Illustrative Individual Financial Statements for a UK ... · PDF fileIllustrative Individual Financial Statements for a UK Company applying FRS 101 (Reduced Disclosure Framework) Complying

Illustrative Individual Financial Statements for a UK Company applying FRS 101 (Reduced Disclosure Framework)

IIllustrative Individual Financial Statements for a UK Company applying FRS 101 (Reduced Disclosure Framework)

Complying with FRS 101, the Companies Act 2006 and other UK requirements extant 31 December 2013

© Copyright Ernst & Young LLP 2013.

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Published 2013 by:

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This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgement. Accordingly, to the fullest extent permitted by law, neither Ernst & Young LLP nor any other member of the global Ernst & Young organisation accept or assume any responsibility or liability for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate adviser.

The Illustrative Financial Statements have been prepared by the Financial Reporting Group of Ernst & Young LLP.

CContents

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INTRODUCTION ........................................................................................................................ III ABBREVIATIONS ....................................................................................................................... V REPORT AND FINANCIAL STATEMENTS OF ENTITY UK LIMITED ........................................................... 1 CORPORATE INFORMATION ......................................................................................................... 3 STRATEGIC REPORT .................................................................................................................. 7 DIRECTORS’ REPORT ............................................................................................................... 13 STATEMENT OF DIRECTORS' RESPONSIBILITIES………………………………………………………………………………… 23

INDEPENDENT AUDITOR’S REPORT .............................................................................................. 25 INCOME STATEMENT................................................................................................................ 29 STATEMENT OF COMPREHENSIVE INCOME ..................................................................................... 35 STATEMENT OF CHANGES IN EQUITY ........................................................................................... 37 BALANCE SHEET .................................................................................................................... 39 NOTES TO THE FINANCIAL STATEMENTS ...................................................................................... 43

1. Authorisation of financial statements and statement of compliance with FRS 101 ..... 43 2. Accounting policies................................................................................................. 43 3. Turnover ................................................................................................................ 73 4. Operating profit ..................................................................................................... 75 5. Auditor’s remuneration ........................................................................................... 77 6. Exceptional items ................................................................................................... 77 7. Staff costs and directors’ remuneration ................................................................... 79 8. Interest receivable .................................................................................................. 81 9. interest payable ..................................................................................................... 81 10. Taxation ................................................................................................................ 83 11. Discontinued operations ......................................................................................... 89 12. Dividends paid and proposed ................................................................................... 93 13. Tangible fixed assets .............................................................................................. 95 14. Intangible assets .................................................................................................. 101 15. Investments - non-current ..................................................................................... 105 16. Business combinations .......................................................................................... 109 17. Investments - current ........................................................................................... 111 18. Other debtors ....................................................................................................... 111 19. Stocks .................................................................................................................. 113 20. Trade creditors .................................................................................................... 113 21. Financial liabilities ................................................................................................ 113 22. Obligations under leases and hire purchase contracts ............................................ 117 23. Financial instruments ........................................................................................... 121 24. Provisions ............................................................................................................ 135 25. Authorised and issued share capital ...................................................................... 137 26. Share-based payments ......................................................................................... 139 27. Reserves .............................................................................................................. 143 28. Post balance sheet event ...................................................................................... 145 29. Capital commitments ............................................................................................ 145 30. Contingent liabilities ............................................................................................. 147 31. Pensions and other post-employment benefits ....................................................... 147 32. Directors’ loans and other directors’ interests ........................................................ 159 33. Off-balance sheet arrangements ........................................................................... 159 34. Other related party transactions ........................................................................... 161

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35. Ultimate Group undertaking .................................................................................. 161 APPENDICES ....................................................................................................................... 163

The Companies Act 2006 Financial Statements format .................................................. 163

IIntroduction

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This publication contains the annual report of a fictional UK company, Entity UK Limited, a private company preparing individual financial statements in accordance with FRS 101 Reduced Disclosure Framework. Entity UK Limited has transitioned to FRS 101 from IFRS. The annual report and financial statements are illustrative only and do not attempt to show all possible disclosure requirements. If there is doubt as to the applicable legal or other requirements, readers should refer to the relevant source and, where necessary, seek professional advice.

This publication is laid out with the commentary on the left hand pages and the illustrative disclosures on the right hand pages. Gaps between items exist to align commentary with the relevant disclosure item, as far as possible, for the convenience of users.

The disclosures and related commentary which are shaded illustrate those IFRS disclosure exemptions that are conditional on the provision of “equivalent disclosures” in the consolidated financial statements of the group in which the entity is consolidated. IFRS disclosure exemptions which are not conditional on “equivalent” disclosures have not been shown. Entity UK Limited is not a financial institution and is therefore able to take advantage of all of the IFRS disclosure exemptions in FRS 101.

Although the illustrative financial statements attempt to show the likely disclosure requirements of manufacturing companies, they should not be regarded as a comprehensive checklist of statutory and accounting requirements. They comply with FRS 101, the Companies Act 2006 and with other requirements in force at 31 December 2013. The Company has transitioned from EU-adopted IFRS, and is now preparing Companies Act individual accounts in accordance with s395(1)(a) of the Act. It is no longer preparing IAS individual accounts in accordance with s395(1)(b) of the Act.

Narrative accompanying the illustrative financial statements The narrative accompanying the illustrative financial statements (on the left-hand pages) contains source references to the Companies Act, International Financial Reporting Standards, Interpretations of the IFRS Interpretations Committee, and pronouncements of the Institute of Chartered Accountants in England and Wales. When the narrative accompanying the financial statements is italicised, it indicates that the requirement discussed is not in fact illustrated. Such narrative has not been given for every conceivable disclosure requirement. Accordingly the narrative should not be regarded as a comprehensive checklist.

Entity UK Limited These are the financial statements of a private company preparing its accounts under FRS 101 and taking advantage of all of the IFRS disclosure exemptions allowed under this standard.

Entity UK Limited is a qualifying entity in accordance with FRS 100 Application of Financial Reporting Requirements, and therefore these are not IAS Accounts as defined by section 395(1) (b) of the Companies Act 2006, so the entity must make amendments to EU adopted IFRS requirements where necessary, in order that the financial statements it prepares are Companies Act individual accounts as defined by s395(1)(a) of the Act.

The annual report and financial statements are illustrative only and they should not be regarded as a pro forma set of financial statements.

These financial statements have been prepared for the year ended 31 December 2013, and therefore IFRS 13 Fair Value Measurement, IAS 19 Revised Employee Benefits and IAS 1 (Amendment) Presentation of Financial Statements have all been adopted as these are mandatory for this year end.

IFRSs 10-12 and the revised versions of IAS27 and IAS 28 have not been applied as they are not mandatory before accounting periods beginning on or after 1 January 2014.

Entity UK Limited has transitioned to FRS 101 from EU-adopted IFRS with no material measurement differences therefore, is not required to prepare a full IFRS 1 transition note or to prepare three balance sheets upon transition. The individual financial statements of Listed UK Group plc, a fictional company transitioning to FRS 101 from previously extant UK GAAP illustrate a full IFRS 1 transition note.

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NNarrative accompanying the illustrative financial statements (continued) FRS 101

FRS 101 was issued in November 2012 and is part of the Financial Reporting Council’s (FRC’s) revised financial reporting standards in the United Kingdom and Republic of Ireland. The revisions fundamentally reform financial reporting, replacing almost all extant standards with three Financial Reporting Standards:

FRS 100 Application of Financial Reporting Requirements (November 2012)

FRS 101 Reduced Disclosure Framework (November 2012); and

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (Spring 2013).

FRS 101 applies to the individual financial statements of a qualifying entity, as defined below, that are intended to give a true and fair view of the assets, liabilities and financial position and of the profit or loss for a period.

A qualifying entity is a “member of a group where the parent of that group prepares publicly available consolidated financial statements which are intended to give a true and fair view (of the assets, liabilities, financial position and profit or loss) and that member is included in the consolidation (as set out in s474(1) of the Companies Act.” A charity may not be a qualifying entity.

In applying FRS 101, a qualifying entity may take advantage of the disclosure exemptions in the standard. In order to take advantage of these disclosure exemptions:

Its shareholders must have been notified in writing about, and do not object to, the used of the disclosure exemptions.

It otherwise applies as its financial reporting framework the recognition, measurement and disclosure requirements of EU adopted IFRS, but makes amendments to EU adopted IFRS requirements where necessary in order to comply with the Act and the Regulations, given that the financial statements that it prepares are Companies Act accounts as defined in section 395(1)(b) of the Act.

It discloses in the notes to its financial statements:

o A brief narrative summary of the disclosure exemptions adopted; and

o The name of the parent of the group in whose consolidated financial statements it financial statements are consolidated and from where those financial statements may be obtained.

Entity UK Limited complies with Schedule 1 of the Companies Act 2006, and is not a financial institution.

A qualifying entity which is a financial institution may not take advantage of the exemptions from IFRS 7, IFRS 13 (in respect of disclosures of financial instruments) and paragraphs 134 to 136 of IAS 1.

FRS 101 is effective for accounting periods beginning on or after 1 January 2015, although early application is permitted. If the entity applies this FRS before 1 January 2015 it must disclose this fact.

Formats The formats used in the illustrative financial statements are taken from Schedule 1 to the Regulations. The profit and loss account is in the format 1 and balance sheet is in format 1.

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AAbbreviations The following abbreviations are used in these illustrative financial statements:

Companies Act The Companies Act 2006 s235(3) Companies Act, Section 235, paragraph 3 7 Sch 2(1) Large and Medium-Sized Companies and Groups (Accounts and Reports)

Regulations 2008, Schedule 7, paragraph 2(1) APB Auditing Practices Board FRC Financial Reporting Council FRS101.10 Financial Reporting Standard 101, paragraph 10 FRS 101.AG1(k) Financial Reporting Standard 101, Application Guidance paragraph AG1

subsection (k) IFRS 1.39 International Financial Reporting Standard 1, paragraph 39 IAS 39.AG71 International Accounting Standard 39, application guidance, paragraph 71 IAS 39.G.1 Guidance on Implementing IAS 39: Financial Instruments: Recognition and

Measurement, Section G, item G.1 IASB International Accounting Standards Board ICAS The Institute of Chartered Accountants in Scotland ISA (UK&I) 700(14) International Standard on Auditing (UK and Ireland) No. 700, paragraph 14 ICAEW The Institute of Chartered Accountants in England and Wales IFRIC Interpretations issued by the IFRS Interpretations Committee LR 9.8.6(5) The UK Listing Authority Listing Rules, chapter 9, rule 9.8.6, paragraph (5) Regulations Large and Medium-Sized Companies and Groups (Accounts and Reports)

Regulations 2008 SI 2011/2198 The Companies (Disclosure of Auditor Remuneration and Liability Limitation

Agreements) (Amendment) Regulations 2011 (Statutory Instrument 2011 No. 2198)

SIC 12.8 SIC Interpretation 12, paragraph 8 TECH 2/10 Technical Release 02/10, issued by the ICAEW and ICAS

Entity UK Limited

1

Entity UK LLimited Report and Financial Statements 31 December 22013

Illustrative financial statements

GGeneral comments on the financial statements

2

Registered number and name s1068, Registrar’s Rules 2009 The 2006 Act allows the registrar to impose requirements as to the form, manner and delivery of documents required to be delivered to him.

Under the Registrar’s Rules 2009, all accounts and related documents are required to state the name and the registered number of the company on at least one of the balance sheet (or abbreviated accounts where applicable), profit and loss account, directors’ report, directors’ remuneration report and audit report.

Author’s note

Entity UK Limited has stated the registered number in the Directors’ Report on page 7.

List of directors, advisers and other information IAS 1.138 An entity shall disclose the following if not disclosed elsewhere in information published with the financial statements:

the domicile and legal form of the entity, its country of incorporation and the address of the registered office (or principal place of business, if different from the registered office);

a description of the nature of the entity’s operations and its principal activities; and

the name of the parent and the ultimate parent of the Group.

Author’s note There is no requirement to give most of the information on the adjacent page, although it is common practice to do so.

Components of financial statements IAS 1.10 A complete set of financial statements comprises:

a statement of financial position as at the end of the period;

a statement of profit or loss and other comprehensive income for the period;

a statement of changes in equity for the period;

a statement of cash flows for the period;

notes, comprising a summary of significant accounting policies and other explanatory information; and

a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statement.

An entity may use titles for the statements other than those used in IAS 1.

IAS 1.49 The financial statements shall be identified clearly and distinguished from other information in the same published document.

IAS 1.51(a) An entity shall clearly identify each financial statement and the notes. In addition, an entity shall display the following information prominently, and repeat it when necessary for information presented to be understandable:

the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period.

Reporting period s394 The directors of every company shall prepare accounts for the company for each of its financial years.

s390(3) The financial year begins with the day immediately following the end of the company’s previous financial year and ends with the last day of its next accounting reference period or such other date, not more than seven days before or after the end of that period, as the directors may determine.

IAS 1.36 An entity shall present a complete set of financial statements (including comparative information) at least annually. When an entity’s balance sheet date changes and the annual financial statements are presented for a period longer or shorter than one year, an entity shall disclose, in addition to the period covered by the financial statements:

the reason for using a longer or shorter period; and

the fact that amounts presented in the financial statements are not entirely comparable.

IAS 1.37 Normally, financial statements are consistently prepared covering a one-year period. However, for practical reasons, some entities prefer to report, for example, for a 52-week period. IAS 1 does not preclude this practice. True and fair view 1 Sch 45, s396, s404 The requirement to show a true and fair view overrides all other accounting requirements of the Companies Act. Where compliance with the requirements of the Companies Act would not be sufficient to give a true and fair view, the necessary additional information must be given in the financial statements or notes. In special circumstances it may be necessary to depart from the requirements of the Companies Act, or accounting standards in order to show a true and fair view. In such circumstances, disclosure must be made, in a note, of the particulars of the departure, the reasons for it and its effect.

Accounting standards and UITF abstracts are applicable to all financial statements whose purpose is to give a true and fair view, and in applying them preparers should be guided by the spirit and reasoning behind the standards and abstracts. However, they do not supersede the exercise of an informed judgement in determining what constitutes a true and fair view in each circumstance.

Entity UK Limited

CCorporate information

3

Directors Professor M C Holman (Chairman) Sir Alexander Scott (Deputy Chairman) J N Smith (Chief Executive) D C Barraclough H C Black R P Brierley Sir David Connor Sir Andrew Dalrymple E A Handsworthy Mrs M A Holly P A MacBryde Professor W H Taylor

Secretary J Harris

Auditors Chartered Accountants & Co. LLP 7 Christian Street London EC2 1VQ

Bankers Bank P.L.C. George Street London EC3 4XA

Solicitors Solicitors & Co. 7 Scott Street London WC3 4AB

Registrars Registration Services 45 Market Street London W2 7JA

Registered Office Homefire House Ashdown Square London EC2A 3XS


GGeneral comments on the financial statements

4

True and fair view 1 Sch 45, s396, s404 (continued) A justifiable reason may therefore exist why an accounting standard or UITF abstract may not be applicable in a given situation, for example, when application would conflict with the giving of a true and fair view. However, because accounting standards and UITF abstracts are formulated with the objective of ensuring that the information resulting from their application faithfully represents the underlying commercial activity, the ASB envisages that only in exceptional circumstances will departure from the requirements of an accounting standard or UITF abstract be necessary in order for the financial statements to give a true and fair view.

Particulars of any material departure from an accounting standard or UITF abstract, the reasons for it and its financial effects should be disclosed in the financial statements. The disclosure made should be equivalent to that given in respect of departures from specific accounting provisions of companies legislation.

Although medium-sized companies* are not required to comply with 1 Sch 45 (and state whether the financial statements have been prepared in accordance with applicable accounting standards*, disclosing particulars and reasons for any departure), the requirements of the Foreword to accounting standards result in the same information, plus the financial effect, being given.

Realised profits 1 Sch 10(2), 13(a) Only realised profits* may be taken to the profit and loss account, unless there are special reasons for a departure from this principle. Where there is a departure the particulars, reasons and effect have to be disclosed. FRS 101.A2.14 Paragraph 40(2) of Schedule 1 to the Regulations then requires that, in general, movements in the value of financial instruments, investment properties or living animals or plants are recognised

in the profit or loss account, notwithstanding the usual restrictions allowing only realised profits and losses to be included in the profit and loss account. Paragraph 40 of Schedule 1 to the Regulations thereby overrides the requirements of Paragraph 13(a) of Schedule 1. FRS 101.AG1(k) Paragraph 88 of IAS 1 Presentation of Financial Statements is amended as follows: An entity shall recognise all items of income and expense arising in a period in profit or loss unless an IFRS requires or permits otherwise, or unless prohibited by the Act.

Comparative information and consistency of presentation IAS 1.38 Except when IFRSs permit or require otherwise, comparative information shall be disclosed in respect of the previous period for all amounts reported in the current period’s financial statements. Comparative information shall be included for narrative and descriptive information when it is relevant to an understanding of the current period’s financial statements.

Author’s note

In accordance with paragraph 8(f) of FRS 101, comparative information is not required in respect of:

paragraph 79(a)(iv) of IAS 1 paragraph 73(e) of IAS 16 paragraph 118(e) of IAS 38 paragraphs 76 and 79(d) of

IAS 40 paragraph 50 of IAS 41

IAS 1.41 When the presentation or classification of items in the financial statements is amended, comparative amounts shall be reclassified unless the reclassification is impracticable. When comparative amounts are reclassified, an entity shall disclose:

the nature of the reclassification;

the amount of each item or class of items that is reclassified; and

the reason for the reclassification.

IAS 1.42 When it is impracticable to reclassify comparative amounts, an entity shall disclose:

the reason for not reclassifying the amounts; and

the nature of the adjustments that would have been made if the amounts had been reclassified.

IAS 1.45 The presentation and classification of items in the financial statements shall be retained from one period to the next unless:

it is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in IAS 8; or

an IFRS requires a change in presentation.

Offset and aggregation in the financial statements IAS 1.32 Assets and liabilities, and income and expenses, shall not be offset unless required or permitted by an IFRS.

IAS 1.29 Each material class of similar items shall be presented separately in the financial statements. Items of a dissimilar nature or function shall be presented separately unless they are immaterial.

Entity UK Limited

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CComments on the strategic report

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General s414A All companies except companies entitled to the small company exemptions are required to prepare a strategic report for each financial year of the company, For a financial year in which the company is a parent company and the directors prepare group accounts, the strategic report must be a consolidated report relating to the undertakings included in the consolidation.

s414B A company is entitled to small companies exemption in relation to the strategic report for a financial year if— (a) it is entitled to prepare accounts for the year in accordance with the small companies regime, or (b) it would be so entitled but for being or having been a member of an ineligible group.

s423

The directors’ report and annual accounts should be sent to every member of the company, every holder of the company’s debentures and every person who is entitled to receive notice of general meetings.

Author’s note There is no statutory requirement for private companies to lay their annual accounts and reports before a general meeting of members. However, such companies may have such a requirement in their Articles.

Review of the business s414C The strategic report must contain:

(a) a fair review of the company’s business; and

(b) a description of the principal risks and uncertainties facing the company.

The review required must be a balanced and comprehensive analysis of the development and performance of the company’s business during the financial year and the position of the business at the end of that year, consistent with the size and complexity of the business.

The review must, to the extent necessary for an understanding of the development, performance or position of the business, include:

(a) analysis using financial key performance indicators and

(b) where appropriate analysis using other key performance indicators including information related to environmental and employee matters. The report must, where appropriate, include references to and additional explanations of amounts included in the annual accounts of the company.

Author’s note

Entity UK Limited has stated in its Strategic Report that it has transitioned to FRS 101 and taken advantage of the

disclosure exemptions, and that the parent company did not object to the use of the disclosure exemptions. There is no explicit requirement to state this in the Directors Report.

Entity UK Limited

SStrategic report

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The Directors present their strategic report for the year ended 31 December 2013. Business review The profit for the year, after taxation, is £10,571,000 (2012: £8,987,000). The directors recommend a final ordinary dividend of 3.52p per ordinary share amounting to £874,000 making a total of ordinary dividends of £2,071,000 for the year.

During the year the company transitioned from EU-adopted IFRS to FRS 101 - Reduced Disclosure Framework and has taken advantage of the disclosure exemptions allowed under this standard. The Company’s parent undertaking, Listed UK Group PLC, was notified of and did not object to the use of the EU-adopted IFRS disclosure exemptions. There were no material recognition or measurement differences arising on the adoption of FRS 101. The Company has also adopted IFRS 13, IAS 19 (Revised) and IAS 1 (amendment) which became mandatory during the year. The impact of the adoption of these standards was as follows:

The adoption of IAS 19 (Revised) has led to the recognition of unrecognised service cost of £428,000 in retained earnings and to an increase in the net interest cost relating to pensions of £52,000 with a corresponding increase in actuarial gains in the year ended 31 December 2012.

The impact of the adoption of the amendments to IAS 1 was to disclose other comprehensive income which can be reclassified to profit and loss separately from other comprehensive income which cannot be recycled to profit and loss.

There was no impact from the adoption of IFRS 13. Under FRS 101, the company has an exemption from all IFRS 13 disclosures.

The Company’s key financial and other performance indicators during the year were as follows:

2013 2012 Change £’000 £’000 % Turnover (continuing operations) 189,711 179,587 +5.6% Operating profit 16,586 13,885 +19.5% Profit for the financial year 10,571 8,987 +17.6% Shareholder’s equity 83,815 63,057 +32.9% Current assets as % of current liabilities (‘quick ratio’) 222% 304% -82% Customer satisfaction 4.5 4.1 +10% Average number of employees 649 618 +5% Turnover from continuing operations increased by 5.6% during the year, primarily due to the acquisition of the Extinguishers business on 1 May 2012, which made a full years contribution in 2013. Extinguishers contributed £22,000,000 of turnover in the period post acquisition in 2012. The impact of the July 2013 acquisition of the Ring Circuits business will not be felt until 2014. Turnover for this business in the next financial year is expected to be significantly higher than that achieved this year. The balance of the increase in turnover from continuing operations is primarily attributable to the successful launch of a new EC-approved fire hydrant which was sold to a number of UK local authorities. Operating profit increased by 19.5% during the year. This improvement was caused by the contribution from the acquisition of the Extinguishers business in 2012.



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s414C (6) The strategic report of medium sized company need not provide key performance indicators relating to non-financial information.

“Key performance indicators” means factors by reference to which the development, performance or position of the company’s business can be measured effectively.

s414C(14) No disclosures are required about impending developments or matters in the course of negotiation if the disclosure would, in the opinion of the directors, be seriously prejudicial to the interests of the company.

Author’s note The strategic report shown on pages 7 to 23 is intended to be illustrative only and should not be used as a model for companies’ financial statements since the level of detail required, including key performance indicators, will depend on the specific circumstances of each company.

Entity UK Limited

SStrategic report

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Business Review (continued)

There was also a better underlying return from existing UK business although a substantial improvement is expected next year due to the new fire hydrant product. This was also impacted by the operating profit from the Hose business which has been recognised as discontinued operations which increased to £1,434,000 from £57,000. Hose manufactures rubber hosepipes and has been operating in an unpredictable product environment, making it difficult for management to derive growth and profitability from the business. On 1 December 2013, the Directors announced their decision to dispose of the Hose business.

