obligation and
unrecognised past service cost and future administration costs at the end of
the reporting period less the fair value of plan assets. The defined benefit
obligation is calculated annually by independent actuaries. The present value
of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that
are denominated in the currency in which the benefits will be paid and that
have terms to maturity approximate to the terms of the related pension liability.
The calculation of the defined benefit obligation of a defined benefit plan
requires estimation of future events, for example salary and pension increases,
inflation and mortality rates. In the event that future experience does not bear
out the estimates made in previous years, an adjustment will be made to the
plan’s defined benefit obligation in future periods which could have a material
effect on the Group. The carrying amounts of assets and liabilities relating
to defined benefit plans, together with the key assumptions used in the
calculation of the defined benefit obligations relating to those plans, are
disclosed in note 8.
w Share-based payments
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value (excluding the
effect of non-market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments
is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of the shares that will eventually vest allowing for the effect
of non-market-based vesting conditions.
Fair value is measured using the Black-Scholes or the Monte Carlo pricing
models. The expected life used in the model has been adjusted, based on
management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
The Group also provides certain employees with the ability to purchase the
Group’s ordinary shares at a discount to the current market value at the date
of the grant. The Group records an expense, based on its estimate of the
discount related to shares expected to vest, on a straight-line basis over the
vesting period.
At the end of the reporting period, the entity revises its estimates for the
number of options expected to vest. It recognises the impact of the revision
to original estimates, if any, in the income statement, with a corresponding
adjustment to equity.
The proceeds received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when the options
are exercised.
x Dividends
Dividends on ordinary shares are recognised as a liability in the period in which
they are approved by the Company’s shareholders.
y Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, when it can be
reliably measured and it is probable that an outflow of economic benefits will
be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
z Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable
to the issue of new ordinary shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Where any Group company purchases the Company’s equity share capital
(treasury shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes) is deducted from equity attributable
to the owners of the Company until the shares are cancelled or reissued.
Financial statements
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The Sage Group plc | Annual Report & Accounts 2012