Peachtree 2013 Annual Report Download - page 104

Group accounting policies continued
102 The Sage Group plc | Annual Report & Accounts 2013
Group accounting policies continued
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.
Post-employment benefits
Obligations under defined contribution schemes are recognised
as an operating cost in 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.
Share-based payments
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.
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.
Dividends
Dividends are recognised through equity when approved by the
Company’s shareholders or on payment, whichever is earlier.
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.
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.
102 The Sage Group plc | Annual Report & Accounts 2013