Profit after tax increased by 17.6%. This increase in profit after tax arose from organic growth of 10% and the results from the Ring Circuits business since acquisition in July 2013.

Shareholders’ equity increased by 32.9% due to retained earnings and the new shares issued during the year.

The company’s “quick ratio” (current assets as a percentage of current liabilities) has reduced due to the purchase of stocks prior to the year end in order to meet demand which resulted in an increase in trade creditors.

Customer satisfaction is a key indicator given the company’s reliance on contracts which are subject to periodic tender. This is monitored by annual questionnaires and other informal feedback. The results of our questionnaires showed a 10% improvement in customer satisfaction compared to last year. The total average number of employees increased by 5% during the year. This was partially attributable to the acquisition of the Extinguishers business but also due to an increased number of persons engaged in research and development activities related to the new fire hydrant. Average employee numbers are expected to decline slightly in the next year as a result of the disposal of the Hose business. The number of employees participating in our employee share scheme increased by 8% during the year.

The products manufactured and sold by the company have minimal environmental impact. However, the board believes that good environmental practices support the board’s strategy by enhancing the reputation of the company, the efficiency of production and the quantity of products. Consequently, the company continues to put environmental responsibilities high on the agenda and increased the percentage of its products recycled from 45% to 52% during the year. In terms of a direct impact on the environment carbon dioxide emissions have reduced by 4% during the year. This was achieved by increasing energy efficiency and reducing wastage.

Principal risks and uncertainties The Company has established a risk committee that meets quarterly and which evaluates the company’s risk appetite. The principal risks and uncertainties facing the Company are broadly grouped as – competitive, legislative and financial instrument risk.

Competitive Risks

In the UK the Company is reliant on certain major local authorities for contracts which are subject to periodic competitive tender. Renewal of these contracts is uncertain and based on financial and performance criteria.

In the USA the principal competitive risk relates to the probability of large multi-nationals entering into the market via “loss leader” products.

Legislative Risks In the UK and Europe, fire safety equipment must be manufactured to EU standards. These standards are subject to continuous revision and any new Directive may have a material impact on the ability of the company to manufacture and supply products at a profit. In addition compliance imposes costs and failure to comply with the standards could materially affect the company’s ability to operate.



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Signature s414D The strategic report must be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company.

Entity UK Limited

SStrategic report

11

Principal risks and uncertainties (continued) In the USA, the equivalent standards are subject to individual State legislatures. These standards vary considerably between individual States and make it difficult to supply a uniform product that meets all requirements.

Exposure to price, credit, liquidity and cash flow risk Price risk arises on financial instruments because of changes in, for example, commodity prices or equity prices. Listed investments with a book value of £1,894,000 are exposed to price risk but this exposure is within the Company’s risk appetite.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for that other party by failing to discharge an obligation. Company policies are aimed at minimising such losses, and require that deferred terms are only granted to customers who demonstrate an appropriate payment history and satisfy credit worthiness procedures. Details of the Company’s receivables are shown on the face of the balance sheet. The Company limits individual trade receivable counterparty exposure to £3,000,000 and at the balance sheet date no single trade debtor exceeded 50% of that amount. Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company aims to mitigate liquidity risk by managing cash generation by its operations, applying cash collection targets throughout the Company. The Company also manages liquidity risk via revolving credit facilities and long term debt. During the year additional shares were issued and debt raised to fund the purchase of Extinguishers.

Cash flow risk is the risk of exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability such as future interest payments on a variability rate debt. The Company manages this risk, where significant, by use of derivatives as explained above.

By order of the board

J Harris

Secretary

22 February 2014


CComments on the directors’ report

12

Directors of the Company s416(1)(a) Disclose names of persons who were directors at any time during the financial year.

Author’s note Also, it is regarded as good practice to show any changes between the year end and the date of the report.

Recommended dividend s416(3) State the amount of dividend recommended (if any). Companies subject to the small companies exemption are exempt from this requirement.

s830(1) A company shall not make a distribution except out of profits available for the purpose.

s837(4) If the audit report is qualified (i.e. it is not a report without qualification to the effect that, in the auditors’ opinion, the financial statements have been properly prepared in accordance with the Companies Act), a distribution cannot be made unless and until the auditor has made a statement in writing that the qualification is not material for determining whether a distribution would contravene the Act. This statement must have been circulated to members in accordance with s423 for a private company or laid before the company in a general meeting.

Future developments 7 Sch 7(1)(b) Give an indication of likely future developments in the business of the company. Financial instruments 7 Sch 6 In relation to the use of financial instruments by the company and its subsidiary undertakings, the directors’ report must contain an indication of:

the financial risk management objectives and policies of the company and its subsidiary undertakings included in the

consolidation, including the policy for hedging each major type or forecasted transaction for which hedge accounting is used; and

the exposure of the company and its subsidiary undertakings included in the consolidation to price risk, credit risk, liquidity risk and cash flow risk.

Disclosure is not required if such information is not material for the assessment of the assets, liabilities, financial position and profit or loss of the company and its subsidiary undertakings included in the consolidation.

Author’s note The expressions, “hedge accounting”, “price risk”, “credit risk”, “liquidity risk” and “cash flow risk” have the same meaning as they have in Council Directive 78/660/EEC on the annual accounts of certain types of companies, and in Council Directive 83/349/EEC on consolidated accounts, as amended.

Research and development 7 Sch 7(1)(c), Give an indication of the activities (if any) in the field of research and development of the company and its subsidiary undertakings.

Events since the balance sheet date 1 Sch 13(b) Include all material adjusting events up to the date that the financial statements are formally approved by the directors.

7 Sch 7(1)(a) Give particulars of any important events affecting the company or any of its subsidiary undertakings which have occurred since the end of the year.

IAS 10.21 IAS 10 also requires that certain post balance sheet events be disclosed in a note to the financial statements. See note 29.

Entity UK Limited

DDirectors’ report

13

Registered No. 54362312 The directors present their report for the year ended 31 December 2013.

Directors of the company The current directors are shown on page 3.

P A MacBryde was appointed on 1 January 2013 and M C Holman was appointed on 22 July 2013.

In addition, A Stanton was a director until 7 January 2013 when he resigned.

J Corless and M C Holman retire from the board at the Annual General Meeting and, being eligible, offer themselves for re-election. J Archer retires by rotation and, being eligible, offers himself for re-election.

Dividends The directors recommend a final ordinary dividend of 3.25 pence per share amounting to £874,000, making a total of ordinary dividends of £1,940,000 for the year.

Future developments The Company intends to continue operating in the areas of electronics and manufacture and installation of fire prevention equipment, consolidating recent acquisitions to increase profitability.

Financial instruments The Company finances its activities with a combination of bank loans, debentures, convertible non-cumulative redeemable preference shares, finance leases and hire purchase contracts, cash and short term deposits, as disclosed in note 23. Overdrafts are used to satisfy short term cash flow requirements. Other financial assets and liabilities, such as trade debtors and trade creditors, arise directly from the Company’s operating activities. The Company also enters into derivative transactions, including principally interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Company’s operations and its sources of finance.

Financial instruments give rise to foreign currency, interest rate, credit, price and liquidity risk information on how these risks arise is set out above, as are the objectives, policies and processes for their management and the methods used to measure each risk.

Use of derivatives

The company uses forward foreign currency contracts to reduce exposure to the variability of foreign exchange rates by fixing the rate of any material payments in a foreign currency. The company also uses interest rate swaps to adjust interest rate exposures in order to guarantee fixed interest payments where payments are variable and hence exposed to interest rate movements. Hedge accounting is used when certain criteria is met as explained in the accounting policy note on page 61.

Research and development The acquisition of the Extinguishers business last year saw the number of staff employed by the Company on research and development more than doubled.

There are two main fire prevention research and development projects: improved fire detection and sprinkler systems and fire retardant fabrics for motor vehicles and aircraft.

Research and development in the electronics business is concentrated on the development of internet enabled safety equipment.

Events since the balance sheet date On 14 January 2014, a short leasehold building with a net book value of £880,000 was severely damaged by flooding. It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of stocks by some £350,000. No provision has been made in the financial statements for this loss.



14

Political contributions 7 Sch 3 If the company or its subsidiaries have made any political donation to any political party or other political organisation, any political donation to any independent election candidate or incurred any political expenditure and the amount of the donation/expenditure or the aggregate amount of all donations/expenditure exceeded £2,000, disclose:

(a) the name of each political party, organisation or independent election candidate to whom any such donation has been made;

(b) the total amount given to that party, organisation or candidate by way of such donations in the financial year; and

(c) the total amount incurred in respect of political expenditure in the financial year.

Wholly-owned subsidiaries of companies incorporated in the United Kingdom are exempt.

7 Sch 4

If the company or its subsidiaries have made any contributions to a non-EU political party disclose:

(a) the amount of the contribution; or

(b) if it has made two or more contributions in the year a statement of the total amount of the contribution.

A non EU political party means any political party which carries on, or proposes to carry on, activities wholly outside member States.

Wholly-owned subsidiaries of companies incorporated in the United Kingdom are exempt.

Foreign branches 7 Sch 7(1)(d)(2)

Give an indication of the existence of branches (as defined in s1046(3)) of the company outside the United Kingdom.

Disabled employees 7 Sch 10 This requirement relates to any company with more than 250 employees under contracts of service working wholly or mainly in

the UK. Give a statement describing the policy applied by the company during the financial year:

for giving full and fair consideration to applications for employment by the company made by disabled persons, having regard to their particular aptitudes and abilities;

for continuing the employment of, and for arranging appropriate training for, employees who have become disabled during the period when they were employed by the company; and

otherwise for the training, career development and promotion of disabled employees.

Employee involvement 7 Sch 11 This requirement relates to any company with more than 250 employees under contracts of service working wholly or mainly in the UK. Give a description of the action taken during the year to introduce, maintain or develop arrangements aimed at:

providing employees systematically with information on matters of concern to them as employees;

consulting employees or their representatives on a regular basis so that the views of employees can be taken into account in making decisions which are likely to affect their interests;

encouraging the involvement of employees in the Group’s performance through an employees’ share scheme or by some other means; and

achieving a common awareness on the part of all employees of the financial and economic factors affecting the performance of the company.

Entity UK Limited


15

Disabled employees The Company gives full consideration to applications for employment from disabled persons where the candidate’s particular aptitudes and abilities are consistent with adequately meeting the requirements of the job. Opportunities are available to disabled employees for training, career development and promotion.

Where existing employees become disabled, it is the Company’s policy to provide continuing employment wherever practicable in the same or an alternative position and to provide appropriate training to achieve this aim.

Employee involvement The Company operates a framework for employee information and consultation which complies with the requirements of the Information and Consultation of Employees Regulations 2005. During the year, the policy of providing employees with information, including information relating to the economic and financial factors affecting the performance of the company, has been continued through the newsletter “Entity UK Limited News” in which employees have also been encouraged to present their suggestions and views on the Company’s performance. Regular meetings are held between local management and employees to allow a free flow of information and ideas. Employees participate directly in the success of the business through the Company’s profit sharing schemes and are encouraged to invest in the Company through participation in share option schemes.



16

Directors’ liabilities s236 If the company has made a qualifying indemnity provision which is in force at the time when the directors’ report is approved for the benefit of one or more directors of an associated company, or was in force at any time during the financial year for the benefit of one of more persons who were then directors of an associated company, the directors’ report must state that any such provision is or (as the case may be) was so in force.

The term “qualifying indemnity provision” applies to both a qualifying third party indemnity provision and a qualifying pension scheme indemnity provision.

s234 A “qualifying third party indemnity provision” is any provision for indemnity against liability incurred by the director to a person other than the company or an associated company in relation to which conditions below are satisfied.

(a) The provision does not provide any indemnity against any liability incurred by the director to pay:

(i) a fine imposed in criminal proceedings; or

(ii) a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (however arising).

(b) The provision does not provide any indemnity against any liability incurred by the director:

(i) in defending any criminal proceedings in which he is convicted; or

(ii) in defending any civil proceedings brought by the company, or an associated company, in which judgement is given against him; or

(iii) in connection with any application under any of the following provisions in which the court refuses to grant him relief (namely s661(3) or (4) (acquisition of shares by innocent nominee) or s1157 (general power to grant relief in case of honest and reasonable conduct)).

(d) Under condition (c) above, the reference to any such conviction, judgement or refusal of relief is a reference to one that has become final, being:

(i) if not appealed against, at the end of the period for bringing an appeal, or

(ii) if appealed against, at the time when the appeal (or any further appeal) is disposed of.

An appeal is disposed of if it is determined and the period for bringing any further appeal has ended, or if it is abandoned or otherwise ceases to have effect.

Author’s note The term “qualifying third party indemnity provision” excludes the purchase or maintenance of insurance against liability as this falls under s233. s235 A ‘qualifying pension scheme indemnity provision’ is any provision indemnifying a director of a company that is a trustee of an occupational pension scheme against liability incurred in connection with the company’s activities as trustee of the scheme and in relation to which conditions below are satisfied.

(a) The provision does not provide any indemnity against any liability incurred by the director to pay:

(i) a fine imposed in criminal proceedings; or

(ii) a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (however arising).

(b) The provision does not provide any indemnity against any liability incurred by the director in defending any criminal proceedings in which he is convicted.

Entity UK Limited


17

Directors’ liabilities The Company has granted an indemnity to one or more of its directors against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the directors’ report.

During the year the Company had in force an indemnity provision in favour of one or more directors of the Company, against liability in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006.

On 1 November 2013, P A McBride became a trustee of the Entity UK Employee Pension Plan, on which date the Company granted indemnity against liability in respect of proceedings brought by third parties, subject to the conditions set out in section 235 of the Companies Act 2006. This qualifying pension scheme indemnity provision remains in force as at the date of approving the directors’ report.



18

Going concern Author’s note Good Practice has made a going concern statement in accordance with the FRC guidance, Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009. This guidance applies to all UK companies.

The going concern statement made by Entity UK Limited is based on Example 1(a) of Appendix II of the FRC guidance. This is because the company has uncomplicated circumstances and little or no exposure to economic difficulties that may impact the going concern assumption.

Purchase of own shares 7 Sch 8, 9, Where shares or a beneficial interest therein are purchased under s659 or where shares are subject to a lien or charge under s670(2) or (4), disclose:

the number, nominal value and percentage of the called-up shares of that class of shares acquired or charged during the period and, if acquired by purchase, give also consideration paid and reasons for purchase;

the maximum number, nominal value and percentage of the called-up shares of that class held or charged at any time during the period;

the number, nominal value and percentage of the called-up shares of that class so acquired or charged which have been disposed of or cancelled during the period, and the amount of the proceeds of disposal, if any; and

where any shares have been charged, the amount of the charge.

Entity UK Limited


19

Going Concern The Company’s business activities, together with the factors likely to affect its future development, its financial position, financial risk management objectives, details of its financial instruments and derivative activities, and its exposures to price, credit, liquidity and cash flow risk are described in the Strategic Report on pages 7 to 11.

The Company has considerable financial resources together with long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the directors believe that the group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.



20

Auditors s485, s487 Auditors must be reappointed for each financial year unless the exemption conditions are met. Where no auditor has been reappointed by the end of the next period for appointing auditors any auditor in office before that time is normally deemed to be reappointed except in certain circumstances.

s475 Auditors need not be appointed if the company is exempt from audit by virtue of either s477 (small companies), s480 (dormant companies) or s482 (non-profit making companies subject to public sector audit). Author’s note There is no requirement to refer to the appointment or reappointment of auditors in the directors’ report, although it is common practice to do so.

Directors’ statement as to disclosure of information to auditors s418(2) The report must contain a statement to the effect that in the case of each director at the time the report is approved:

so as far as each director is aware there is no relevant information of which the company’s auditors are unaware and

he has taken all the steps he ought to take as a director to make himself aware of the any relevant audit information and to establish that the company’s auditors are aware of that information.

Signature s419(1) The directors’ report must be approved by the board of directors and signed on behalf of the board by a director or the secretary of the company.

s433

Every copy of a directors’ report which is published (i.e. issued, circulated or made available for public inspection) must state the name of the person who signed it on behalf of the board.

s447(3)

The copies of the balance sheet and directors’ report delivered to the Registrar must state the name of the person who signed it on behalf of the board.

Entity UK Limited


21

Auditors A resolution to reappoint Chartered Accountants & Co. LLP as auditors will be put to the members at the Annual General Meeting.

Directors’ statement as to disclosure of information to auditors The directors who were members of the board at the time of approving the directors’ report are listed on page 3. Having made enquiries of fellow directors and of the Company’s auditors, each of these directors confirms that:

to the best of each director’s knowledge and belief, there is no information (that is, information needed by the Company’s auditors in connection with preparing their report) of which the Company’s auditors are unaware; and

each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company’s auditors are aware of that information.

By order of the board

J Harris

Secretary

22 February 2014


CComments on the statement of directors’ responsibilities

22

Directors’ responsibilities in respect of the financial statements APB 2010/02 App 17 An illustrative example of a directors’ responsibilities statement for a non-publicly traded company appears in Appendix 17 of APB 2010/02. This has been replicated in Entity UK Limited except for the fourth bullet point on going concern since a separate statement on going concern is included in the Directors’ Report. The third bullet point does not apply to Small or Medium-Sized companies.

Entity UK Limited

SStatement of Directors’ responsibilities

23

The directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in accordance with applicable UK law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for that period.

In preparing those financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; and

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


CComments on independent auditor’s report

24

Independent auditor’s report s495(1) An audit report is required to be attached to all annual accounts of the company of which copies are required to be sent to members under s423.

s495(2) The auditor’s report must include:

(a) an introduction identifying the annual accounts that are the subject of the audit and the financial reporting framework that has been applied in their preparation;

(b) a description of the scope of the audit identifying the auditing standards in accordance with which the audit was conducted.

s495(3) The audit report must state clearly whether, in the auditor’s opinion, the annual accounts:

(a) give a true and fair view of the company and/or group at the end of the financial year and of the profit or loss for the financial year;

(b) have been properly prepared in accordance with the relevant financial reporting framework; and

(c) have been prepared in accordance with the requirement of this Act (and, where applicable, Article 4 of the IAS Regulation).

s495(4) The auditor’s report must be either unqualified or qualified and must include a reference to any matters to which the auditor wishes to draw attention by way of emphasis without qualifying the report.

s496 The auditor must state in his report on the annual accounts whether in his opinion the information given in the directors’ report is consistent with the financial statements.

s498(2) The auditor shall state in his report if he is of the opinion that:

adequate accounting records have not been kept, or that returns adequate for the audit have not been received from branches not visited by him; or

the company’s individual accounts are not in agreement with the accounting records or returns.

s498(3) The auditor must state in his report if he fails to obtain all the information and explanations which, to the best of his knowledge and belief, are necessary for the purposes of his audit. s498(4) If the requirements related to disclosure of directors’ benefits (see pages 112-114) are not complied with the auditor must include a statement in his report giving the required particulars. s498(5) If the directors have prepared accounts in accordance with the small companies regime and, in the auditor’s opinion, they were not entitled to do so, the auditor shall state that fact in his report. s503(3) The auditor’s report must state the name of the auditor and be signed and dated. Where the auditor is an individual, the report must be signed by him. Where the auditor is a firm, the report must be signed by the senior statutory auditor in his own name, for and on behalf of the auditor.

Entity UK Limited

IIndependent auditor’s report to the members of Entity UK Limited

25

We have audited the financial statements of Entity UK Limited for the year ended 31 December 2013 which comprise the Income Statement, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Balance Sheet, and the related notes 1 to 35. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 23, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Report and Financial Statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

give a true and fair view of the state of the company’s affairs as at 31 December 2013 and of its profit for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.


26

Entity UK Limited

IIndependent auditor’s report to the members of Entity UK Limited

27

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

the financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

[Signature John Smith (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor City Date]

Author’s note

Audit teams should always use the most recent version of the relevant audit report on the Audit Reports Database as this illustrative report may have been superseded.

Audit teams should also ensure that they apply the most recent internal guidance on the format of the signatures required on the audit reports to be delivered to the company and to the registrar.

Companies House have issued a document detailing the most common reasons why a set of submitted annual accounts is rejected. This document can be found at www.companieshouse.gov.uk/about/pdf/commonAccountsRejections.pdf


CComments on the income statement

28

Income statement 1Sch formats

The profit and loss account must comply with one of the prescribed formats in the Regulations.

1 Sch 4,6

Since the items in the profit and loss account formats are denoted by Arabic numbers they may be disclosed in the notes to the financial statements rather than on the face of the profit and loss account. The items may also be combined if either they are not material or the combination facilitates assessment (providing, in the latter case, the individual items are disclosed in the notes) or they must be adapted where the special nature of a company’s business requires.

1 Sch 3(1)-(2)

Greater detail can be given in the financial statements than that prescribed by the formats. New items may be inserted for income or expenditure not otherwise covered.

1 Sch 2

The format chosen may not be changed from year to year unless, in the director’s opinion, there are special reasons for the change. Particulars of any change must be disclosed and the reasons for a change must be explained in a note to the financial statements.

1 Sch 7

For every amount in the profit and loss account the corresponding amounts for the previous financial year should be also shown. If that corresponding amount is not comparable, the former may be adjusted and the particulars of the non-comparability and of any adjustment be disclosed in a note to the financial statements.

1 Sch 8

Amounts in respect of assets or income may not be set off against amounts in respect of items representing liabilities or expenditure of vice versa.

IAS 1.10A An entity may present a single statement of profit or loss and other comprehensive income presented in two sections. The sections shall be

presented together, with the profit or loss section presented first followed directly by the other comprehensive income section. An entity may present the profit or loss section in a separate statement of profit or loss. If so the separate statement of profit or loss shall immediately precede the statement presenting comprehensive income, which shall begin with profit or loss. IAS 1.81 An entity shall present all items of income and expense recognised in a period:

in a single statement of comprehensive income, or

in two statements: a statement displaying components of profit or loss (separate income statement) and a second statement beginning with profit or loss and displaying components of other comprehensive income (statement of comprehensive income).

IAS 1.81C, FRS 101.AG1(i) A qualifying entity shall present the components of profit or loss in the statement of comprehensive income (in either the single statement or two statement approach) in accordance with the profit and loss account format requirements of the Act* instead of paragraph 82 and 84 to 86 of IAS 1 Presentation of Financial Statements. The entity may elect to apply the requirements of those paragraphs so long as the resulting statement of comprehensive income complies with the profit and loss account format requirements of the Act. *An entity shall apply, as required by company law, either Part 1 “General Rules and Formats” of Schedule 2 to the Regulations; Part 1 “General Rules and Formats” of Schedule 3 to the Regulations; or Part 1 “General Rules and Formats” of Schedule 1 to the LLP Regulations. Author’s note Entity UK Limited has presented items of income and expense recognised in the period in two statements.

An example of the single statement of comprehensive income can be seen in the implementation guidance to IAS 1.

IAS 1.82 As a minimum, the statement of comprehensive income shall include line items that present the following amounts for the period:

turnover; interest; share of the profit or loss of

associates and joint ventures accounted for using the equity method;

tax expense; a single amount comprising

the total of: – the post-tax profit or loss of

discontinued operations; – the post-tax gain or loss

recognised on the measurement to fair values less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation;

profit or loss; each component of other

comprehensive income classified by nature (excluding share of the other comprehensive income of associates and joint ventures accounted for using the equity method);

share of the other comprehensive income of associates and joint ventures accounted for using the equity method; and

total comprehensive income.

Author’s note This requirement is optional and may be made so long as it does not conflict with the Companies Act. Entity UK Limited has opted not to make this disclosure.

Entity UK Limited

IIncome statement for the year ended 31 December 2013

29

Notes Continuing operations

Discontinued operations Total

2013 2013 20133 £000 £000 £000 Turnover 3 189,711 39,361 229,072 Cost of sales (143,819) (37,172) (180,991) Gross profit 45,892 2,189 48,081

Distribution costs (14,844) (200) (15,044) Administrative expenses (19,025) (555) (19,580) Other operating expenses (427) – (427) Other operating income 3,556 - 3,556 Operating profit 4 15,152 1,434 16,586

Interest receivable and similar income 8 678 320 998 Interest payable and similar cost 9 (1,739) (438) (2,177) Other finance cost – pensions 31 (60) – (60) (1,121) (118) (1,239) Profit on ordinary activities before taxation 14,031 1,316 15,347 Tax (expense) 10 (4,381) (395) (4,776) Profit for the financial year 9,650 921 10,571



30

Income statement (continued)

FRS 101.AG1(k) An entity shall recognise all items of income and expense in a period in profit or loss unless an IFRS requires or permits otherwise, or unless prohibited by the Act.

IAS 1.99,100 An entity shall present an analysis of expenses using a classification based on either the nature of expenses or their function within the entity, whichever provides information that is reliable and more relevant. Entities are encouraged to present this analysis in the statement of comprehensive income or in the separate income statement (if presented).

IAS 1.104 Entities classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense.

Author’s note The income statement must comply with Schedule 1 formats of the Companies Act, and are not IAS accounts.

Turnover S474(1)

Turnover should be shown net of VAT, trade discounts and any other taxes based on turnover.

Operating profit 1 Sch 6 Every profit and loss account of a company must show the amount of the company’s profit or loss on ordinary activities before taxation. IAS 1.85 Additional line items, headings and subtotals shall be presented in the statement of comprehensive income and the separate income statement (if presented) when such presentation is relevant to an understanding of the entity’s financial performance.

Author’s note This requirement is optional and may be made so long as it does not conflict with the Companies Act. Entity UK Limited has opted not to make this disclosure.

IAS 1.BC55-BC56 Operating activities’ are not defined in IAS 1 and the revised version of the standard does not require its disclosure. That does not preclude an entity from doing so, but the IASB believes it would be misleading to exclude items of an operating nature from the results from operating activities, for example because they occur irregularly or infrequently or are unusual in amount, or because they do not include cash flows, even if that had been industry practice.

Exceptional Items

IAS 1.97 When items of income and expense are material, their nature and amount shall be disclosed separately.

IAS 1.98

Circumstances that would give rise to separate disclosure of items of income and expense include:

Write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs;

Restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring;

Disposals of items of property, plant and equipment;

Disposals of investments; Discontinued operations; Litigation settlements; and Other reversals of provisions

Author’s note

Although the term “exceptional items” is not an IFRS expression or a Companies Act requirement, it is acceptable to describe items requiring separate disclosure under IAS 1.97 as exceptional, providing that the entity gives its accounting policy relating to exceptional items and an appropriate explanation of the amounts so treated. Entity UK Limited has chosen to show disclose its exceptional items in note 7.

Interest payable and interest receivable IAS 32.35 Interest, dividends, losses and gains relating to a financial instrument or a component that is a financial liability shall be recognised as income or expense in profit or loss. Distributions to holders of an equity instrument shall be debited by the entity directly to equity, net of any related income tax benefit. Transaction costs of an equity transaction shall be accounted for as a deduction from equity, net of any related income tax benefit.

Author’s note Accordingly, dividends relating to the liability component of preference shares are included in finance costs, and not as an appropriation of profit.

Other finance expense – pensions IAS 19.134 Paragraph 120 requires and entity to recognise service cost and net interest on the net defined benefit liability (asset) in profit or loss. This standard does not specify how an entity should present service cost and net interest on the net defined benefit liability (asset). An entity presents those components in accordance with IAS 1.

Author’s note Presentation of the service cost and net interest expense as either a single line item or split into their component parts is acceptable both under IAS 19 and IAS 1. Entity UK Limited has chosen to present the net interest element in other finance expense.

Taxation IAS 12.77 The tax (expense)/income related to profit or loss from ordinary activities shall be presented in the statement of comprehensive income.

Entity UK Limited

IIncome statement for the year ended 31 December 2013

31

Notes

Continuing operations

Restated

Discontinued operations

Total

Restated 2012 2012 2012 £000 £000 £000

Turnover 3 179,587 42,809 222,396 Cost of sales (136,642) (42,052) (178,694) Gross profit 42,945 757 43,702

Distribution costs (14,174) (300) (14,474) Administrative expenses (17,260) (400) (17,660) Other operating expenses (1,088) - (1,088) Other operating income 3,405 - 3,405 Operating profit 4 13,828 57 13,885

Interest receivable and similar income 8 706 346 1,052 Interest payable and similar cost 9 (1,525) (435) (1,960) Other finance cost – pensions 31 (102) – (102) (921) (89) (1,010) Profit on ordinary activities before taxation 12,907 (32) 12,875 Tax (expense)/credit 10 (3,895) 7 (3,888)

Profit/(loss) for the financial year 9,012 (25) 8,987



32

Income Statement (continued)

Discontinued operations IFRS 5.33 (a), FRS 101.AG1(g) An entity shall disclose:

(a) a single amount in the statement of comprehensive income comprising the total of:

the post-tax profit or loss of discontinued operations; and

the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.

(b) an analysis of the single amount in (a) into:

the revenue, expenses and pre-tax profit or loss of discontinued operations;

the related income tax expense as required by paragraph 81(h) of IAS 12;

the gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s ) constituting the discontinued operation; and

the related income tax expense as required by paragraph 81(h) of IAS 122.

The analysis may be shall be presented in the notes or in the statement of comprehensive income. If it is presented in the statement of comprehensive income it shall be presented in a section column identified as relating to discontinued operations, ie separately from continuing operations; a total column shall also be presented. FRS 101.AG1(g) (d) the amount of income from continuing operations and from discontinued operations attributable to owners of the parent. These disclosures may be are presented either in the notes or in the statement of comprehensive income. IFRS 5.32 A discontinued operation is a component of an entity that has either been disposed of, or classified as held for sale, and represents a

separate major line of business or geographical area of operations; or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or is a subsidiary acquired exclusively with a view to resale.

IFRS 5.31 A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In other words, a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use. IFRS 5.34 An entity shall re-present the disclosures in paragraph 33 for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the end of the reporting period for the latest period.

Other income FRS 101.AG1(r)

Paragraph 29 of IAS 20 Accounting for Government Grants and Disclosure of Government assistance is amended as follows:

Grants related to income are presented as part of profit or loss, either separately of under a general heading such as ‘Other income’; alternatively, they are not deducted in reporting the related expense.

Extraordinary items FRS 101.AG1(j) Paragraph 87 of IAS 1 has been amended to read as follows:

Ordinary activities are any activities which are undertaken be a reporting entity as part of its business and such related activities in which the reporting entity engages in furtherance of, incidental to, or arising from, these activities. Ordinary activities include any effects on the reporting entity of any event in the various environments in which it operates, including the political, regulatory, economic and geographical environments, irrespective of the

frequency and unusual nature of the events.

The following paragraph has also been added by FRS 101:

IAS 1.87A

Extraordinary items are material items possessing a high degree of abnormality which arise from events or transactions that fall outside the ordinary activities of the reporting entity and which are not expected to recur. They do not include items occurring within the entity’s ordinary activities that are required to be disclosed by IAS 1.97, nor do they include prior period items merely because they relate to a prior period.

Entity UK Limited

33


CComments on the statement of comprehensive income

34

Statement of comprehensive income IAS 1.81A The statement of profit or loss and other comprehensive income (statement of comprehensive income) shall present, in addition to the profit or loss and other comprehensive income sections: (a) profit or loss; (b) total other comprehensive income; (c) comprehensive income for the period, being the total of profit or loss and other comprehensive income. If an entity presents a separate statement of profit or loss it does not present the profit or loss section in the statement presenting comprehensive income. IAS 1.81B An entity shall present the following items, in addition to the profit or loss and other comprehensive income sections, as allocation of profit or loss and other comprehensive income for the period: (b) comprehensive income for the period attributable to: (i) non-controlling interests, and (ii) owners of the parent.

IAS 1.82A The other comprehensive income section shall present line items for amounts of other comprehensive income in the period, classified by nature (including share of the other comprehensive income of associates and joint ventures accounted for using the equity method) and grouped into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or loss; and (b) will be reclassified subsequently to profit or loss when specific conditions are met. Author’s note The disclosure above is not required if it conflicts with the Companies Act. IAS 1.90 An entity shall disclose the amount of income tax relating to each component of other comprehensive income, including reclassification adjustments, either in the statement of comprehensive income or in the notes.

IAS 1.91 An entity may present components of other comprehensive income either:

net of related tax effects, or before related tax effects with

one amount shown for the aggregate amount of income tax relating to those components.

If the entity elects alternative (b), it shall allocate the tax between the items that might be reclassified subsequently to the profit or loss section and those that will not be reclassified subsequently to the profit and loss account. Author’s note

Entity UK Limited presents items of comprehensive income before tax, with an analysis given in note 11.

IAS 1.92 - 94 An entity shall disclose reclassification adjustments relating to components of other comprehensive income. Other IFRSs specify whether and when amounts previously recognised in other comprehensive income are reclassified to profit or loss. Such reclassifications are referred to in this Standard as reclassification adjustments. A reclassification adjustment is included with the related component of other comprehensive income in the period that the adjustment is reclassified to profit or loss. For example, gains realised on the disposal of available-for-sale financial assets are included in profit or loss of the current period. These amounts may have been recognised in other comprehensive income as unrealised gains in the current or previous periods. Those unrealised gains must be deducted from other comprehensive income in the period in which the realised gains are reclassified to profit or loss to avoid including them in total comprehensive income twice. An entity may present reclassification adjustments in the statement of comprehensive income or in the notes. An entity presenting reclassification adjustments in the notes presents the components of other comprehensive income after any related reclassification adjustments.

IFRS 7.20(a)(ii) An entity shall disclose the following items of income, expense, gains or losses either in the statement of

comprehensive income or in the notes:

net gains or net losses on available-for-sale financial assets, showing separately the amount of gain or loss recognised in other comprehensive income during the period and

the amount removed from equity and recognised in profit or loss for the period;

IFRS 7.23(c)-(d) For cash flow hedges, an entity shall disclose:

the amount that was recognised in other comprehensive income during the period; and

the amount that was removed from equity and included in profit or loss for the period, showing the amount included in each line item in the statement of comprehensive income.

Author’s note Although disclosures are not required under IFRS 7, some of these disclosures are required under 1 Sch 55. IAS 19.120 An entity shall recognise the components of defined benefit cost, except to the extent that another IFRS requires or permits their inclusion in the cost of an asset as follows: (a) service cost in profit or loss; (b) net interest on the net defined benefit liability (asset) in profit or loss; and (c) remeasurements of the net defined benefit liability (asset) in other comprehensive income.

IAS 12.61A Current tax and deferred tax shall be recognised outside profit or loss if the tax relates to items that are recognised, in the same or a different period, outside profit or loss. Therefore, current tax and deferred tax that relates to items that are recognised, in the same or a different period:

in other comprehensive income, shall be recognised in other comprehensive income (examples of such items include revaluations of property, plant and equipment).

Entity UK Limited

SStatement of comprehensive income for the year ended 31 December 2013

35

Notes 2013 2012

Restated £000 £000 Profit for the financial year 10,571 8,987

Other comprehensive income: Items that cannot be reclassified to profit or loss:

Revaluation of land and buildings 13 888 846

Remeasurement gains on defined benefit pension plans 31 385 652 Tax on items relating to components of other comprehensive income 10 (292) (345) Items that can be reclassified to profit or loss:

Available for sale financial assets:

(Losses)/ Gains on valuation of available-for-sale financial assets (5) 8 Reclassification adjustments for disposal of available-for-sale

financial assets – (55) Net loss on available-for-sale financial assets (5) (47)

Cash flow hedges: Reclassification adjustments for gains/losses included in profit or

loss 23 (65) (47) Gains/losses arising during the year 23 58 61 Adjustment for cash flow hedges transferred to the initial carrying

amount of the hedged item 23 4 – (3) 14 Tax on items relating to components of other comprehensive income 10 (10) 93

Other comprehensive income for the year, net of tax 963 1,213

Total comprehensive income for the year 11,534 10,200


CComments on the statement of changes in equity

36

Statement of comprehensive income (continued) IAS 12.61A (continued)

directly in equity, shall be recognised directly in equity (examples of such items are change in accounting policy applied retrospectively, correction of an error or the initial recognition of the equity component of a compound financial instrument).

1 Sch 55

Where financial instruments have been at fair value, there must be stated:

the significant assumptions underlying the valuation models and techniques used where the fair value of the instruments has been determined in accordance with paragraph 37(4)

for each category of financial instrument, the fair value of the instruments in that category and the changes in value

included in the profit and loss account, or

credited to or debited from the fair value reserve, in respect of those instruments, and

for each class of derivatives, the extent and nature of the instruments, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows.

Where any amount is transferred to or from the fair value reserve during the financial year, there must be stated in tabular form:

The amount of the reserve as at the date of the beginning of the financial year and as at the balance sheet date respectively,

The amount transferred to or from reserves during that year, and

The source and application respectively of the amounts so transferred.

Statement of changes in equity IAS 1.106 An entity shall present a statement of changes in equity showing in the statement:

total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests;

for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8;

for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:

- profit or loss;

- other comprehensive income: and

- transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.

IAS 1.106A Disclose for each component of equity, either in the statement in changes of equity or in the notes, an analysis of other comprehensive income by item.

IAS 1.107 An entity shall present, either in the statement of changes in equity or in the notes, the amount of dividends recognised as distributions to owners during the period, and the related amount per share.

IAS 19.122

Remeasurements of net defined benefit liability (asset) recognised in other comprehensive income shall not be reclassified to profit or loss in a subsequent period. However, the entity may transfer those amounts recognised in other comprehensive income within equity.

Entity UK Limited

SStatement of changes in equity for the year ended 31 December 2013

37

Called up share

capital Revaluation

reserve AFS reserve

Cash flow hedge

reserve Retained earnings

Total Equity

£000 £000 £000 £000 £000 £000

At 1 January 2012 19,469 - 109 34 26,281 45,893 Change in accounting policy (note 2.2) – - - - (428) (428)

At 1 January 2012 (restated) 19,469 - 109 34 25,853 45,465

Profit for the financial year - - - - 8,987 8,987 Other comprehensive income – 609 (34) 10 628 1,213 Total comprehensive income for the year – 609 (34) 10 9,615 10,200 Depreciation transfer for land and buildings – (13) – – 13 – Shares issued 8,650 - - - - 8,650 Share issue costs (32) - - - - (32) Shares issued – exercise of options 294 - - - - 294 Exercise of options (proceeds) - - - - 175 175 Share-based payment transactions – – – – 307 307 Equity dividends paid (Note 12) – – – – (2,002) (2,002)

At 31 December 2012 28,381 596 75 44 33,961 63,057

Profit for the financial year - - - - 10,571 10,571 Other comprehensive income – 639 (4) (2) 330 963 Total comprehensive income for the year – 639 (4) (2) 10,901 11,534 Depreciation transfer for land and buildings – (26) – – 26 – Shares issued 10,740 – – – – 10,740 Share issue costs (38) - - - - (38) Arising on exercise of options 353 - - - - 353 Share-based payment transactions – – – – 322 322 Equity dividends paid (Note 12) – – – – (2,153) (2,153)

At 31 December 2013 39,436 1,209 71 42 43,057 83,815


CComments on the Balance sheet

38

Information to be presented in the balance sheet 1 Sch 1, 1 Sch 4(2), (3), 1 Sch 5, 6 Sch 17, 21 The face of every balance sheet must show the items denoted by letters or Roman numbers in the format specified by the Companies Act, unless the amounts are nil in both years. The items must be shown under the headings and subheadings specified by the formats. Items to which Arabic numbers are assigned may be combined on the face of the financial statements if they are either not material or the combination facilitates assessment (providing, in the latter case, the individual items are disclosed in the notes). With balance sheet format 1, the total can be presented at the Total Assets less Current Liabilities level or anywhere thereafter.

1 Sch 4(1) The arrangement and headings of items denoted by an Arabic number in the formats should be adapted to suit any special nature of a company’s business.

1 Sch 3 Greater detail can be given in the financial statements than that prescribed by the formats. New items may be inserted for assets or liabilities not otherwise covered.

1 Sch 2 The format chosen may not be changed from year to year unless, in the directors’ opinion, there are special reasons for a change. Particulars of any change must be disclosed and the reasons for the change must be explained in a note to the financial statements.

IAS 1.53A, FRS 101.AG1(h) A qualifying entity shall comply with the balance sheet format requirements of the Act* instead of paragraphs 54 to 76 of IAS 1 Presentation of Financial Statements, unless the entity applies those paragraphs and the resulting statement of financial position complies with the balance sheet format requirements of the Act. *An entity shall apply, as required by company law, either part 1 ‘General Rules and Formats’ of Schedule 1 to the Regulations; Part 1 ‘General Rules and Formats’ of Schedule 2 to the Regulations; Part 1 ‘General Rules and Formats’ of

Schedule 3 to the Regulations; or Part 1 ‘General Rules and Formats’ of Schedule1 to the LLP Regulations. IAS 1.54 As a minimum, the statement of financial position shall include line items that present the following amounts:

property, plant and equipment; investment property; intangible assets; financial assets (excluding

investments accounted for using the equity method, trade and other receivables and cash and cash equivalents);

investments accounted for using the equity method;

biological assets; inventories; trade and other receivables; cash and cash equivalents; the total of assets classified as

held for sale and assets included in disposal groups classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations;

trade and other payables; provisions; financial liabilities (excluding

trade and other payables and provisions);

liabilities and assets for current tax, as defined in IAS 12 Income Taxes;

deferred tax liabilities and deferred tax assets as defined in IAS 12;

liabilities included in disposal groups classified as held for sale in accordance with IFRS 5.

Non-controlling interests, presented within equity; and

issued capital and reserves attributable to owners of the parent.

IAS 1.55 Additional line items, headings and subtotals shall be presented in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position.

Current/non-current presentation 1 Sch formats note 5 For each item included under debtors, disclose the amount falling due after more than one year.

1 Sch formats Where applicable, disclose separately amounts shown in the company’s balance sheet due from group undertakings. IAS 1.60 An entity shall present current and non-current assets, and current and non-current liabilities as separate classifications in its statement of financial position, except when a presentation based on liquidity provides information that is reliable and is more relevant. When that exception applies, all assets and liabilities shall be presented in order of their liquidity. IAS 1.61 Whichever method of presentation is adopted, an entity shall disclose the amount expected to be recovered or settled after more than twelve months for each asset and liability line item that combines amounts expected to be recovered or settled (a) no more than twelve months after the reporting period and (b) more than twelve months after the reporting period.

Author’s note As per IAS1.53A a Company should only apply paragraphs 54 to 76 of IAS 1 if this does not conflict with the Act. Entity UK Limited has elected not to apply these paragraphs.

IAS 1.77 An entity shall disclose, either in the statement of financial position or in the notes, further sub classifications of the line items presented, classified in a manner appropriate to the entity’s operations.

Offset IAS 1.32 Assets and liabilities, and income and expenses, shall not be offset unless required or permitted by a Standard or an Interpretation.

Fixed assets 1 Sch 17-20 Fixed assets should be stated at purchase price or production cost, subject to provisions for depreciation or impairment in value, unless they are carried at valuation. Current assets 1 Sch 23, 24 Current assets are to be valued at the lower of purchase price or production cost and net realisable value.

Entity UK Limited

BBalance sheet at 31 December 2013

39

2013

Total

2012 Restated

Total Notes £000 £000

Fixed assets Intangible assets 14 5,793 3,181 Tangible assets 11,13 52,812 43,619 Investments 15 10,693 6,392 69,298 53,192 Current assets Stocks 19 28,571 20,965 Trade debtors 11 26,367 24,094 Amounts owed by associates 2,048 1,951 Amounts owed by entities with significant influence over the

company

651 620 Other debtors 18 14 13 Prepayments and accrued income 176 168 Investments 17 1,368 1,377 Deferred tax assets 10 522 589 Short term deposits 10,000 10,000 Cash at bank and in hand 11 14,632 6,460 84,349 66,237 Creditors: amounts falling due within one year

Bank loans and overdrafts 11,21 9,610 2,377 Trade creditors 11,20 19,493 9,977 Amounts owed to joint ventures 32 30 Government grants 156 149 Income tax payable 3,585 4,437 Other creditors including tax and social security 4,562 4,345 Financial instruments 21 183 174 Accruals and deferred income 220 200 Obligations under finance leases and hire purchase contracts 22 87 83 37,928 21,772 Net current assets 46,421 44,465 Total assets less current liabilities 115,719 97,657 Creditors: amounts falling due after more than one year Bank loans and overdrafts 21 16,506 19,620 Liability component of preference shares 21 2,839 2,696 Government grants 3,209 4,708 Other payables 77 96 Financial instruments 21 33 31 Deferred income 196 165 Obligations under finance leases and hire purchase contracts 22 950 905 23,810 28,221 Provisions for liabilities 10,24 7,370 5,187 Defined benefit pension plan surplus 31 (9) – Defined benefit pension plan deficit 31 733 1,192 Net assets 83,815 63,057


CComments on the Balance sheet

40

Current/non-current presentation IAS 1.66 An entity shall classify an asset as current when:

it expects to realise or intends to sell or consume it in its normal operating cycle;

is held primarily for the purpose of trading;

it is expected to be realised within twelve months after the reporting period; or

it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets should be classified as non-current.

IAS 1.69 A liability shall be classified as current when:

it is expected to be settled in the entity’s normal operating cycle;

it is held primarily for the purpose of trading;

it is due to be settled within twelve months after the reporting period; or

the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

All other liabilities should be classified as non-current.

IAS 1.72 An entity classifies its financial liabilities as current when they are due to be settled within twelve months after the reporting period, even if:

the original term was for a period longer than twelve months; and

an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorised for issue.

Author’s note

As per IAS1.53A a Company should only apply paragraphs 54 to 76 of IAS 1 if this does not conflict with the Act.

The defined benefit asset and liability have been shown with provisions using the guidance from Appendix IV of FRS 17, paragraph 43 which required the pension asset/liability is presented at the foot of the balance sheet separately from and after all other net assets.

Financial assets and liabilities IFRS 7.8(c) The carrying amount of loans and receivables, as defined in IAS 39, shall be disclosed either in the statement of financial position or in the notes.

IFRS 7.6 When IFRS 7 requires disclosures by class of financial instrument, an entity shall group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. An entity shall provide sufficient information to permit reconciliation to the line items presented in the statement of financial position.

Assets and liabilities in disposal groups held for sale IFRS 5.38, 5.39 An entity shall present a non-current asset classified as held for sale and the assets of a disposal group classified as held for sale separately from other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale shall be presented separately from other liabilities in the statement of financial position. Those assets and liabilities shall not be offset and presented as a single amount. Except in the case of a newly acquired subsidiary classified as held for sale on acquisition, the major classes of assets and

liabilities classified as held for sale shall be separately disclosed either on the face of the statement of financial position or in the notes. An entity shall present separately any cumulative income or expense recognised directly in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale.

IFRS 5.40 An entity shall not reclassify or re-present amounts presented for non-current assets or for the assets and liabilities of disposal groups classified as held for sale in the statements of financial position for prior periods to reflect the classification in the statement of financial position for the latest period presented.

Author’s note A one-line presentation of assets and liabilities held for sale on the balance sheet is not permitted by the Regulations. As a practical solution, Entity UK Limited has presented aggregate assets and aggregate liabilities held for sale as a memorandum cross referenced to the detailed analysis in the notes.

Signature and date s414 Only one director needs to sign the balance sheet on behalf of the board. The copy of the balance sheet delivered to the Registrar of Companies must be signed. Every copy of the balance sheet which is laid before the company in general meeting, or which is otherwise circulated, published or issued, shall state the name of the person who signed the balance sheet on behalf of the board.

IAS 10.17 An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact.

Entity UK Limited

BBalance sheet at 31 December 2013

41

2013

2012

Restated Notes £000 £000 Capital and reserves Called up share capital 25 39,436 28,381 Revaluation reserve 27 1,209 596 AFS reserve 27 71 75 Cash flow hedge reserve 27 42 44 Retained earnings 27 43,057 33,961

Total equity 83,815 63,057

Professor M C Holman Chairman P A MacBryde Finance Director 22 February 2014

Included within Net Assets are the following assets and liabilities related to disposal groups classified as held for sale (see note 11)

2013 2012 £000 £000

Assets in disposal groups classified as held for sale 11,811 - Liabilities in disposal groups classified as held for sale 12,627 -


CComments on the notes to the financial statements

42

Authorisation of financial statements and statement of compliance with FRS 101

Authorisation of the financial statements for issue IAS 10.17 An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact. IAS 1.138 An entity shall disclose the following if not disclosed elsewhere in information published with the financial statements:

the domicile and legal form of the entity, its country of incorporation and the address of the registered office (or principal place of business, if different from the registered office);

a description of the nature of the entity’s operations and its principal activities; and

the name of the parent and the ultimate parent of the group.

Author’s note For items in italics above please refer to comments on IAS 1.138 on page 2. IAS 1.51(b), (c) An entity shall display the following information prominently, and repeat it when necessary for the information presented to be understandable:

whether the financial statements cover the individual entity or a group of entities; and

the date of the end of the reporting period or the period covered by the financial statements or notes.

Statement of compliance FRS 101.10

Where a qualifying entity prepares its financial statements in accordance with FRS 101, it shall state in the notes to the financial statements: ‘These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework’. The financial statements of such an entity do not comply with all of the of EU-adopted IFRSs and should not therefore

contain an unreserved statement of compliance set out in paragraph 3 of IFRS 1 and paragraph 16 of IAS 1.

S400 CA 2006 A company is exempt from the requirement to prepare group accounts if it is itself a subsidiary undertaking and its immediate parent undertaking is established under the law of an EEA State. (1)(a) where the company is a wholly-owned subsidiary of that parent undertaking; (2)(c) the company must disclose in its individual accounts that it is exempt from the obligation to prepare and deliver group accounts.

Basis of preparation and general comments on the notes FRS 101.5(c)

A qualifying entity applying this FRS to its individual financial statements may take advantage of the disclosure exemptions in paragraphs 8 to 9, in accordance with paragraphs 6 to 7, provided that:

(c) It discloses in the notes to its financial statements

a brief narrative summary of the disclosure exemptions adopted; and

the name of the parent of the group in whose consolidated financial statement it is consolidated, and from where those financial statements may be obtained.

Author’s note FRS 101.5(c)(i) only requires a brief narrative summary of the disclosure exemptions taken. However, for illustrative purposes, Entity UK Limited has listed all of the applicable disclosure exemptions. IAS 1.112 The notes shall:

present information about the basis of preparation of the financial statements and the specific accounting policies used in accordance with paragraphs 117-124;

disclose the information required by IFRSs that is not presented elsewhere in the financial statements; and

provide information that is not presented elsewhere in the financial statements, but is

relevant to an understanding of any of them.

IAS 1.113 An entity shall, as far as practicable, present notes in a systematic manner. An entity shall cross-reference each item in the statements of financial position and of comprehensive income, in the separate income statement (if presented), and in the statements of changes in equity and of cash flows to any related information in the notes.

IAS 1.51(d)-(e) An entity shall display the following information prominently, and repeat when necessary for the information presented to be understandable:

the presentation currency, as defined in IAS 21; and

the level of rounding used in presenting amounts in the financial statements.

IAS 1.117 An entity shall disclose in the summary of significant accounting policies:

the measurement basis (or bases) used in preparing the financial statements; and

the other accounting policies used that are relevant to an understanding of the financial statements.

1 Sch 44 Disclose a description of each of the accounting policies that is material in the context of an entity’s financial statements. This must include the policies in respect of depreciation and diminution in value of assets. 1 Sch 45 State whether the financial statements have been prepared in accordance with applicable accounting standards. The particulars of any material departure from those standards should be given along with the reason for it.

Transition Author’s note

As Entity UK Limited has transitioned to FRS 101 from EU-adopted IFRS without material effect a transition note is not required. An example of a transition note for an entity transitioning to FRS 101 from previous UK GAAP is contained in the FRS 101 Illustrative financial statements, Listed UK Group plc, also available on GAAIT.

Entity UK Limited

NNotes to the financial statements at 31 December 2013

43

1. Authorisation of financial statements and statement of compliance with FRS 101 The financial statements of Entity UK Limited (the “Company”) for the year ended 31 December 2013 were authorised for issue by the board of directors on 22 February 2014 and the balance sheet was signed on the board’s behalf by Professor M C Holman and P A MacBryde. Entity UK Limited is incorporated and domiciled in England and Wales. These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards. The company has used a true and fair view override in respect of the non amortisation of goodwill (see note 2.4 (b)). The Company’s financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

The Company has taken advantage of the exemption under s400 of the Companies Act 2006 not to prepare group accounts as it is a wholly owned subsidiary of Listed UK Group PLC. The results of Listed UK Group PLC are included in the consolidated financial statements of Listed UK Group PLC which are available from Homefire House, Ashdown Square, London EC2A 3XS.

The principal accounting policies adopted by the Company are set out in note 2.

2 . Accounting policies

2.1 Basis of preparation The Company transitioned from EU-adopted IFRS to FRS 101 for all periods presented. There were no material amendments on the adoption of FRS 101. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2013. The Company has taken advantage of the following disclosure exemptions under FRS 101: (a) the requirements of paragraphs 45(b) and

46-52 of IFRS 2 Share based Payment, because:

(i) the share based payment arrangement concerns the instruments of another group entity; [for an ultimate parent, the share based payment arrangement must concern its own equity instruments and its separate financial statements must be consolidated financial statements of the group; And, in both cases this exemption requires that equivalent disclosures are included in the consolidated financial statements of the group in which the entity is consolidated. ]

(b) The requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m), B64(n)(ii), B64 (o)(ii), B64(p), B64(q)(ii), B66 and B67of IFRS 3 Business Combinations [this exemption requires that equivalent disclosures are included in the consolidated financial statements of the group in which the entity is consolidated.]

(c) the requirements of paragraph 33 (c) of IFRS 5 Non current Assets Held for Sale and Discontinued Operations [this exemption requires that equivalent disclosures are included in the financial statements of the group in which the entity is consolidated.]

(d) the requirements of IFRS 7 Financial Instruments: Disclosures, [this exemption requires that equivalent disclosures are included in the consolidated financial statements of the group in which the entity is consolidated. ]

(e) the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement,[ this exemption requires that equivalent disclosures are included in the financial statements of the group in which the entity is consolidated.]

(f) the requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of: (i) paragraph 79(a)(iv) of IAS 1; (ii) paragraph 73(e) of IAS 16 Property, Plant and Equipment; (iii) paragraph 118(e) of IAS 38 Intangible Assets; (iv) paragraphs 76 and 79(d) of IAS 40 Investment Property; and (v) paragraph 50 of IAS 41 Agriculture.



44

Basis of preparation and general comments on the notes (continued) FRS 100.12 A qualifying entity applying EU-adopted IFRS prior to the date of transition to FRS 101 will then be preparing Companies Act individual accounts in accordance with section 395(1)(a) of the Act and thus will no longer be preparing IAS individual accounts in accordance with section 395(1)(b) of the Act. It shall consider whether amendments are required to comply with paragraph 5(b) of FRS 101, but it does not reapply the provisions of IFRS 1. Where amendments to the recognition, measurement and disclosure requirements of EU-adopted IFRS in accordance with paragraph 5(b) of FRS 101 are required, the entity shall determine whether the amendments have a material effect on the first financial statements presented. Where there is:

No material effect, the qualifying entity shall disclose that it has undergone transition to FRS 101 and a brief narrative of the disclosure exemptions adopted, for all periods presented; or

A material effect, the qualifying entity’s first financial statements shall include:

a description of the nature of each material change in accounting policy;

reconciliations of its equity determined in accordance with EU-adopted IFRS to its equity determined in accordance with FRS 101 for both the date of transition to FRS 101 and the end of the latest period presented in the entity’s most recent annual financial statements prepared in accordance with EU-adopted IFRS; and

a reconciliation of profit or loss determined in accordance with EU-adopted IFRS to its profit or loss determined in accordance with FRS 101 for the latest period presented in the entity’s most recent annual financial statements prepared in accordance with EU-adopted IFRS.

IAS 1.119 In deciding whether a particular accounting policy should be disclosed, management considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in the reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in IFRS. Some Standards specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow.

IAS 1.121 An accounting policy may be significant because of the nature of the entity’s operations even if amounts shown for current and prior periods are not material. It is also appropriate to disclose each significant accounting policy that is not specifically required by IFRSs, but selected and applied in accordance with IAS 8.

Changes in accounting policy IAS 8.28 When initial application of an IFRS has an effect on the current period or any prior period, would have such an effect except that it is impracticable to determine the amount of the adjustment, or might have an effect on future periods, an entity shall disclose:

the title of the IFRS; when applicable, that the

change in accounting policy is made in accordance with its transitional provisions;

the nature of the change in accounting policy;

when applicable, a description of the transitional provisions;

when applicable, the transitional provisions that might have an effect on future periods;

for the current period and each prior period presented, to the extent practicable, the amount of the adjustment:

– for each financial statement line item affected; and

– if IAS 33 applies to the entity, for basic and diluted earnings per share;

the amount of the adjustment relating to periods before those presented, to the extent practicable; and

if retrospective application required by paragraph 19(a) or (b) is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied.

Financial statements of subsequent periods need not repeat these disclosures.

IAS 8.29 When a voluntary change in accounting policy has an effect on the current period or any prior period, would have an effect on that period except that it is impracticable to determine the amount of the adjustment, or might have an effect on future periods, an entity shall disclose:

the nature of the change in accounting policy;

the reasons why applying the new accounting policy provides reliable and more relevant information;

for the current period and each prior period presented, to the extent practicable, the amount of the adjustment:

– for each financial statement line item affected

the amount of the adjustment relating to periods before those presented, to the extent practicable; and

if retrospective application is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied.


Entity UK Limited


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2.1 Basis of preparation (continued)(g) the requirements of paragraphs 10(d), 10(f),

39(c) and 134-136 of IAS 1 Presentation of Financial Statements;

(h) the requirements of IAS 7 Statement of Cash Flows;

(i) the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;

(j) the requirements of paragraph 17 of IAS 24 Related Party Disclosures;

(l) the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member ; and

(m) the requirements of paragraphs 134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of Assets, [this exemption requires that equivalent disclosures are included in the consolidated financial statements of the group in which the entity is consolidated.]

2.2 Changes in accounting policy and disclosures New and amended standards and interpretations adopted by the Company The following new and amended IFRS and IFRIC interpretations are mandatory as of 1 January 2013 unless otherwise stated and the impact of adoption is described below.

There are no other changes to IFRS effective in 2013 which have a material impact on Entity UK Limited.

IFRS 13 Fair Value Measurement IFRS 13 does not affect when fair value is used, but rather describes how to measure fair value where fair value is required or permitted by IFRS. The company is exempt under FRS 101 from the disclosure requirements of IFRS 13. There was no impact on the company from the adoption of IFRS 13.

IAS 19 Employee Benefits (Revised) The revised standard includes a number of amendments that range from fundamental changes to simple clarifications and re-wording. The more significant changes include the following:

For defined benefit plans, the ability to defer the recognition of actuarial gains and losses (i.e. the corridor approach) has been removed.

Objectives for disclosures of defined benefit plans are explicitly stated in the revised standard, along with new or revised disclosure requirements.

Termination benefits will be recognised at the earlier of when the offer of termination cannot be withdrawn, or when the related restructuring costs are recognised under IAS 37 Liabilities.

The distinction between short-term and other long-term employee benefits will be based on the expected timing of settlement rather than the employees’ entitlement to the benefits.

The impact on the company from the adoption of IAS 19 (Revised) is as follows:

The recognition of unrecognised service cost of £428,000 in retained earnings at 1 January 2012;

An increase in the net interest cost relating to pensions of £52,000 and a corresponding increase in actuarial gains in the year ended 31 December 2012, and an increase in the net interest cost relating to pensions of £40,000 and a corresponding increase in actuarial gains in the year ended 31 December 2013;

Additional disclosures which have been made in note 31.

IAS 1 (Amendment) The impact of the adoption of the amendment to IAS 1 was to disclose other comprehensive income which cannot be reclassified to profit and loss separately from other comprehensive income that can be reclassified to profit and loss.



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Author’s note In some cases, a description has been provided of changes to reporting standards effective in 2013 despite the fact that they are not relevant to the activities of Entity UK Limited and consequently have no financial effect. These illustrative disclosures have been provided to assist users of this publication who might need to implement these new or revised requirements. If in reality an entity concludes that a new requirement is not relevant to its activities, there is no benefit in making such detailed disclosure. Disclosure of significant judgements (apart from those involving estimation) IAS 1.122 An entity shall disclose, in the summary of significant accounting policies or other notes, the judgements, apart from those involving estimations, that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

IAS 1.123 Examples of the judgments (apart from those involving estimations) that management makes and that can significantly affect the amounts recognised in the financial statements include:

whether financial assets are held-to-maturity investments;

whether substantially all the significant risks and rewards of ownership of financial assets and lease assets are transferred to other entities;

whether, in substance, particular sales of goods are financing arrangements and therefore do not give rise to revenue; and

whether the substance of the relationship between the entity and a special purpose entity indicates that the entity controls the special purpose entity.

Author’s note Entities often combine disclosure of accounting judgements and sources

of estimation uncertainty. Whilst this is not prohibited, preparers should acknowledge the very different disclosure requirements.

IAS 1.122 asks entities to describe judgements having a material effect on amounts recognised in the financial statements. This relates therefore to judgements as to whether an asset or liability exists; whether an asset of liability is derecognised; or whether an arrangement should be treated as an equity transaction. The disclosure requirement does not relate to judgements concerning the measurement of those items, which is a matter for the disclosures about estimation uncertainty in IAS 1.125.

This does not mean that every accounting judgement should be disclosed. However, disclosure would be appropriate in cases where the accounting outcome is materially different dependent on the judgement taken. For example, when management has concluded that an entity is not a subsidiary despite holding more than 50% of the voting rights; when a significant sale and leaseback transaction has resulted in derecognition of the related asset; or when an internally developed intangible asset is determined to meet the criteria for recognition.

Disclosure of major sources of estimation uncertainty IAS 1.125 An entity shall disclose in the notes information about the assumptions it makes about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, the notes shall include details of:

their nature; and

their carrying amount as at the end of the reporting period.

IAS 1.129 An entity presents the disclosures in paragraph 125 in a manner that helps users of financial statements to understand the judgements that

management makes about the future and about other sources of estimation uncertainty. The nature and extent of the information provided vary according to the nature of the assumption and other circumstances. Examples of the types of disclosures an entity makes are:

the nature of the assumption or other estimation uncertainty;

the sensitivity of carrying amounts to the methods, assumptions and estimates underlying their calculation, including the reasons for the sensitivity;

the expected resolution of an uncertainty and the range of reasonably possible outcomes within the next financial year in respect of the carrying amounts of the assets and liabilities affected; and

an explanation of changes made to past assumptions concerning those assets and liabilities, if the uncertainty remains unresolved.

IAS 1.130 IAS 1 does not require an entity to disclose budget information or forecasts in making the disclosures in paragraph 125.

Author’s note IAS 1.125 requires disclosures to be presented in a manner that helps users of financial statements to understand the judgements made by management about the future and other key sources of estimation uncertainty. As such, an entity has to tailor the extent of disclosure to its own facts and circumstances.

IAS 27.38

When an entity prepares separate financial statements it shall account for investments in subsidiaries, jointly controlled entities or associates either:

At cost, or

In accordance with IAS 39

An entity shall apply the same accounting for each category of investments.

Entity UK Limited


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2.3 Judgements and key sources of estimation uncertainty The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.

As noted opposite, IAS 1.122 requires disclosures of the significant judgements that affect the amounts recognised in the financial statements.

This does not mean that every accounting judgement should be disclosed. However, disclosure would be appropriate in cases where the accounting outcome is materially different dependent on the judgement taken.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:

Operating lease commitments The Company has entered into commercial property leases as lessor on its investment property portfolio and as a lessee it obtains the use of property, plant and equipment. The classification of such leases as operating or finance lease requires the Company to determine, based on an evaluation of the terms and conditions of the arrangements, whether it retains or acquires the significant risks and rewards of ownership of these assets and accordingly whether the lease requires an asset and liability to be recognised in the balance sheet.

Development costs Development costs are capitalised in accordance with the accounting policy given below. Initial capitalisation of costs is based on management’s judgement that technological and economical feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised management makes assumptions regarding the expected future cash generation of the assets, discount rates to be applied and the expected period of benefits. At 31 December 2013, the

carrying amount of capitalised development costs was £2,718,000 (2012: £2,181,000). The following estimates are dependent upon assumptions which could change in the next financial year and have a material effect on the carrying amounts of assets and liabilities recognised at the balance sheet date: Revaluation of property, plant and equipment and investment properties The Company carries its investment properties at fair value, with changes in fair values being recognised in the income statement. In addition, it measures land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. The Company engaged independent valuation specialists to determine fair value as at 31 December 2013. For the investment property the valuer used a valuation technique based on a discounted cash flow model as there is a lack of comparable market data because of the nature of the property.

The determined fair value of the investment properties is most sensitive to the estimated yield as well as the long term vacancy rate. The key assumptions used to determine the fair value of the investment property are further explained in Note 13.


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Entity UK Limited


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2.3 Judgements and key sources of estimation uncertainty (continued) Fair value of unquoted equity instruments The unquoted equity instruments have been valued based on the valuation guidelines issued by the British Venture Capital Association and are subject to uncertainty due to the lack of observable market prices for these instruments. The fair value of the unquoted equity instruments at 31 December 2013 was £354,000 (2012: £337,000). Taxation Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Further details are contained in note 10.

Pension and other post employment benefits The cost of defined benefit pensions plans and other post employment medical benefits are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long term nature of these plans, such estimates are subject to significant uncertainty. In determining the appropriate discount rate, management considers the interest rates of corporate bonds in the respective currency with at least AA rating, with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The underlying bonds are further reviewed for quality, and those having excessive credit spreads are removed from the population of bonds on which the discount rate is based, on the basis that they do not represent high quality bonds. The mortality rate is based on publicly available mortality tables for the specific country. Future

salary increases and pension increases are based on expected future inflation rates for the respective country. Further details are given in note 31.



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Foreign currency translation 1 Sch 70 Disclose the basis of translation of foreign currency balances and transactions and the treatment of exchange differences.

IAS 21.21 A foreign currency transaction should be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

IAS 21.23 At the end of each reporting period:

foreign currency monetary items shall be translated using the closing date;

non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction; and

non-monetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when the fair value was determined.

IAS 21.28 Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognised in profit or loss in the period in which they arise, except as described in IAS 21.32

IAS 21.32 Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation shall be recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation, as appropriate.

IAS 21.53 When the presentation currency is different from the functional

currency, that fact shall be stated, together with disclosure of the functional currency and the reason for using a different presentation currency.

IAS 21.54

When there is a change in the functional currency of either the reporting entity or a significant foreign operation, that fact and the reason for the change in functional currency shall be disclosed.

IAS 21.55 When an entity presents its financial statements in a currency that is different from its functional currency, it shall describe the financial statements as complying with IFRS only if they comply with all the requirements of each applicable Standard and each applicable Interpretation of those Standards including the translation method.

IAS 21.57

When an entity displays its financial statements or other financial information in a currency that is different from either its functional currency or its presentation currency and the requirements of paragraph 55 are not met, it shall:

clearly identity the information as supplementary information to distinguish it from the information that complies with IFRS;

disclose the currency in which the supplementary information is displayed; and

disclose the entity’s functional currency and the method of translation used to determine the supplementary information.

Intangible assets IFRS 3.18 The acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values. IFRS 3.32 An acquirer shall recognise goodwill as of the acquisition date measured as the excess of:

the aggregate of (i) the consideration transferred

measured in accordance with IFRS, which generally requires acquisition date fair value; (ii) the amount of any non-controlling interest in the acquire measured in accordance with IFRS 3; and (iii) in a business combination achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquire.

the net of the acquisition date amounts of identifiable assets acquired and the liabilities assumed measured in accordance with IFRS 3.

FRS 101.A2.8

A qualifying entity preparing accounts in accordance with FRS 101 may have recognised goodwill which, in accordance with IFRS 3 Business Combinations, is not amortised. The non-amortisation of goodwill conflicts with paragraph 22 of Schedule 1 to the Regulations, which requires acquired goodwill to be reduced by provisions for depreciation calculated to write off the amount systematically over a period chosen by the directors, not exceeding its useful economic life. As such the non-amortisation of goodwill will usually be a departure, for the overriding purpose of giving a true and fair view, from the requirement of paragraph 22 of Schedule 1 to the Regulations. In this circumstance there will need to be given in the notes to the accounts ‘particulars of the departure, the reasons for it and its effect (paragraph 10(2) of Schedule 1 to the Regulations). This is not a new instance of the use of the ‘true and fair override’ as paragraph 18 of FRS 10 Goodwill and intangible assets noted that it would have been required by companies applying paragraph 17 of FRS 10 which states ‘where goodwill and intangible assets are regarded as having indefinite useful lives, they should not be amortised.

Entity UK Limited


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2.4 Significant accounting policies a) Foreign currency translation The company’s financial statements are presented in sterling, which is also the company’s functional currency. Transactions and balances Transactions in foreign currencies are initially recorded in the entity’s functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

b) Intangible assets Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree's identifiable net assets, is determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses.

The UK Companies Act requires goodwill to be reduced by provisions for depreciation on a systematic basis over a period chosen by the directors, its useful economic life. However, under IFRS 3 Business Combinations goodwill is not amortised. Consequently, the company does not amortise goodwill, but reviews it for impairment on an annual basis or whenever there are indicators of impairment. The company is therefore invoking a ‘true and fair view override’ to overcome the prohibition on the non-amortisation of goodwill in the Companies Act. The company is not able to reliably estimate the impact on the financial statements of the true and fair override on the basis that the useful life of goodwill cannot be

predicted with a satisfactory level of reliability, nor can the pattern in which goodwill diminishes be known. Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer's previously held equity interest in the acquiree) over the net identifiable amounts of the assets acquired and the liabilities assumed in exchange for the business combination. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash-generating units (or groups of cash generating units) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which goodwill is allocated shall represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and not be larger than an operating segment before aggregation.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite.



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Intangible assets (continued) IAS 36.80 (a) – (b) For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date,

be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of represent the lowest level within the entity at which the goodwill is monitored for internal management purposes, and

not be larger than an operating segment determined in accordance with IFRS 8 Operating Segments before aggregation.

IAS 38.48 Internally generated goodwill shall not be recognised as an asset.

IAS 38.21 An intangible asset shall be recognised if, and only if:

it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and

the cost of the asset can be measured reliably.

IAS 38.24 An intangible asset shall be measured initially at cost.

IAS 38.118(a),(b), (d) An entity shall disclose the following for each class of intangible assets, distinguishing between internally generated intangible assets and other intangible assets:

whether the useful lives are indefinite or finite and, if finite, the useful lives or the amortisation rates used;

the amortisation methods used for intangible assets with finite useful lives; and

the line item(s) of the income statement in which any amortisation of intangible assets is included.

IAS 38.54 No intangible asset arising from research (or from the research phase of an internal project) shall be recognised. Expenditure on research (or on the research phase of an internal project) shall be recognised as an expense when it is incurred.

IAS 38.57 An intangible asset arising from development (or from the development phase of an internal project) shall be recognised if, and only if, an entity can demonstrate all of the following:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;

its intention to complete the intangible asset and use or sell it;

its ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;

the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

its ability to measure reliably the expenditure attributable to the intangible asset during its development.

FRS 1.1.A2.8 A qualifying entity preparing accounts in accordance with FRS 101 may have recognised goodwill which, in accordance with IFRS 3 Business Combinations, is not amortised. The non-amortisation of goodwill conflicts with paragraph 22 of Schedule 1 to the Regulations, which requires acquired goodwill to be reduced by provisions for depreciation calculated to write off the amount systematically over a period chosen by the directors, not exceeding its useful economic life. As such, the non-amortisation of goodwill will usually be a departure, for the overriding purpose of giving

a true and fair view, from the requirements of paragraph 22 of Schedule 1 to the Regulations. In this circumstance there will need to be given in the notes to the accounts ‘particulars of the departure, the reasons for it and its effect’ (paragraph 10(2) of Schedule 1to the Regulations). This is not a new instance of FRS 10 Goodwill and intangible assets noted that it would have been required by companies applying paragraph 17 of FRS 10 which states ‘Where goodwill and intangible assets are regarded as having indefinite useful economic lives, they should not be amortised.’

Investment property IAS 40.20 An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement.

IAS 40.30, IAS 40.34 Where a property interest is held by a lessee under an operating lease and is classified as an investment property, the fair value model shall be applied. In all other circumstances, an entity shall choose as its accounting policy either the fair value model or the cost model and shall apply that policy to all of its investment property. IAS 40.66 An investment property shall be derecognised (eliminated from the balance sheet) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. IAS 40.69 Gains or losses arising from the retirement or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognised in profit or loss (unless IAS 17 requires otherwise on a sale and leaseback) in the period of the retirement or disposal.

Entity UK Limited


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2.4 Significant accounting policies (continued) b) Intangible assets (continued) Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

Research and development costs Research costs are expensed as incurred. Development expenditure on an individual project is recognised as an intangible asset when the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the asset and the ability to measure reliably the expenditure during development. Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised evenly over the period of expected future benefit. During the period of development, the asset is tested for impairment annually. c) Investment property Investment properties are measured initially at cost, including transaction costs. Subsequent to

initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the period in which they arise. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of investment property, is recognised in the income statement in the period of derecognition. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Company accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.



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Investments IAS 27.38

When an entity prepares separate financial statements it shall account for investments in subsidiaries, joint ventures and associates either

a) at cost, or

b) in accordance with IFRS 9.

The entity shall apply the same accounting for each category of investments.

IFRS 13.91 An entity shall disclose information that helps users of its financial statements assess both of the following:

(a) for assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements.

(b) for recurring fair value of measurements using significant observable inputs (Level 3), the effect of the measurements on profit and loss or other income.

Tangible fixed assets IAS 16.73(a)-(c) The financial statements shall disclose, for each class of property, plant and equipment:

the measurement bases used for determining the gross carrying amount;

the depreciation methods used; and

the useful lives or the depreciation rates used.

IAS 23.8 An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.

IAS 16.29 An entity shall choose either the cost model or the revaluation model as its accounting policy and shall apply that policy to an entire class of property, plant and equipment.

IAS 16.67 The carrying amount of an item of property, plant and equipment shall be derecognised:

on disposal; or

when no future economic benefits are expected from its use or disposal.

IAS 16.68 The gain or loss arising from the derecognition of an item of property, plant and equipment shall be included in profit or loss when the item is derecognised. Gains shall not be classified as revenue.

1 Sch 18

In the case of any fixed asset which has a limited useful life, the amount of (a) its purchase price or production cost, or (b) where it is estimated that any such asset will have a residual value at the end of the period of its useful economic life, its purchase price or production cost less that estimated residual value, must be reduced by provisions for depreciation calculated to write off that amount systematically over the period of the asset’s useful economic life.

1 Sch 33, 3(1)

On revaluation of assets other than investment properties, the revalued amount less any residual value should be depreciated over the remaining useful economic life. Depreciation charged prior to the revaluation should not be written back to the profit and loss account, except to the extent that it relates to a provision for diminution in value which is subsequently found to be unnecessary.

IAS 23.8 An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. An entity shall recognise other borrowing costs as an expense in the period in which it incurs them.


(a) for assets and liabilities that are measured at fair value on a

recurring or non-recurring basis in the statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements.


Impairment of assets IAS 36.9 An entity shall assess at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset.

IAS 36.18 This Standard defines recoverable amount as the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use.

IAS 36.119

A reversal of an impairment loss for an asset other than goodwill shall be recognised immediately in profit or loss, unless the asset is carried at revalued amount in accordance with another IFRS (for example, the revaluation model in IAS 16). Any reversal of an impairment loss of a revalued asset shall be treated as a revaluation increase in accordance with that other IFRS.

FRS 101.AG1(s)

Paragraph 124 of IAS 36 Impairment of Assets is amended as follows:

An impairment loss recognised for goodwill shall not be reversed in a subsequent period, if and only if, the reasons for the impairment loss have ceased to apply.

Entity UK Limited


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2.4 Significant accounting policies (continued) d) Investments

Investments in subsidiaries, associates and joint ventures are held at historical cost less any applicable provision for impairment.

e) Tangible fixed assets Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended. Borrowing costs directly attributable to assets under construction and which meet the recognition criteria in IAS 23 are capitalised as part of the cost of that asset.

Land and buildings are recognised initially at cost and thereafter carried at fair value less depreciation and impairment charged subsequent to the date of the revaluation. Fair value is based on periodic valuations by an external independent valuer and is determined from market-based evidence by appraisal. Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation surplus is credited to the revaluation reserve in equity except to the extent that it reverses a decrease in the carrying value of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent of any existing surplus in respect of that asset in the revaluation reserve.

An annual transfer is made from the revaluation reserve to retained earnings for the difference between depreciation based on the carrying amount of the assets and that based on the assets’ original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal any revaluation reserve relating to the

particular asset being sold is transferred to retained earnings.

Depreciation is provided on all property, plant and equipment, other than land, on a straight-line basis over its expected useful life as follows:

Buildings – over 20 to 50 years

Plant and equipment

– over 5 to 15 years

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the income statement in the period of derecognition.

f) Impairment of non-financial assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount in order to determine the extent of the impairment loss. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses on continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset.



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Assets in disposal groups classified as held for sale IFRS 5.6 A non-current asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Provisions for liabilities IAS 37.14 A provision shall be recognised when:

an entity has a present obligation (legal or constructive) as a result of a past event;

it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

a reliable estimate can be made of the amount of the obligation.

If these conditions are not met, no provision shall be recognised. Leases IAS 17.7 The classification of leases adopted in this Standard is based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. Risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return because of changing economic conditions. Rewards may be represented by the expectation of profitable operation over the asset’s economic life and of gain from appreciation in value or realisation of a residual value.

IAS 17.8 A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

SIC 15.4 The lessor should recognise the aggregate cost of incentives as a reduction of the rental income.

Financial assets IAS 39.45 (a) - (d) For the purpose of measuring a financial asset after initial recognition, IAS 39 classifies financial assets into the following four categories defined in paragraph 9:

financial assets at fair value through profit or loss;

held-to-maturity investments; loans and receivables; and available-for-sale financial

assets. These categories apply to measurement and profit or loss recognition under IAS 39. The entity may use other descriptors for these categories or other categorisations when presenting information on the face of the financial statements. The entity shall disclose in the notes the information required by IFRS 7 and IFRS 13.

Author’s note

Although there are exemptions under FRS 101 from the disclosures of IFRS 7, IAS 1 paragraph 117 requires disclosures on measurement and other policies that are relevant to an understanding of the financial statements.

IFRS 7.21 In accordance with paragraph 117 of IAS 1, an entity discloses, in the summary of significant accounting policies, the measurement basis (or bases) used in preparing the financial statements and the other accounting policies used that are relevant to an understanding of the financial statements. IAS 39.38 A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using trade date accounting or settlement date accounting.

IFRS 7 B5 (a)-(c), (e) IFRS 7.21 requires disclosure of the measurement basis (or bases) used in preparing the financial statements and the other accounting policies used that are relevant to an understanding of the financial statements. For financial

instruments, such disclosure may include:

for financial assets or financial liabilities designated as at fair value through profit or loss

- the nature of the financial assets or financial liabilities the entity has designated as at fair value through profit or loss;

- the criteria for so designating such financial assets or financial liabilities on initial recognition; and

- how the entity has satisfied the conditions in paragraph 9, 11A or 12 of IAS 39 for such designation. For instruments designated in accordance with paragraph (b)(i) of the definition of a financial asset or financial liability at fair value through profit or loss in IAS 39, that disclosure includes a narrative description of the circumstances underlying the measurement or recognition inconsistency that would otherwise arise. For instruments designated in accordance with paragraph (b)(ii) of the definition of a financial asset or financial liability at fair value through profit or loss in IAS 39, that disclosure includes a narrative description of how designation at fair value through profit or loss is consistent with the entity’s documented risk management or investment strategy.

the criteria for designating financial assets as available-for-sale.

whether regular way purchases and sales of financial assets are accounted for at trade date or at settlement date.

how net gains or net losses on each category of financial instrument are determined, for example, whether the net gains or net losses on items at fair value through profit or loss include interest or dividend income.

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2.4 Significant accounting policies (continued) For assets where an impairment loss subsequently reverses, the carrying amount of the asset or cash generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined, net of depreciation, had no impairment losses been recognised for the asset or cash generating unit in prior years. A reversal of impairment loss is recognised immediately in the income statement, unless the asset is carried at a revalued amount when it is treated as a revaluation increase.

g) Assets in disposal groups classified as held for sale Non-current assets and disposal groups are classified as held for sale only if available for immediate sale in their present condition, a sale is highly probable and expected to be completed within one year from the date of classification. Such assets are measured at the lower of carrying amount and fair value less costs to sell and are not depreciated or amortised.

h) Provisions for liabilities A provision is recognised when the Company has a legal or constructive obligation as a result of a past event; it is probable that an outflow of economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. If the effect is material, expected future cash flows are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability.

Where the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when recovery is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance cost.

i) Leases Company as a lessee Assets held under finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease, with a corresponding liability being recognised for the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the lease

liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. Assets held under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.

Leases where the lessor retains a significant portion of the risks and benefits of ownership of the asset are classified as operating leases and rentals payable are charged in the income statement on a straight line basis over the lease term.

Company as a lessor

Assets leased out under operating leases are included in property, plant and equipment and depreciated over their estimated useful lives. Rental income, including the effect of lease incentives, is recognised on a straight line basis over the lease term.

Where the Company transfers substantially all the risks and benefits of ownership of the asset, the arrangement is classified as a finance lease and a receivable is recognised for the initial direct costs of the lease and the present value of the minimum lease payments. As payments fall due, finance income is recognised in the income statement so as to achieve a constant rate of return on the remaining net investment in the lease.

j) Financial Instruments i) Financial assets Initial recognition and measurement Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.



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Financial assets (continued) IFRIC 9.7 An entity shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is either (a) a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract or (b) a reclassification of a financial asset out of the fair value through profit or loss category, in which case an assessment is required.

IFRIC 9.7A The assessment whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on reclassification of a financial asset out of the fair value through profit or loss category in accordance with IFRIC 9.7 shall be made on the basis of the circumstances that existed on the later date of:

when the entity first became a party to the contract; and

a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required under the contract.

For the purpose of this assessment IAS 39.11(c) shall not be applied (i.e., the hybrid (combined) contract shall be treated as if it had not been measured at fair value with changes in fair value recognised in profit or loss). If an entity is unable to make this assessment the hybrid (combined) contract shall remain classified as at fair value through profit or loss in its entirety. IFRS 7.8 (a),(b) The carrying amounts of each of the following categories, as defined in IAS 39, shall be disclosed either in the statement of financial position or in the notes:

financial assets at fair value through profit or loss, showing separately those designated as such on initial recognition.

held-to-maturity investments

loans and receivables

available-for-sale financial assets

Financial liabilities IAS 39.43 When a financial asset or financial liability is recognised initially, an entity shall measure it at its fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. IAS 39.47(a), (b) After initial recognition, an entity shall measure all financial liabilities at amortised cost using the effective interest method, except for:

financial liabilities at fair value through profit or loss; and

financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or are accounted for using the continuing involvement approach.

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2.4 Significant accounting policies (continued) i) Financial assets (continued) The Company’s financial assets include cash and short-term deposits, trade and other receivables, loan notes, quoted and unquoted financial instruments, and derivative financial instruments.

Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Financial assets at fair value through profit of loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. The Company has not designated any financial assets upon initial recognition as at fair value through profit or loss. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the balance sheet at fair value with changes in fair value recognised in finance revenue or finance expense in the income statement. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognised at fair value and subsequently measured at amortised cost using the effective interest (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance revenue in the income statement. Losses arising from impairment are recognised in the income statement in other operating expenses. Available-for-sale financial assets Available-for-sale financial investments include equity securities. Equity investments classified as available-for sale are those which are neither

classified as held for trading nor designated at fair value though profit or loss. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the unrealised gains and losses reserve. When the investment is derecognised, the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is recognised in the income statement in other operating expenses and removed from the unrealised gains and losses reserve. The Company evaluates its available-for-sale financial assets and whether the ability and intent to sell them in the near term is still appropriate. When the Company is unable to trade these financial assets due to inactive markets and management’s intent significantly changes to do so in the foreseeable future, the Company may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and when the Company has the intent and ability to hold these assets for the foreseeable future or until maturity.

ii) Financial liabilities Initial recognition and measurement Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs. Subsequent measurement The measurement of financial liabilities depends on their classification as follows: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.



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Offsetting of financial instruments IAS 32.42

A financial asset and a financial liability shall be offset and the net amount presented in the statement of financial position when, and only when, an entity:

(a) currently has a legally enforceable right to set off the recognised amounts; and

b) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Fair values IAS 39.AG71 A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. Fair value is defined in terms of a price agreed by a willing buyer and a willing seller in an arm’s length transaction. The objective of determining fair value for a financial instrument that is traded in an active market is to arrive at the price at which a transaction would occur at the end of the reporting period in that instrument (i.e. without modifying or repackaging the instrument) in the most advantageous active market to which the entity has immediate access. However, the entity adjusts the price in the more advantageous market to reflect any differences in counterparty credit risk between instruments traded in that market and the one being valued. The existence of published price quotations in an active market is the best evidence of fair value and when they exist they are used to measure the financial asset or financial liability.

IAS 39.AG74 If the market for a financial instrument is not active, an entity establishes fair value by using a valuation technique. Valuation techniques include using recent arm’s length market transactions

between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the entity uses that technique.

Derivative financial instruments and hedging IFRS 13.91 An entity shall disclose information that helps users of its financial statements assess both of the following:

(a) for assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements.


IAS 39.87

A hedge of the foreign currency risk of a firm commitment may be accounted for as a fair value hedge or a cash flow hedge.

IAS 39.89 If a fair value hedge meets the conditions in paragraph 88 of IAS 39 during the period, it shall be accounted for as follows:

the gain or loss from remeasuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign currency component of its carrying amount measured in accordance with IAS 21 (for a non-derivative hedging instrument) shall be recognised in profit or loss; and

the gain or loss on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and

be recognised in profit or loss. This applies if the hedged item is otherwise measured at cost. Recognition of the gain or loss attributable to the hedged risk in profit or loss applies if the hedged item is an available-for-sale financial asset.

IAS 39.95 If a cash flow hedge meets the conditions in paragraph 88 of IAS 39 during the period, it shall be accounted for as follows:

the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge shall be recognised in other comprehensive income; and

the ineffective portion of the gain or loss on the hedging instrument shall be recognised in profit or loss.

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2.4 Significant accounting policies (continued) ii) Financial liabilities (continued) Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in profit or loss.

Interest bearing loans and borrowings

Obligations for loans and borrowings are recognised when the Company becomes party to the related contracts and are measured initially at the fair value of consideration received less directly attributable transaction costs.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance revenue and finance cost.

Derecognition of financial liabilities A liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in profit or loss.

iii) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

iv) Fair values The fair value of financial instruments that are

traded in active markets at the reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 23.

v) Derivative financial instruments and hedging The Company uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is formally designated and documented at its inception. This documentation identifies the risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective in offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the reporting period for which they were designated.



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Convertible preference shares IAS 32 AG31(a) A common form of compound financial instrument is a debt instrument with an embedded conversion option, such as a bond convertible into ordinary shares of the issuer, and without any other embedded derivative features. IAS 32.28 requires the issuer of such a financial instrument to present the liability component and the equity component separately on the balance sheet, as follows: The issuer’s obligation to make scheduled payments of interest and principal is a financial liability that exists as long as the instrument is not converted. On initial recognition, the fair value of the liability component is the present value of the contractually determined stream of future cash flows discounted at the rate of interest applied at that time by the market to instruments of comparable credit status and providing substantially the same cash flows, on the same terms, but without the conversion option. IAS 32.38. Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components of the instrument in proportion to the allocation of proceeds. Transaction costs that relate jointly to more than one transaction (for example, costs of a concurrent offering of some shares and a stock exchange listing of other shares) are allocated to those transactions using a basis of allocation that is rational and consistent with similar transactions using a basis of allocation that is rational and consistent with similar transactions.

Inventories 1 Sch 24 Stocks and work in progress should be valued at the lower of cost and net realisable value.

1 Sch 28 Companies Act allows the use of FIFO, LIFO, weighted average price and other similar methods for valuing stocks and fungible assets

but the method chosen must appear to the directors to be appropriate. LIFO is not considered to be an appropriate method of stock valuation by IAS 2.

IAS 2.36(a) The financial statements shall disclose the accounting policies adopted in measuring inventories, including the cost formula used.

Trade and other receivables IAS 39.46(a) Loans and receivables shall be measured at amortised cost using the effective interest method.

Cash and cash equivalents Author’s note

Although a company complying with FRS 101 is exempt from IAS 7 disclosures, it still needs to comply with paragraph 117 of IAS 1 which requires the disclosure of significant accounting policies.

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2.4 Significant accounting policies (continued) For the purpose of hedge accounting, hedges are classified as:

fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment; or

cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction;

Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the income statement. The treatment of gains and losses arising from revaluing derivatives designated as hedging instruments depends on the nature of the hedging relationship, as follows: Fair value hedges For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged; the derivative is remeasured at fair value and gains and losses from both are taken to profit or loss. For hedged items carried at amortised cost, the adjustment is amortised through the income statement such that it is fully amortised by maturity. When an unrecognised firm commitment is designated as a hedged item, this gives rise to an asset or liability in the balance sheet, representing the cumulative change in the fair value of the firm commitment attributable to the hedged risk. The Company discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Company revokes the designation. The Company has an interest rate swap that is used as a hedge for the exposure of changes in the fair value of its 8.25% fixed rate secured loan. See note 23 for further details. k) Convertible preference shares The component of the convertible preference shares that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of transaction costs. The corresponding dividends on those shares are charged as interest expense in the income statement. On issuance of the convertible preference shares, the fair value of

the liability component is determined using a market rate for an equivalent non-convertible bond; and this amount is classified as a financial liability measured at amortised cost until it is extinguished on conversion or redemption.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders equity, net of transaction costs. The carrying amount of the conversion option is not remeasured in subsequent years.

Transaction costs are apportioned between the liability and equity components of the convertible preference shares based on the allocation of proceeds to the liability and equity components when the instruments are first recognised.

l) Stocks Stocks are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition, as follows:

Raw materials and consumables - purchase cost on a first-in, first-out basis

Work in progress and finished goods - cost of direct materials and labour plus attributable overheads based on a normal level of activity, excluding borrowing costs

Cost of stock includes the transfer from equity of gains and losses on qualifying cash flow hedges in respect of the purchase of materials. Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.

m) Trade and other debtors Trade debtors, which generally have 30-90 day terms, are recognised and carried at the lower of their original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried at amortised cost. Provision for impairment is made through profit or loss when there is objective evidence that the Company will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.

n) Cash at bank and in hand

Cash and short term deposits in the balance sheet comprise cash at banks and in hand and short term deposits with an original maturity of three months or less.



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Income taxes IAS 12.46 Current tax liabilities (assets) for the current and prior periods shall be measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. IAS 12.15 A deferred tax liability shall be recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from:

the initial recognition of goodwill; or

the initial recognition of an asset or liability in a transaction which: - is not a business combination; and - at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

However, for taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures, a deferred tax liability shall be recognised in accordance with IAS 12.39.

IAS 12.24 A deferred tax asset shall be recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that:

is not a business combination; and

at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

IAS 12.53 Deferred tax assets and liabilities shall not be discounted. IAS 12.61A Current tax and deferred tax shall be recognised outside profit or loss if the tax relates to items that are

recognised, in the same or a different period, outside profit or loss. Therefore, current tax and deferred tax that relates to items that are recognised, in the same or a different period:

in other comprehensive income, shall be recognized in other comprehensive income.

Directly in equity, shall be recognized directly in equity.

Borrowing costs IAS 23.8 An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. An entity shall recognise other borrowing costs as an expense in the period in which it incurs them.

IAS 23.27,28

When application of this Standard constitutes a change in accounting policy, an entity shall apply the Standard to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after the effective date.

However, an entity may designate any date before the effective date and apply the Standard to borrowing costs relating to all qualifying assets for which the commencement date for capitalisation is on or after that date.

Government grants IAS 20.39(a) The accounting policy adopted for government grants, including the methods of presentation adopted in the financial statements should be disclosed.

FRS 101.AG1 (m)

Paragraph 24 of IAS 20 Accounting for Government Grants is amended as follows:

Government grants related to assets, including non-monetary grants at fair value, shall be presented in the statement of financial position either by setting

up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.

FRS 101.AG1(o)

Paragraph 26 of IAS 20 Accounting for Government Grants is amended as follows: One method recognises the The grant is recognised as deferred income that is recognised in profit or loss on a systematic basis over the useful life of the asset.

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2.4 Significant accounting policies (continued) o) Income taxes Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date. Deferred income tax assets and liabilities are offset, only if a legally enforcement right exists to set off current tax assets against current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the company to make a single net payment.

Income tax is charged or credited to other comprehensive income if it relates to items that are charged or credited to other comprehensive income. Similarly, income tax is charged or credited directly to equity if it relates to items that are credited or charged directly to equity. Otherwise income tax is recognised in the income statement.

p) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are

expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

The Company continues to expense borrowing costs relating to construction projects that commenced prior to 1 January 2009. q) Government grants Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Government grants in respect of capital expenditure are credited to a deferred income account and are released as income by equal annual amounts over the expected useful lives of the relevant assets. Grants of a revenue nature are credited to income so as to match them with the expenditure to which they relate.



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Pensions and other post-employment benefits IAS 19.63 An entity shall recognise the net defined benefit liability (asset) in the statement of financial position.

IAS 19.64 When an entity has a surplus in a defined benefit plan, it shall measure the net defined benefit asset at the lower of: (a) the surplus in the defined benefit plan; and (b) the asset ceiling, determined using the discount rate specified in paragraph 83.

IAS 19.67 An entity shall use the projected unit credit method to determine the present value of its defined benefit obligations and the related current service cost and, where applicable, past service cost. IAS 19.120 An entity shall recognise the components of defined benefit cost, except to the extent that another IFRS requires or permits their inclusion in the cost of an asset, as follows:

(a) service cost in profit or loss

(b) net interest on the net defined benefit liability (asset) in profit or loss; and

(c) remeasurements of the net defined benefit liability (asset) in other comprehensive income.

Exceptional items IAS 1.97 When items of income and expense are material, an entity shall disclose their nature and amount separately.

Author’s note Although the term “exceptional item” is not an IFRS expression it is acceptable to describe items requiring separate disclosure under IAS 1.97 as exceptional, provided that the entity gives its accounting policy relating to exceptional items and an appropriate explanation of the amounts so treated.

Entity UK Limited


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2.4 Significant accounting policies (continued) r) Pensions and other post-employment benefits

The Company operates two defined benefit pension plans, both of which require contributions to be made to separately administered funds. The UK scheme was closed to new members in June 2002 from which time membership of a defined contribution plan is available. The Company has also agreed to provide certain additional post-employment healthcare benefits to senior employees in the United States. These benefits are unfunded.

The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligation) and is based on actuarial advice. Past service costs are recognised in profit or loss on a straight-line basis over the vesting period or immediately if the benefits have vested. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured using current actuarial assumptions and the resultant gain or loss recognised in the income statement during the period in which the settlement or curtailment occurs.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.

Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on the net assets (excluding amounts included in net interest), are recognised

immediately in other comprehensive income in the period in which they occur.

The defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is restricted to the present value of any amount the Company expects to recover by way of refunds from the plan or reductions in the future contributions.

Contributions to defined contribution schemes are recognised in the income statement in the period in which they become payable.

s) Exceptional items The Company presents as exceptional items those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.



68

Revenue recognition IAS 18.35(a) An entity shall disclose the accounting policies adopted for the recognition of revenue including the methods adopted to determine the stage of completion of transactions involving the rendering of services.

Entity UK Limited


69

2.4 Significant accounting policies (continued) t) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods.

Within its electronics segment, the Company operates a loyalty points programme, GoodPoints, which allows customers to accumulate points when they purchase products in the Company’s retail stores. The points can then be redeemed for free products, subject to a minimum number of points being obtained.

Consideration received is allocated between the electronic products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined by applying statistical analysis. The fair value of the points issued is deferred and recognised as revenue when the points are redeemed. Rendering of services Revenue from the installation of fire extinguishers, fire prevention equipment and fire retardant fabrics is recognised by reference to the stage of completion. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. Where the contract outcome cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Rental income Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease term.

Interest income Revenue is recognised as interest accrues using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to its net carrying amount.

Dividends Revenue is recognised when the Company’s right to receive payment is established.



70

Share-based payments IFRS 2.10 For equity-settled share-based payment transactions, the entity shall measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity shall measure their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted.

IFRS 2.30 For cash-settled share-based payment transactions, the entity shall measure the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the entity shall remeasure the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.

IFRS 2.21

Market conditions, such as a target share price upon which vesting (or exercisability) is conditioned, shall be taken into account when estimating the fair value of the equity instruments granted. Therefore, for grants of equity instruments with market conditions, the entity shall recognise the goods or services received from a counterparty who satisfies all other vesting conditions (e.g. services received from an employee who remains in service for the specified period of service), irrespective of whether that market condition is satisfied.

IFRS 2.21A

Similarly, an entity shall take into account all non-vesting conditions when estimating the fair value of the equity instruments granted. Therefore, for grants of equity instruments with non-vesting conditions, the entity shall recognise the goods or services received from a counterparty that satisfies all

vesting conditions that are not market conditions (e.g. services received from an employee who remains in service for the specified period of service), irrespective of whether those non-vesting conditions are satisfied.

Changes in accounting estimates IAS 8.39 An entity shall disclose the nature and amount of a change in an accounting estimate that has an effect in the current period or is expected to have an effect in future periods, except for the disclosure of the effect on future periods when it is impracticable to estimate that effect.

IAS 8.40 If the amount of the effect in future periods is not disclosed because estimating it is impracticable, an entity shall disclose that fact.

Errors IAS 8.49 When an entity corrects an error it shall disclose the following:

the nature of the prior period error;

for each prior period presented, to the extent practicable, the amount of the correction:

– for each financial statement line item affected; and

– if IAS 33 applies to the entity, for basic and diluted earnings per share;

the amount of the correction at the beginning of the earliest prior period presented; and

if retrospective restatement is impracticable for a particular prior period, the circumstances that led to the existence of that condition and a description of how and from when the error has been corrected.


Entity UK Limited


71

2.4 Significant accounting policies (continued) u) Share-based payments Equity-settled transactions The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award.

Fair value is determined by an external valuer using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any service and performance (vesting conditions), other than performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting conditions. Like market performance conditions, non-vesting conditions are taken into account in determining the grant date fair value.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market vesting condition or a non-vesting condition, which are treated as vesting irrespective of whether or not the market vesting condition or non-vesting condition is satisfied, provided that all other non-market vesting conditions are satisfied.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market vesting conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition or a non-vesting condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity. Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period.

In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.

Where an equity-settled award is cancelled (including when a non-vesting condition within the control of the entity or employee is not met), it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement. Cash-settled transactions The cost of cash-settled transactions is measured initially at fair value at the grant date using a Black-Scholes model, further details of which are given in Note 26. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in profit or loss for the period.



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Turnover IAS 18.35 (b), (c)

An entity shall disclose:

the amount of each significant category of revenue recognised during the period including revenue arising from:

– the sale of goods; – the rendering of

services; – interest; – royalties; – dividends; and

the amount of revenue arising from exchanges of goods or services included in each significant category of revenue.

IAS 40.75(f), (i) The amounts recognised in profit or loss for: rental income from investment property.

IAS 17.50 Lease income from operating leases shall be recognised in income on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished.

Author’s note The analysis required by IAS 18 is of all revenue recognised in the period; however that might be classified on the face of the income statement. Accordingly, for the purpose of this disclosure, total revenue recognised in the period will include revenue from discontinued operations and should include finance income.

1 Sch 68

If in the course of the financial year the company has carried on business of two or more classes that, in the opinion of the directors, differ substantially from each other, the amount of turnover attributable to each class must be stated and the class described. If in the course of the year the company has supplied markets that, in the opinion of the directors, differ substantially from each other, the amount of turnover attributable to each market must also be stated.

S474

Turnover must be stated net of trade discounts, VAT and similar taxes.

.

Entity UK Limited


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3. Turnover Turnover recognised in the income statement is analysed as follows. 2013 2012 £000 £000 Sale of goods 170,250 161,052 Rendering of services 16,612 16,006 Revenue from redemption of Goodpoints 1,375 1,125 Rental income 1,474 1,404 189,711 179,587 Finance revenue 678 706 Turnover from continuing operations 190,389 180,293

No revenue was derived from exchanges of goods or services (2012: nil). Deferred revenue 2013 2012 £000 £000 At 1 January 365 364 Deferred during the year 1,426 1,126 Released to the income statement (1,375) (1,125) At 31 December 416 365

Current 220 200 Non-current 196 165 The deferred revenue refers to the accrual and release of GoodPoints transactions. As at 31 December 2013, the estimated liability for unredeemed points was approximately £416,000 (2012: £365,000). The Company operates in two principal areas of activity, that of electronics and the manufacture and installation of fire prevention equipment. The investment property activity leases offices and manufacturing sites surplus to the Company’s requirements and does not actively trade in the investment property market. The rubber equipment activity is a discontinued operation. Turnover by area of activity 2013 2012 £000 £000 Fire prevention equipment 115,380 108,795 Electronics 72,857 69,388 Investment property 1,474 1,404 Rubber equipment (discontinued) 39,361 42,809 229,072 222,396 Turnover by geographical area 2013 2012 £000 £000 United Kingdom 193,787 191,452 United States 35,285 30,944 229,072 222,396

Turnover by origin and destination are not materially different.



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Operating profit Research and development IAS 38.126 An entity shall disclose the aggregate amount of research and development expenditure recognised as an expense during the period.

Investment properties IAS 40.75(f) An entity shall disclose the amounts recognised in profit or loss for:

rental income from investment property;

direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period;

direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income during the period; and

the cumulative change in fair value recognised in profit or loss on a sale of investment property from a pool of assets in which the cost model is used into a pool in which the fair value model is used.

Author’s note Rental income from investment properties is disclosed in note 3.

Depreciation and amortisation IAS 1.104 Entities classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense.

IAS 1.105 The choice between the function of expense method and the nature of expense method depends on historical and industry factors and the nature of the entity. Both methods provide an indication of those costs that might vary, directly or indirectly, with the level of sales or production of the entity. Because each method of presentation has

merit for different types of entities, this Standard requires management to select the most relevant and reliable presentation. However, because information on the nature of expenses is useful in predicting future cash flows, additional disclosure is required when the function of expense classification is used. In paragraph 104 of IAS 1, “employee benefits” has the same meaning as in IAS 19 Employee Benefits.

IAS 38.118(d) The line item(s) of the statement of comprehensive income in which any amortisation of intangible assets is included.

Foreign currency translation IAS 21.52(a) An entity shall disclose the amount of exchange differences recognised in profit or loss except for those arising on financial instruments measured at fair value through profit or loss in accordance with IAS 39.

Movements in inventories IAS 2.36(d)-(g) The financial statements shall disclose:

the amount of inventories recognised as an expense during the period;

the amount of any write-down of inventories recognised as an expense in the period;

the amount of any reversal of any write-down that is recognised as a reduction in the amount of inventories recognised as an expense in the period; and

the circumstances or events that led to the reversal of a write-down of inventories in accordance with IAS 2.34.

Operating lease payments IAS 17.35(c) Lessees shall make the following disclosure, for operating leases: lease and sublease payments recognised as an expense in the period, with separate amounts for minimum lease payments, contingent rents, and sublease payments.

Government grants IAS 20.39(b), (c) The following matters shall be disclosed:

the nature and extent of government grants recognised in the financial statements and an indication of other forms of government assistance from which the entity has directly benefited; and

unfulfilled conditions and other contingencies attaching to government assistance that has been recognised.

Impairment IAS 36.126 (a)-(b) An entity shall disclose the following for each class of assets:

the amount of impairment losses recognised in profit or loss during the period and the line item of the statement of comprehensive income in which those impairment losses are included; and

the amount of reversals of impairment losses recognised in profit or loss during the period and the line item of the statement of comprehensive income in which those impairment losses are reversed.

Entity UK Limited


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4. Operating profit This is stated after charging/(crediting):

2013 2012 £000 £000

Research and development costs written off 2,247 2,140Amortisation of deferred development costs** 79 67Total research and development costs 2,326 2,207

Direct expenses for investment properties generating rental income 106 101Direct expenses for investment properties not generating rental income 152 145Decrease in fair value of investment properties 321 306

Depreciation of property, plant and equipment (excluding discontinued operations)

3,706 3,419

Impairment of tangible fixed assets (note 13) 348 –

Net foreign currency exchange differences (68) (65)

Cost of stocks recognised as an expense (included in cost of sales) 137,217 130,731Including: – write-down of stocks to net realisable value 300 286 – reversals of impairments in stocks* – (45)

Operating lease payments – minimum lease payments 255 250 – sublease payments (45) (31)Total lease and sublease payments recognised in the income statement 210 219

Government grants (1,961) (1,053)

* The reversals of impairment in stocks arose as a result of recovery in sales prices.

** Amortisation of intangible assets is included in cost of sales.



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Auditors’ remuneration s494, SI 2011/2198

For companies which are not small or medium disclose the amount of remuneration receivable by the auditors for services other than the auditing of the accounts, analysed under the following headings and separately in respect of services to the company and its subsidiaries on the one hand and to associated pension schemes on the other:

auditing the accounts of any associate* of the company

audit related assurance services;

taxation compliance services;

all other taxation advisory services not falling in taxation above;

internal audit services;

all assurance services not falling within paragraphs 1 to 5;

all services relating to corporate finance transactions entered into, or proposed to be entered into, by or on behalf of the company or any of its associates not falling within any of the paragraphs 1 to 6;

all non-audit services not falling within paragraphs 2 to 7;

* References to ‘associates’ in the categories actually mean subsidiaries (except those subject to severe long term restrictions) and associated pension schemes. Fees to associated pension schemes must be disclosed separately from fees to ‘associates’. In the descriptions used in the accounts, companies may wish to refer to subsidiaries where appropriate to avoid confusion.

When a service could fall under more than one of the above headings, it shall be disclosed under the first mentioned.

Individual accounts of parents that prepare group accounts and subsidiaries are not required to disclose amounts in respect of non-audit services provided the group accounts are required to make the disclosures and the individual accounts state this. The audit fee reported should include amounts for remuneration

receivable by the company’s auditor or its associates for auditing the accounts. TECH 04/11(21.1) If the audit fee changed in the year includes an amount carried out in the previous year by the previous auditor (if for example, the fee has been under-accrued), this amount should be disclosed separately as required by the Regulations. There is no explicit requirement for separate disclosure where there has been no change of auditors.

Exceptional items IAS 1.85 Additional line items, headings and subtotals shall be presented in the statement of comprehensive income and the separate income statement (if presented) when such presentation is relevant to an understanding of the entity’s financial performance.

IAS 1.86 Because the effects of an entity’s various activities, transactions and other events differ in frequency, potential for gain or loss and predictability, disclosing the components of financial performance assists in an understanding of the financial performance achieved and in making projections of future results. Additional line items are included in the statement of comprehensive income and in the separate income statement (if presented) and the entity amends the descriptions used and the ordering of items when this is necessary to explain the elements of financial performance. Factors to be considered include materiality and the nature and function of the items of income and expense.

Author’s note Although the term “exceptional item” is not an IFRS expression it is acceptable to describe items requiring separate disclosure under IAS 1.85 as exceptional, provided that the entity gives its accounting policy relating to exceptional items and an appropriate explanation of the amounts so treated.

Care should be taken to ensure that items identified as exceptional are material and their disclosure is

consistent with the company’s stated accounting policy and with matters discussed in the Directors Report.

Material items of income and expense IAS 1.97 When items of income and expense are material, their nature and amount shall be disclosed separately.

IAS 1.98 Circumstances that would give rise to the separate disclosure of items of income and expense include:

write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs;

restructuring of the activities of an entity and reversals of any provisions for the costs of restructuring;

disposals of items of property, plant and equipment;

disposals of investments; discontinued operations; litigation settlements; and other reversals of provisions.

Entity UK Limited


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5. Auditor’s remuneration The Company paid the following amounts to its auditors in respect of the audit of the financial statements and for other services provided to the Company.

2013 2012 £000 £000

Audit of the financial statements 151 140

The company has taken advantage of the exemption not to disclose amounts paid for non audit services as these are disclosed in the group accounts of its parent Listed Group UK plc.

6. Exceptional items 2013 2012 £000 £000

Recognised in arriving at operating profit from continuing operations: Reorganisation costs 578 1,301 Gain on disposal of property, plant and equipment (559) (602) 19 699 Reorganisation costs

During the year the Company incurred costs of £578,000 (2012: £1,301,000) in respect of reorganisation costs, mainly in rationalising our organisational, information systems and support functions, under the “Efficiency Project”. Since the project relates to transforming the business for the future these costs are not directly related to current operations and are therefore disclosed as

Gain on disposal of property, plant and equipment Gains and losses on property, plant and equipment are classified as exceptional on the basis that they arise from transactions to dispose of assets other than at the end of their usual expected lives or at values significantly different to their previously assessed residual. As such, the amounts earned or charged in any given year is not indicative of a trend in financial performance.



78

Staff costs s411 Disclose the average monthly number of persons employed under contracts of service and an analysis of this total by categories as determined by the directors (having regard to the manner in which the company’s activities are organised).

Staff costs of the above employees must be analysed into their constituent parts:

wages and salaries paid or payable in respect of that year;

social security costs incurred by the company on their behalf; and

other pension costs.

Author’s note “Staff” normally includes the executive directors, being employees under contracts of service.

IAS 1.104 Entities classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense.

IFRS 2.51 To give effect to the principle in IFRS 2.50, the entity shall disclose at least:

the total expense recognised for the period arising from share-based payment transactions in which the goods or services received did not qualify for recognition as assets and hence were recognised immediately as an expense, including separate disclosure of that portion of the total expense that arises from transactions accounted for as equity-settled share-based payment transactions; and

for liabilities arising from share-based payment transactions:

– the total carrying amount at the end of the period; and

– the total intrinsic value at the end of the period of liabilities for which the counterparty’s right to cash or other assets had vested by the

end of the period (e.g. vested share appreciation rights).

IAS 19.46 An entity shall disclose the amount recognised as an expense for defined contributions plans.

Directors’ remuneration 5 Sch 1(1)(a), 9, 15(1) Disclose the aggregate amount of remuneration paid to or receivable by directors in respect of qualifying services. Remuneration includes salary, fees and bonuses, taxed allowances, estimated money value of benefits in kind (excluding the award of or gains from exercising share options, pension contributions or benefits and amounts under long-term incentive schemes) and emoluments in respect of accepting office as director.

“Qualifying services” means services as director of the company and services (while director of the company) as director of any of its subsidiary undertakings or otherwise in connection with the management of the affairs of the company or any of its subsidiary undertakings.

5 Sch 7(4) Amounts to be shown for any financial year are the sums receivable in respect of that year (whenever paid) or in the case of the sums not receivable in respect of a period, the sums paid during the year.

5 Sch 7(2), (3) The amounts include all sums paid by or receivable from the company, the company’s subsidiary undertakings or any other person.

Amounts paid to or receivable by a connected person of a director or a body corporate controlled by a director are to be included as emoluments of the director, but not such that any amount is counted twice.

5 Sch 1(1)(d) Show the aggregate value of any company contributions paid, or treated as paid, to a pension scheme in respect of directors’ qualifying services, being contributions by reference to which the rate or amount of any money purchase

benefits that may become payable will be calculated.

5 Sch 1(2) Disclose the number of directors (if any) to whom retirement benefits are accruing in respect of qualifying services under (a) money purchase schemes and (b) defined benefit schemes.

5 Sch 1(3) For non-quoted companies and non AIM companies disclose the number of directors who exercised share options and, the number of directors in respect of whose qualifying services shares were received or receivable under long term incentive shares.

5 Sch 1(1)(b) Quoted and AIM companies should disclose the aggregate amount of gains made by directors on the exercise of options.

5 Sch 1(1)(c) Disclose the aggregate of:

the amount of money paid to or receivable by directors under long-term incentive schemes in respect of qualifying services; and

the net value of the assets (other than money and share options) received or receivable by the directors under such schemes in respect of such services.

5 Sch 2(1) Where the aggregate of amounts shown under 5 Sch 1(1)(a)-(c) total £200,000 or more disclose:

the amount of the aggregate attributable to the highest paid director; and

the amount of the contributions to money purchase schemes so attributable.

5 Sch 2(2)

Where the highest paid director has performed qualifying services in the year by reference to which the amount of any defined benefits that are payable will be calculated disclose the amount of the accrued pension at the end of the year and the amount of his accrued lump sum.

Entity UK Limited


79

7. Staff costs and directors’ remuneration (a) Staff costs

2013 2012 £000 £000

Wages and salaries 8,621 8,210 Social security costs 896 854 Other pension costs (note 31) 1,352 1,283 Other post-retirement benefit costs 29 28 10,898 10,375

Included in wages and salaries is a total expense of share-based payments of £433,000 (2012: £412,000) of which £322,000 (2012: £307,000) arises from transactions accounted for as equity-settled share-based payment transactions.

Included in other pension costs are £1,232,000 (2012: 1,173,000) in respect of defined benefit schemes and £120,000 (2012: £110,000) in respect of the defined contribution scheme.

The average monthly number of employees during the year was made up as follows:

2013 2012 No. No.

Electronics 164 156 Manufacturing and installation of fire prevention equipment 377 359 Research and development 63 60 Administration 45 43 649 618

(b) Directors’ remuneration

2013 2012 £000 £000

Directors’ remuneration 367 341

Amounts receivable under long term incentive plans 26 54 Number of directors accruing benefits under: Defined benefit schemes 2 2

Number of directors who received shares in respect of qualifying services 4 4

Number of directors who exercised share options 1 2 2013 2012 £000 £000 In respect of the highest paid director: Aggregate remuneration 110 105

Accrued pension at the end of the year 39 26

Accrued lump sum at the end of the year 70 60

The highest paid director exercised share options during the year and also received shares under the group’s long term incentive scheme.



80

Interest receivable and interest payable 1 Sch formats, 1 Sch 66 Disclose interest or similar charges in respect of (a) bank loans and overdrafts; and (b) other loans. There is no requirement to subdivide (a). This does not apply to interest due to the company from group undertakings as this is disclosed separately. IAS 32.40 Dividends classified as an expense may be presented in the statement of comprehensive income or separate income statement (if presented) either with interest on other liabilities or as a separate item. In addition to the requirements of this Standard, disclosure of interest and dividends is subject to the requirements of IAS 1 and IFRS 7. In some circumstances, because of the differences between interest and dividends with respect to matters such as tax deductibility, it is desirable to disclose them separately in the statement of comprehensive income or separate income statement (if presented). Disclosures of the tax effects are made in accordance with IAS 12.

1 Sch 55











Entity UK Limited


81

8. Interest receivable 2013 2012 £000 £000

Bank interest receivable 599 617 Interest income from loan notes 76 77 Total interest income for financial assets measured at amortised cost 675 694 Net gain on financial assets and financial liabilities at fair value through profit

and loss

2

1 Ineffectiveness on derivatives used for hedging 1 11 Total interest receivable and similar income 678 706

9. Interest payable 2013 2012 £000 £000

Bank loans and overdrafts 917 740 Other loans (including the debt component of preference shares) 737 702 Finance charges payable under finance leases and hire purchase contracts 40 40 Total interest expense 1,694 1,482 Unwinding of discount on provisions 45 43 Total interest payable and similar costs 1,739 1,525



82

Income taxes IAS 12.79 The major components of tax expense/(income) shall be disclosed separately.

Author’s note There is no requirement to analyse other current income tax charge between UK Corporation Tax and Foreign tax. However Entity UK Limited has elected to do so.

IAS 12.80 Components of tax (expense)/income may include:

current tax expense/(income);

any adjustments recognised in the period for current tax of prior periods;

the amount of deferred tax expense/(income) relating to the origination and reversal of temporary differences;

the amount of deferred tax expense/(income) relating to changes in tax rates or the imposition of new taxes;

the amount of the benefit arising from a previously unrecognised tax loss, tax credit or temporary difference of a prior period that is used to reduce current tax expense;

the amount of the benefit from a previously unrecognised tax loss, tax credit or temporary difference of a prior period that is used to reduce deferred tax expense;

deferred tax expense arising from the write-down, or reversal of a previous write-down, of a deferred tax asset; and

the amount of tax expense/(income) relating to those changes in accounting policies and errors that are included in profit or loss in accordance with IAS 8, because they cannot be accounted for retrospectively.

Author’s note This reconciliation includes all tax in the income statement, i.e. including amounts relating to discontinued operations.

IAS 12.81 The following shall also be disclosed separately:

the aggregate current and deferred tax relating to items that are charged or credited directly to equity;

the amount of income tax relating to each component of other comprehensive income

an explanation of the relationship between tax expense/(income) and accounting profit in either or both of the following forms:

– a numerical reconciliation between tax (expense)/income and the product of accounting profit multiplied by the applicable tax rate(s), disclosing also the basis on which the applicable tax rate(s) is (are) computed; or

– a numerical reconciliation between the average effective tax rate and the applicable tax rate, disclosing also the basis on which the applicable tax rate is computed;

an explanation of changes in the applicable tax rate(s) compared to the previous accounting period;

the amount (and expiry date, if any) of deductible temporary differences, unused tax losses, and unused tax credits for which no deferred tax asset is recognised in the statement of financial position.

Entity UK Limited


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10. Taxation (a) Tax charged in the income statement

2013 2012 £000 £000

Current income tax: UK corporation tax 4,378 2,840 Foreign tax 567 540 Current income tax charge 4,945 3,380 Amounts overprovided in previous years (55) (52) Total current income tax 4,890 3,328

Deferred tax: Origination and reversal of temporary differences (81) 570 Impact of change in tax laws and rates (33) (10) Total deferred tax (114) 560 Tax expense in the income statement 4,776 3,888 The tax expense in the income statement is disclosed as follows: Income tax expense on continuing operations 4,381 3,895 Income tax expense/(credit) on discontinued operations 395 (7) 4,776 3,888

(b) Tax relating to items charged or credited to other comprehensive income Current tax: Tax on defined benefit pension plans (6) – Total current income tax (6) – Deferred tax: Actuarial gains on defined benefit pension plans 88 150 Net gain/loss on revaluation of cash flow hedges (1) 4 Unrealised gain on available-for-sale financial assets (1) (13) Exchange differences on retranslation of foreign operations 75 (44) Net gain on revaluation of land and buildings 204 195 Change in tax laws and rates (57) (40) Total deferred tax 308 252 Tax expense in the statement of other comprehensive income 302 252



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Income taxes (continued) IAS 12.81

the aggregate amount of temporary differences associated with investments in subsidiaries, branches and associates and interests in joint ventures, for which deferred tax liabilities have not been recognised;

in respect of each type of temporary difference, and in respect of each type of unused tax losses and unused tax credits:

– the amount of the deferred tax assets and liabilities recognised in the statement of financial position for each period presented; and

– the amount of the deferred tax income or expense recognised in profit or loss, if this is not apparent from the changes in the amounts recognised in the statement of financial position; and

in respect of discontinued operations, the tax expense relating to:

– the gain or loss on discontinuance;

– the profit or loss from the ordinary activities of the discontinued operation for the period, together with the corresponding amounts for each prior period presented; and

the amount of income tax consequences of dividends to shareholders of the entity that were proposed or declared before the financial statements were authorised for issue, but are not recognised as a liability in the financial statements.

if a business combination in which the entity is the acquirer causes a change in the amount recognised for its pre-acquisition deferred

tax asset, the amount of that change; and

if the deferred tax benefits acquired in a business combination are not recognised at the acquisition date but are recognised after the acquisition date, a description of the event or change in circumstances that caused the deferred tax benefits to be recognised.

IAS 12.87 It would often be impracticable to compute the amount of unrecognised deferred tax liabilities arising from investments in subsidiaries, branches and associates and interests in joint ventures. Therefore, IAS 12 requires an entity to disclose the aggregate amount of the underlying temporary differences but does not require disclosure of the deferred tax liabilities. Nevertheless, where practicable, entities are encouraged to disclose the amounts of the unrecognised deferred tax liabilities because financial statement users may find such information useful.

IAS 12.82 An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when:

the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences; and

the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates.

Author’s note IAS 12.47 states that deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period. The change in tax rate will have no effect on

current tax liabilities arising prior to the effective date of change; however the change will result in a reduction in deferred tax assets and liabilities. At year-end, an analysis of when the deferred tax balance is expected to reverse and the rate that will be applicable in the period of reversal. The reduction in tax rate will not affect deferred tax expected to reverse prior to the effective date of the change however it will affect subsequent reversals.

Entity UK Limited


85

10. Taxation (continued) (c) Reconciliation of the total tax charge The tax expense in the income statement for the year is higher than the standard rate of corporation tax in the UK of 23.75% (2012: 24.75%). The differences are reconciled below:

2013 2012 £000 £000

Profit from continuing operations before taxation 14,031 12,907 Gain/(loss) from discontinued operations before taxation 1,316 (32) Accounting profit before income tax 15,347 12,875

Tax calculated at UK standard rate of corporation tax of 23.75% (2012: 24.75%) 3,645 3,187

Expenses not deductible for tax purposes 1,213 757 Share-based payment relief 109 (82) Dividends on preference shares included in finance costs 53 53 Non-taxable income (297) (62) Effect of higher taxes on overseas earnings 130 90 Utilisation of previously unrecognised tax losses 11 7 Tax overprovided in previous years (55) (52) Change in tax laws and rate (33) (10) Total tax expense reported in the income statement 4,776 3,888

(d) Unrecognised tax losses The Company has tax losses which arose in the UK of £1,234,000 (2012: £1,198,000) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as there is uncertainty over the recoverability.

(e) Change in Corporation Tax rate

The UK corporation tax rate was reduced from 24% to 23% effective 1 April 2013. Any deferred tax expected to reverse in the year to 31 December 2014 has been remeasured using the rates substantively enacted at 31 December 2013.



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Income taxes (continued) IAS 12.52A, IAS 12.82A In some jurisdictions, income taxes are payable at a higher or lower rate if part or all of the net profit or retained earnings is paid out as a dividend to shareholders of the entity. In some other jurisdictions, income taxes may be refundable or payable if part or all of the net profit or retained earnings is paid out as a dividend to shareholders of the entity. In these circumstances, an entity shall disclose the nature of the potential income tax consequences that would result from the payment of dividends to its shareholders. In addition, the entity shall disclose the amounts of the potential income tax consequences practicably determinable and whether there are any potential income tax consequences not practicably determinable.

IAS 12.87A The above requires an entity to disclose the nature of the potential income tax consequences that would result from the payment of dividends to its shareholders. An entity discloses the important features of the income tax systems and the factors that will affect the amount of the potential income tax consequences of dividends. IAS 12.87B It would sometimes not be practicable to compute the total amount of the potential income tax consequences that would result from the payment of dividends to shareholders. This may be the case, for example, where an entity has a large number of foreign subsidiaries. However, even in such circumstances, some portions of the total amount may be easily determinable. For example, in a consolidated group, a parent and some of its subsidiaries may have paid income taxes at a higher rate on undistributed profits and be aware of the amount that would be refunded on the payment of future dividends to shareholders from consolidated retained earnings. In this case, that refundable amount is disclosed. If applicable, the entity also discloses that there are

additional potential income tax consequences not practicably determinable. In the parent’s separate financial statements, if any, the disclosure of the potential income tax consequences relates to the parent’s retained earnings.

IAS 12.74 An entity shall offset deferred tax assets and deferred tax liabilities if any only if:

the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and

the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

(i) the same taxable entity; or

(ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Entity UK Limited


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10. Taxation (continued) (f) Deferred tax The deferred tax included in the company balance sheet is as follows:

2013 2012 £000 £000 Deferred tax liability Accelerated capital allowances (4,351) (2,629) Revaluations of investment properties (1,240) (1,330) Revaluations of land and buildings (471) (232) Revaluation of available-for-sale financial assets (46) (47) Pensions and post-employment medical benefits (29) – Revaluation in respect of foreign currency cash flow contracts (31) (42) (6,168) (4,280) Deferred tax asset Pensions and post-employment medical benefits 168 286 Revaluation of fair value hedges (interest rate swaps) 9 10 Tax losses carried forward 156 163 Deferred revenue on customer loyalty programmes 71 65 Share-based payment 78 72 Revaluation in respect of foreign currency cash flow contracts 50 48 Liability component of preference shares 95 55 627 699 Disclosed on the balance sheet Deferred tax asset 522 589 Deferred tax liability (6,063) (4,170) (5,541) (3,581)

The balance of deferred tax for tax losses carried forward in 2013 and 2012 relates to capital losses arising in Extinguishers, recoverability of which is dependent on future capital gains in excess of those arising from the reversal of deferred tax liabilities. The capital losses to which the deferred tax asset relates arose on the disposal of property following the closure of one of the operating sites. Negotiations are at an advanced stage for the disposal of the land from this site, and it is anticipated that such disposal will generate a capital gain significantly in excess of the loss arising in the current year, and against which this loss can be relieved. 2013 2012Deferred tax in the income statement £000 £000

Accelerated capital allowances 116 855Revaluations of investment properties (90) (180)Restatement of hedged loan to fair value (1) 11Revaluation of fair value hedges (interest rate swaps) 1 (11)Foreign currency cash flow contracts 2 (9)Tax losses carried forward 4 – Deferred revenue on customer loyalty programmes 5 (11)Share-based payment (12) (44)Pension plans and other post-employment medical benefits (66) (5)Liability component of preference shares (40) (36)Change in tax laws and rates (33) (10) Deferred tax (credit)/expense (114) 560



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Discontinued operations IFRS 5.30 An entity shall present and disclose information that enables users of the financial statements to evaluate the financial effects of discontinued operations and disposals of non-current assets (or disposal groups).

IFRS 5.33(c) An entity shall disclose the net cash flows attributable to the operating, investing and financing activities of discontinued operations. These disclosures may be presented either in the notes or in the financial statements. These disclosures are not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition.

IFRS 5.35 Adjustments in the current period to amounts previously presented in discontinued operations that are directly related to the disposal of a discontinued operation in a prior period shall be classified separately in discontinued operations. The nature and amount of such adjustments shall be disclosed. Examples of circumstances in which these adjustments may arise include the following:

the resolution of uncertainties that arise from the terms of the disposal transaction;

the resolution of uncertainties that arise from and are directly related to the operations of the component before its disposal; and

the settlement of employee benefit plan obligations, provided that the settlement is directly related to the disposal transaction.

IFRS 5.36 If an entity ceases to classify a component of an entity as held for sale, the results of operations of the component previously presented in discontinued operations in accordance with paragraphs 33-35 shall be reclassified and included in income from continuing operations for all periods presented. The amounts for prior periods shall be described as having been re-presented.

IFRS 5.38, 39 The major classes of assets and liabilities classified as held for sale shall be separately disclosed either in the statement of financial position or in the notes, except for a newly acquired subsidiary classified on acquisition as held for sale. An entity shall present separately any cumulative income or expense recognised in other comprehensive income relating to a non-current asset (or disposal group) classified as held for sale.

IFRS 5.41 An entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or sold:

a description of the non-current asset (or disposal group);

a description of the facts and circumstances of the sale, or leading to the expected disposal, and the expected manner and timing of that disposal;

the gain or loss recognised and, if not separately presented in the statement of comprehensive income, the caption in the statement of comprehensive income that includes that gain or loss;

Entity UK Limited


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11. Discontinued operations On 1 December 2013, the Board announced its decision to dispose of the Hose business. Hose manufactures rubber hosepipes and is a separate major line of business within the UK operations. Hose had been operating in an unpredictable product environment, making it difficult for management to derive growth and profitability from the business. The resultant gain or loss on disposal will be recognised within discontinued activities in the income statement in 2014. As at 31 December 2013 final negotiations for the sale were in progress, a sale is highly probable and therefore Hose was classified as a disposal group held for sale.

The major classes of assets and liabilities of the business as at 31 December 2013 were as follows:

2013 £000

Assets Tangible fixed assets 4,399 Trade debtors 6,118 Cash at bank and in hand 1,294 Assets held for resale 11,811

Liabilities Trade creditors 6,572 Bank loans 5,809 Deferred tax liabilities 246 Liabilities classified as held for resale 12,627 Net liabilities of disposal group 816

Bank loans comprised a fixed rate £5,809,000 bank loan having an effective interest rate of 7.5%. It is repayable in full on 1 January 2017.

The net cash flows attributable to Hose are as follows: 2013 2012 £000 £000

Operating cash flows 13 (1,999) Investing cash flows (121) (250) Financing cash flows (436) (436) Net cash outflow (544) (2,685)



90

Discontinued operations (continued) IFRS 5.42 If an asset or disposal group was previously classified as held for resale and during the period it is decided to change the plan to sell the non-current asset (or disposal group), provide a description of the facts and circumstances leading to the decision and its effect on the results for the period and any prior periods presented.

IAS 12.81(h)

The following shall also be disclosed in respect of discontinued operations, the tax expense relating to:

the gain or loss on discontinuance; and

the profit or loss from the ordinary activities of the discontinued operation for the period, together with the corresponding amounts for each prior period presented.

Author’s note In this example Hose does not operate a defined benefit pension scheme. However where disposal units include defined benefit plans, the position regarding settlements or curtailments would have to be considered.

Entity UK Limited


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11. Discontinued operations (continued) Impairment of property, plant and equipment

Immediately before classification as a discontinued operation, the recoverable amount for certain items of tangible fixed assets in Hose was estimated and no impairment was identified. On reclassification, the carrying value of the assets in the disposal group was reduced by £348,000 to reflect their fair value less costs to sell. The fair value of tangible fixed assets was determined from an independent valuation based on recent transactions for similar assets.



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Dividends paid and proposed IAS 1.107 An entity shall present, either in the statement of changes in equity, or in the notes, the amount of dividends recognised as distributions to owners during the period, and the related amount of dividends per share.

IAS 1.137 An entity shall disclose in the notes:

the amount of dividends proposed or declared before the financial statements were authorised for issue but not recognised as a distribution to owners during the period, and the related amount per share; and

the amount of any cumulative preference dividends not recognised.

IAS 10.12 If an entity declares dividends to holders of equity instruments after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period.

1 Sch 43(b)-(c) Disclose:

the aggregate amount of dividends paid in the financial year (other than those for which a liability existed at the immediately preceding balance sheet date); and

the aggregate amount of dividends that the company is liable to pay at the balance sheet date.

1 Sch 43(d) Dividends declared (ie appropriately authorised and no longer at the discretion of the entity) after the balance sheet date but before the financial statements are authorised for issue are not a liability at the balance sheet date but are disclosed in the notes to the financial statements.

1 Sch 62 Disclose the amount and period for which each class of fixed cumulative dividend is in arrears.

Author’s note Please note that the presentation illustrated assumes that the company has applied Table A in its Articles, which requires a final dividend to be approved by the shareholders in general meeting. The determination of the point at which an equity dividend becomes a legal liability in discussed in TECH 02/10 “Guidance on the Determination of Realised Profits and losses in the context of Distributions under the Companies Act 2006”.

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12. Dividends paid and proposed 2013 2012

£000 £000 Declared and paid during the year: Equity dividends on ordinary shares: Final dividend for 2012: 5.01p (2011: 5.58p) 1,087 1,112 First Interim for 2013: 2.41p (2012: 4.58p) 523 890 Second Interim for 2013: 2.35p (2012: Nil) 543 – Dividends paid 2,153 2,002

Proposed for approval by shareholders at the AGM: Final dividend for 2013: 3.52p (2012: 5.01p) 874 1,087



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Tangible fixed assets IAS 16.73(d), (e) The financial statements shall disclose, for each class of property, plant and equipment:

the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period;

a reconciliation of the carrying amount at the beginning and end of the period showing:

– additions; – assets classified as held

for sale or included in a disposal group classified as held for sale in accordance with IFRS 5 and other disposals;

– acquisitions through business combinations;

– increases or decreases resulting from revaluations and from impairment losses recognised or reversed in other comprehensive income in accordance with IAS 36;

– impairment losses recognised in profit or loss in accordance with IAS 36;

– impairment losses reversed in profit or loss in accordance with IAS 36;

– depreciation; – the net exchange

differences arising on the translation of the financial statements from the functional currency into a different presentation currency, including the translation of a foreign operation into the presentation currency of the reporting entity; and

– other changes. Author’s note There is an exemption under FRS 101.8(f) from the requirement to show comparatives for the above information. IAS 16.74 The financial statements shall also disclose:

the existence and amounts of restrictions on title, and property, plant and equipment pledged as security for liabilities;

the amount of expenditures recognised in the carrying amount of an item of property, plant and equipment in the course of its construction;

the amount of contractual commitments for the acquisition of property, plant and equipment; and

if it is not disclosed separately in the statement of comprehensive income, the amount of compensation from third parties for items or property, plant and equipment that were impaired, lost or given up that is included in profit or loss.

Author’s note For the third bullet point in italics above please refer to note 29. IAS 16.79 Users of financial statements may also find the following information relevant to their needs and therefore, entities are encouraged to disclose these amounts:

the carrying amount of temporarily idle property, plant and equipment;

the gross carrying amount of any fully depreciated property, plant and equipment that is still in use;

the carrying amount of property, plant and equipment retired from active use and held for sale in accordance with IFRS 5; and

when the cost model is used, the fair value of property, plant and equipment when this is materially different from the carrying amount.

Impairment IAS 36.130 An entity shall disclose the following for each material impairment loss recognised or reversed during the period for an individual asset, including goodwill, or a cash-generating unit:

the events and circumstances that led to

the recognition or reversal of the impairment loss;

the amount of the impairment loss recognised or reversed;

for an individual asset, the nature of the asset; and if the entity reports segment information in accordance with IFRS 8, the reporting segment to which the asset belongs;

for a cash-generating unit: a description of the cash-generating unit (such as whether it is a product line, a plant, a business operation, a geographical area or a reportable segment); the amount of the impairment loss recognised or reversed by class of assets and, if the entity reports under IFRS 8, by reportable segment; and if the aggregation of assets for identifying the cash-generating unit has changed since the previous estimate of the cash-generating unit’s recoverable amount, a description of the current and former way of aggregating assets and the reasons for changing the way the cash-generating unit is identified;

whether the recoverable amount of the asset (cash-generating unit) is its fair value less costs to sell or its value in use;

if recoverable amount is fair value less costs to sell, the basis used to determine fair value less costs to sell (such as whether fair value was determined by reference to an active market); and

if recoverable amount is value in use, the discount rate(s) used in the current estimate and previous estimate (if any) of value in use.

IAS 36.131 An entity shall disclose the following information for the aggregate impairment losses and the aggregate reversals of impairment losses recognised during the period for which no information is disclosed in accordance with paragraph 130:

the main classes of assets affected by impairment losses and the main classes of assets affected by reversals of impairment losses; and

the main events and circumstances that led to the recognition of these impairment losses and reversals of impairment losses.

Entity UK Limited


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13. Tangible fixed assets

Land and

Plant and

buildings equipment Total £000 £000 £000

Cost or fair value: At 1 January 2013 25,640 32,478 58,118 Foreign currency adjustment 9 114 123 Additions 2,970 10,800 13,770 Acquisition of business - 1,500 1,500 Revaluations 567 – 567 Disposals – (6,810) (6,810) Discontinued operations (Note 11) (4,123) (2,980) (7,103) At 31 December 2013 25,063 35,102 60,165

Depreciation and impairment: At 1 January 2013 1,949 12,550 14,499 Foreign currency adjustment 1 12 13 Provided during the year 694 3,012 3,706 Acquisition of business - 500 500 Impairment loss 187 161 348 Disposals – (4,610) (4,610) Discontinued operations (Note 11) (1,449) (1,255) (2,704) At 31 December 2013 1,382 10,370 11,752

Carrying amount:

at 31 December 2013 23,681 24,732 48,413

at 31 December 2012 23,691 19,928 43,619

Impairment The impairment loss during 2013 of £348,000 arose on reducing the carrying value of assets being reclassified as held for disposal to their recoverable amount, being fair value less estimated selling costs. This relates to the whole cash-generating unit represented by the rubber equipment business segment comprising the assets of Hose and was included in the loss for the year from discontinued operations in 2012. Fair value was determined by independent valuers and was based on recent transactions for similar assets within the same industry.

Assets under construction Included in plant and equipment for the Company at 31 December 2013 was an amount of £1,575,000 (2012: £1,500,000) relating to expenditure for a plant in the course of construction.

Short leasehold buildings

Included within Land and Buildings are short leasehold buildings with a carrying amount of £1,382,000 (2012: £1,567,000).



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Tangible fixed assets (continued) Capitalised borrowing costs IAS 23.26 An entity shall disclose the amount of borrowing costs capitalised during the period; and the capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation.

Finance leases IAS 17.31(a) In respect of finance leases, lessees should disclose, for each class of asset, the net carrying amount at the end of the reporting period.

Revaluations IAS 16.77 If items of property, plant and equipment are stated at revalued amounts, the following shall be disclosed:

the effective date of the revaluation;

whether an independent valuer was involved;

the methods and significant assumptions applied in estimating the items’ fair values;

the extent to which the items’ fair values were determined directly by reference to observable prices in an active market or recent market transactions on arm’s length terms or were estimated using other valuation techniques;

for each revalued class of property, plant and equipment, the carrying amount that would have been recognised had the assets been carried under the cost model; and

the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders.

1 Sch 53

Distinguish between freeholds, long leaseholds (over 50 years unexpired) and short leaseholds.

Investment property IAS 17.49 Lessors shall present assets subject to operating leases in their statements of financial position according to the nature of the asset. IAS 40.75(a)-(e), (g), (h) An entity shall disclose:

whether it applies the fair value model or the cost model;

if it applies the fair value model, whether, and in what circumstances, property interests held under operating leases are classified and accounted for as investment property;

when classification is difficult (see IAS 40.14), the criteria it uses to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of business;

the methods and significant assumptions applied in determining the fair value of investment property, including a statement whether the determination of fair value was supported by market evidence or was more heavily based on other factors (which the entity shall disclose) because of the nature of the property and lack of comparable market data;

the extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. If there has been no such valuation, that fact shall be disclosed;

the existence and amounts of restrictions on the realisability of investment property or the remittance of income and proceeds of disposal; and

contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

IAS 40.76 An entity that applies the fair value model shall disclose a reconciliation of the carrying amount of investment property at the beginning and end of the period showing the following:

additions, disclosing separately those additions resulting from acquisitions and those resulting from subsequent expenditure recognised in the carrying amount of an asset;

additions resulting from acquisitions through business combinations;

assets classified as held for sale or included in a disposal group classified as held for sale in accordance with IFRS 5 and other disposals;

net gains or losses from fair value adjustments;

the net exchange differences arising on the translation of the financial statements into a different presentation currency, and on translation of a foreign operation into the presentation currency of the reporting entity;

transfers to and from inventories and owner-occupied property; and

other changes. Author’s note There is an exemption available under paragraph 8(f) of FRS 101 not to disclose comparatives in respect of the above information. IAS 40.77 When a valuation obtained for investment property is adjusted significantly for the purpose of the financial statements, for example to avoid double-counting of assets or liabilities that are recognised as separate assets and liabilities, the entity shall disclose a reconciliation between the valuation obtained and the adjusted valuation included in the financial statements, showing separately the aggregate amount of any recognised lease obligations that have been added back, and any other significant adjustments. IAS 40.78 In the exceptional cases when an entity measures investment properties using the cost model in IAS 16 the reconciliation required above should disclose amounts relating to that investment property separately from amounts relating to other investment property. For the detailed requirements, please refer to IAS 40.78.

Entity UK Limited


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13. Tangible fixed assets (continued) Capitalised borrowing costs The amount of borrowing costs capitalised during the year ended 31 December 2013 was £128,000 (2012: nil). The rate used to determine the amount of borrowing costs eligible for capitalisation was 10% which is the effective rate of the borrowing used to finance the construction.

Assets held under finance leases The carrying value of plant and equipment held under finance leases and hire purchase contracts at 31 December 2013 was £1,237,000 (2012: £1,178,000). Additions during the year include £132,000 (2012: £45,000) of plant and equipment held under finance leases and hire purchase. Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities. Fair value of land and buildings (excluding investment properties) The Company’s land and buildings (excluding investment properties) were valued by Chartered Surveyors & Co. as at 31 December 2013, on the basis of open market value supported by market evidence in accordance with the Appraisal and Valuation Manual of The Royal Institution of Chartered Surveyors. Revaluations of £888,000 were accounted for in the year. The previous valuation was carried out by Chartered Surveyors & Co on the same basis as at 31 December 2012. These assets have been assessed as level 3 in the fair value hierarchy. The critical assumptions made relating to the fair value of the land and buildings are set out below: Land and buildings would be sold at similar prices to comparable land and buildings in the area. An adjustment has been made to observable prices of comparable buildings in the area to adjust

for differences in the condition of the land and buildings. If the land and buildings were measured using the cost model, the carrying amounts would be as follows:

2013 2012 £000 £000

Cost 13,462 11,769 Accumulated depreciation (1,245) (564) Net carrying amount 12,217 11,205

Included within land and buildings are investment properties held at fair value as follows:

2013 £000

Fair value as at 1 January 8,893 Additions – subsequent expenditure 1,277 Fair value losses (321) Fair value as at 31 December 9,849

The fair value of completed investment property has been determined on a market value basis in accordance with the Appraisal and Valuation Manual of The Royal Institution of Chartered Surveyors. The valuation is prepared on an aggregated ungeared basis. As set out in Note 2.3, in arriving at their estimates of market values, the valuers have used their market knowledge and professional judgment and not only relied on historical transactional comparables. These assets have been assessed as Level 3 assets in the fair value hierarchy.



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Investment Property (continued) IAS 40.79 Additional disclosures are required by an entity that applies the cost model, including the depreciation methods used; gross carrying amount and the accumulated depreciation at the beginning and end of the period; and a reconciliation of the carrying amount of investment property at the beginning and end of the period showing movements similar to those required for property, plant and equipment under IAS 16.73. For the detailed requirements, please refer to IAS 40.79.

Author’s note There is an exemption under FRS 101.8(f) from the requirement to show comparatives for the above information. 1 Sch 34(2), 52

For assets shown at valuation, disclose the years, amounts of valuation, the items affected and the basis of valuation. If made during the current year, also disclose the names or the qualifications of the valuers, and basis of valuation.

1 Sch 34(3)-(4)

For each balance sheet category containing revalued assets, give comparable amounts under the historical cost convention or the differences between the those comparable amounts and the revalued amounts. ‘Comparable amounts’ covers aggregate cost and aggregate depreciation.

1 Sch 58 (3) (a),(b)

In the case of investment property, for each balance sheet item affected there must be shown, either separately or in the notes to the accounts (a) the comparable amounts determined according to the historical cost accounting rules, or (b) the differences between those amounts and the corresponding amounts actually shown in the balance sheet in respect of that item.


(a) for assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements. (b) for recurring fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other comprehensive income for the period.

IFRS 13.92 To meet the objectives in paragraph 91, an entity shall consider all the following: (a) the level of detail necessary to satisfy the disclosure requirements; (b) how much emphasis to place on each of the various requirements; (c) how much aggregation or disaggregation to undertake; and (d) whether users of financial statements need additional information to evaluate the quantitative information disclosed. If the disclosures provided in accordance with this IFRS and other IFRSs are insufficient to meet the objectives in paragraph 91, an entity shall disclose additional information necessary to meet those objectives.

IFRS 13.93 To meet the objectives in paragraph 91, an entity shall disclose, at a minimum, the following information for each class of assets and liabilities (see paragraph 94 for information on determining appropriate classes of assets and liabilities) measured at fair value (including measurements based on fair value within the scope of this IFRS) in the statement of financial position after initial recognition:

(a) for recurring and non-recurring fair value measurements, the fair value measurement at the end of the reporting period, and for non-recurring fair value measurements, the reasons for the measurement. Recurring fair value measurements of assets or liabilities are those that other IFRSs require or permit in the statement of financial position at the end of each reporting period. Non-recurring fair value measurements of assets or liabilities are those that other IFRSs require or permit in the statement of

financial position in particular circumstances (eg when an entity measures an asset held for sale at fair value less costs to sell in accordance with IFRS 5

Non-current Assets Held for Sale and Discontinued Operations because the asset’s fair value less costs to sell is lower than its carrying amount).

(b) for recurring and non-recurring fair value measurements, the level of the fair value hierarchy within which the fair value measurements are categorised in their entirety (Level 1, 2 or 3). (c) for assets and liabilities held at the end of the reporting period that are measured at fair value on a recurring basis, the amounts of any transfers between Level 1 and Level 2 of the fair value hierarchy, the reasons for those transfers and the entity’s policy for determining when transfers between levels are deemed to have occurred (see paragraph 95). Transfers into each level shall be disclosed and discussed separately from transfers out of each level. (d) for recurring and non-recurring fair value measurements categorised within Level 2 and Level 3 of the fair value hierarchy, a description of the valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in valuation technique (eg changing from a market approach to an income approach or the use of an additional valuation technique), the entity shall disclose that change and the reason(s) for making it. For fair value measurements categorised within Level 3 of the fair value hierarchy, an entity shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. An entity is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the entity when measuring fair value (eg when an entity uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure an entity cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the entity.

Entity UK Limited


99

13. Tangible fixed assets (continued) The valuations were performed by Chartered Surveyors & Co., an accredited independent valuer with a recognised and relevant professional qualification and with recent experience in the location and category of the investment property being valued. The critical assumptions made to which the fair value measurement is sensitive are set out below: 2013 2012 Yields (%) 6% - 7% 5% - 6% Inflation rate (%) 3.5% 3% Long term vacancy rate (%) 9% 5% Long term growth in real rental rates (%) 3% 4%

There are no interrelationships between these assumptions.



100

Investment Property (continued)

(f) for recurring fair value measurements categorised within Level 3 of the fair value hierarchy, the amount of the total gains or losses for the period in (e)(i) included in the profit and loss that is attributable to the change in unrealised gains or losses relating to those assets and liabilities held at the end of the reporting period, and the line items(s) in the profit or loss in which those unrealised gains or losses are recognised.

(h)(i) for recurring fair value measurements categorised within level 3 of the fair value hierarchy: for all such measurements, a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. If there are interrelationships between those inputs and other observable inputs used in the fair value measurement, an entity shall also provide a description of those interrelationships and of how they might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement. To comply with that disclosure requirement, the narrative description of the sensitivity to changes in unobservable inputs shall include, at a minimum, the unobservable inputs disclosed when complying with (d).

Intangible assets IAS 38.118(c) An entity shall disclose the following for each class of intangible assets, distinguishing between internally generated intangible assets and other intangible assets (comparative information is required):

the gross carrying amount and any accumulated amortisation (aggregated with accumulated impairment losses) at the beginning and end of the period; and

a reconciliation of the carrying amount at the beginning and end of the period showing:

– additions, indicating separately those from internal development, those acquired separately, and those acquired through business combinations; – assets classified as held for sale or included in a disposal group classified as held for sale in accordance with IFRS 5 and other disposals; – increases or decreases during the period resulting from revaluations and from impairment losses recognised or reversed directly in equity in accordance with IAS 36 (if any); – impairment losses recognised in profit or loss during the period in accordance with IAS 36 (if any); – impairment losses reversed in profit or loss during the period in accordance with IAS 36 (if any); – any amortisation recognised during the period; – net exchange differences arising on the translation of the financial statements into the presentation currency, and on the translation of a foreign operation into the presentation currency of the entity; and – other changes in the carrying amount during the period. Author’s note There is an exemption available under paragraph 8(f) of FRS 101 not to disclose comparatives in respect of the above information. IAS 38.122 An entity shall also disclose:

for an intangible asset assessed as having an indefinite useful life, the carrying amount of that asset and the reasons supporting the assessment of an indefinite useful life. In giving these reasons, the entity shall describe the factor(s) that played a significant role in determining that the asset has an indefinite useful life;

a description, the carrying amount and remaining amortisation period of any individual intangible asset that is material to the entity’s financial statements;

for intangible assets acquired by way of a government grant and initially recognised at fair value: (i) the fair value initially recognised for these assets;(ii) their carrying amount; and (iii) whether they are measured after recognition under the cost model or the revaluation model;

the existence and carrying amounts of intangible assets whose title is restricted and the carrying amounts of intangible assets pledged as security for liabilities; and

the amount of contractual commitments for the acquisition of intangible assets.

s844(3) If development costs are shown as an asset in the individual accounts of a company, give the reasons if any capitalised development costs are not treated as a realised loss.

IAS 38.128 An entity is encouraged, but not required, to disclose the following information:

a description of any fully amortised intangible asset that is still in use; and

a brief description of significant intangible assets controlled by the entity but not recognised as assets because they did not meet the recognition criteria in this Standard or because they were acquired or generated before the version of IAS 38 issued in 1998 was effective.

1 Sch 51 An entity is not required to show corresponding amounts for details of additions, disposals, revaluations, transfers and cumulative depreciation of fixed assets.

I Sch 19(2)

Provision must be made for any fixed asset which has diminished in value if the reduction is expected to be permanent. If the provision is not shown on the face of the profit and loss account, it must be disclosed by way of a note.

Entity UK Limited


101

14. Intangible assets

Development

costs Goodwill Total

£000 £000 £000 Cost: At 31 December 2012 2,562 1,000 3,562 Additions – acquisition of business - 2,075 2,075 Additions – internal development 616 - 616 At 31 December 2013 3,178 3,075 6,253

Depreciation and impairment: At 31 December 2012 381 - 381 Amortisation during the year 79 - 79 At 31 December 2013 460 - 460

Carrying amount:

at 31 December 2013 2,718 3,075 5,793

at 31 December 2012 2,181 1,000 3,181

Goodwill acquired through business combinations has been allocated to two cash-generating units, which are also operating segments, as follows:

electronics cash-generating unit; and fire prevention equipment cash-generating unit.

These represent the lowest level within the Company at which goodwill is monitored for internal management purposes. Electronics cash-generating unit The recoverable amount of the electronics unit has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by the board covering a three-year period.

The projected cash flows have been updated to reflect the decreased demand for products and services. The discount rate applied to cash flow projections is 11.3% (2012: 10.3%) and cash flows beyond the 3-year budget are extrapolated using a 2.6% growth rate (2012: 3.1%) that is the same as the long-term average growth rate for electronics.

Fire prevention equipment cash-generating unit The recoverable amount of the fire prevention equipment unit is determined on a value in use basis using cash flow projections based on financial budgets approved by the board covering a two-year period.

The projected cash flows have been updated to reflect the decreased demand for products and services. The discount rate applied to the cash flow projections is 11.3% (2012: 10.3%). The growth rate used to extrapolate the cash flows of the fire prevention unit beyond the two-year period is 4.5% (2012: 4.5%).



102

Intangible assets (continued) 1 Sch 22(4)

The method and period of amortisation of goodwill and intangible assets should be disclosed and the reason for choosing that period.

Revaluations

IAS 38.124 If intangible assets are accounted for at revalued amounts, an entity shall disclose the following:

by class of intangible assets: (i) the effective date of the revaluation; (ii) the carrying amount of revalued intangible assets; and (iii) the carrying amount that would have been recognised had the revalued class of intangible assets been measured after recognition using the cost model;

the amount of the revaluation surplus that relates to intangible assets at the beginning and end of the period, indicating the changes during the period and any restrictions on the distribution of the balance to shareholders; and

the methods and significant assumptions applied in estimating the assets’ fair values.

Impairment of goodwill and intangibles with indefinite lives IAS 36.134(a)-(e) For each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant in comparison with the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives, disclose:

the carrying amount of goodwill allocated to the unit (group of units);

the carrying amount of intangible assets with indefinite useful lives allocated to the unit (group of units); and

the basis on which the unit’s (group of units’) recoverable amount has

been determined (i.e. value in use or fair value less costs to sell).

If the units (group of units) recoverable amount is based on value in use, provide:

a description of each key assumption on which management has based its cash flow projections for the period covered by the most recent budgets/forecasts. Key assumptions are those to which the unit’s (group of units’) recoverable amount is most sensitive;

a description of management’s approach to determining the value(s) assigned to each key assumption, whether those value(s) reflect past experience or, if appropriate, are consistent with external sources of information, and, if not, how and why they differ from past experience or external sources of information;

the period over which management has projected cash flows based on financial budgets/forecasts approved by management and, when a period greater than five years is used for a cash-generating unit (group of units) why that longer period is justified;

the growth rate used to extrapolate cash flow projections beyond the period covered by the most recent budgets/forecasts, and the justification for using any growth rate that exceeds the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market to which the unit (group of units) is dedicated; and

the discount rate(s) applied to the cash flow projections.

If recoverable amount is based on fair value less costs to sell, describe the methodology used to determine fair value less costs to sell. If fair value less costs to sell is not determined using an observable market price for the unit (group of units), the following information shall also be disclosed:

a description of each key assumption on which management has based its determination of fair value less costs to sell. Key

assumptions are those to which the units’ (group of units’) recoverable amount is most sensitive; and

a description of management’s approach to determining the value(s) assigned to each key assumption, whether those value(s) reflect past experience or, if appropriate, are consistent with external sources of information, and, if not, how and why they differ from past experience or external sources of information.

Sensitivity to changes in assumptions IAS 36.133 If, the initial allocation of goodwill acquired in a business combination cannot be completed before the end of the annual period in which the business combination is effected, any portion of the goodwill acquired in a business combination during the period that has not been allocated to a cash-generating unit (group of units) at the end of the reporting period, shall be disclosed together with the reasons why that amount remains unallocated.

IAS 36.134(f) If a reasonably possible change in a key assumption on which management has based its determination of the unit’s (group of units’) recoverable amount would cause the unit’s (group of units’) carrying amount to exceed its recoverable amount, disclose:

the amount by which the unit’s (group of units’) recoverable amount exceeds its carrying amount;

the value assigned to the key assumption; and

the amount by which the value assigned to the key assumption must change, after incorporating any consequential effects of that change on the other variables used to measure recoverable amount, in order for the unit’s (group of units’) recoverable amount to be equal to its carrying amount.

Entity UK Limited


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14. Intangible assets (continued) Carrying amount of goodwill allocated to cash-generating units

Electronics Unit Fire Prevention Unit Total

2013 2012 2013 2012 2013 2012

£000 £000 £000 £000 £000 £000

Carrying amount of goodwill 1,575 225 1,500 775 3,075 1,000

Key assumptions used in value in use calculations The calculation of value in use for both electronics and the fire prevention units is most sensitive to the following assumptions:

Gross margin; Discount rates;

Raw materials price inflation; Market share during the budget period; and Growth rate used to extrapolate cash flows beyond the budget period.

Gross margins are based on average values achieved in the three years preceding the start of the budget period. These are increased over the budget period for anticipated efficiency improvements. A factor of 3% per annum was applied for electronics and 5% per annum for the fire prevention unit.

Discount rates reflect management’s estimate of return on capital employed (ROCE) required in each business. This is the benchmark used by management to assess operating performance and to evaluate future capital investment proposals. The rates applied in the electronics and fire prevention unit budgets are based on the spread between current ROCE and base interest rates, adjusted by the forward interest rates at the end of the budget period. Forward rates are obtained from market quotations.

Raw materials price inflation estimates are obtained from published indices for the countries from which materials are sourced. Forecast figures are used if data is publicly available (principally for the UK and US).

Market share assumptions are important because, as well as using industry data for growth rates (as noted below) management assess how the unit’s relative position to its competitors might change over the budget period. Management expects the Group’s share of the electronics market to be stable over the budget period, whereas for the reasons explained above, the board expects the Group’s position relative to its competitors to strengthen following the Extinguishers acquisition.

Growth rate estimates are based on published industry research. For the reasons explained above, the long-term rate used to extrapolate the budget for the fire prevention unit includes an additional element for increasing market share.

Sensitivity to changes in assumptions For the electronics unit, the estimate of recoverable amount is equal to its carrying value and, consequently, any adverse change in any of the above key assumptions would cause the carrying value of the unit to exceed its recoverable amount and a further impairment loss to be recognised as an impairment loss was recognised in respect of this cash generating unit in the current year.

For the fire prevention unit, there are reasonably possible changes in key assumptions which could erode the estimated amount of £2.9 million by which the carrying value of the unit exceeds its recoverable amount. These are discussed below.

Raw materials price inflation – management has considered the possibility of greater than budgeted increases in raw material price inflation which might result from supply being unable to satisfy increases in demand anticipated as a result of regulatory changes as discussed in the operating and financial review. Budgeted price inflation lies within a range of 2.3% to 3.5%, (2010: 2.5% to 3.7%) depending on the country from which materials are purchased. Should the Group be unable to pass on or absorb through efficiency improvements additional cost increases of 3.1% (2010: 3.2%), value in use would be reduced to a value equal to its carrying amount.



104

Investments IFRS 7.8(a)-(d) The carrying amounts of each of the following categories, as defined in IAS 39, shall be disclosed either in the statement of financial position or in the notes:

financial assets at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those classified as held for trading in accordance with IAS 39;

held to maturity investments;

loans and receivables; and

available-for-sale financial assets

IFRS 7.9(a)-(d) If the entity has designated a loan or receivable (or group of loans or receivables) as at fair value through profit or loss, in accordance with paragraph IAS 39.9 it shall disclose:

the maximum exposure to credit risk of the loan or receivable (or group of loans or receivables) at the end of the reporting period;

the amount by which any related credit derivatives or similar instruments mitigate that maximum exposure to credit risk;

the amount of change, during the period and cumulatively, in the fair value of the loan or receivable (or group of loans or receivables) that is attributable to changes in the credit risk of the financial asset determined either:

(i) as the amount of change in its fair value that is not attributable to changes in market conditions that give rise to market risk; or

(ii) using an alternative method the entity believes more faithfully represents the amount of change in its fair value that is attributable to changes in the credit risk of the asset.

Changes in market conditions that give rise to market risk include changes in an observed (benchmark) interest rate, commodity price, foreign exchange rate or index of price or rates.

the amount of the change in the fair value of any related credit derivatives or similar instruments that has occurred during the period and cumulatively since the loan or receivable was designated.

IFRS 7.11(a), (b) The entity shall disclose:

the methods used to comply with the requirements in paragraphs IFRS 7.9(c).

if the entity believes that the disclosure it has given to comply with the requirements in paragraph IFRS 7.9(c) does not faithfully represent the change in the fair value of the financial asset attributable to changes in its credit risk, the reasons for reaching this conclusion and the factors it believes are relevant.

IFRS 7.36(c) An entity shall disclose by class of financial instrument information about the credit quality of financial assets that are neither past due nor impaired.

1 Sch 54 Investments (whether fixed or current assets) should be split between listed and unlisted investments. Investments in companies traded on the Alternative Investment Market are not ‘listed’.

Give the market value of listed investments and if the stock exchange value is less than the market value disclose both.

Entity UK Limited


105

14. Intangible assets (continued) Sensitivity to changes in assumptions (continued)

Growth rate assumptions – management recognises that as the regulatory environment for fire prevention equipment changes and the market becomes more profitable, new entrants might be attracted to the market. The effect of new entrants is not expected to impact adversely on forecasts included in the budget, but could yield a reasonably possible alternative to the estimated long term growth rate of 4.5% (2010: 4.5%). A 1.5% (2010: 1.5%) reduction in this growth rate would give a value in use equal to the carrying amount of the fire prevention unit.

15. Investments – non-current 2013 2012

£000 £000

Investment in subsidiaries 5,000 1,000 Investments in associates 764 764 Investments in joint ventures 172 172 Investments at cost 5,936 1,936 Restricted cash deposits 2,509 2,315 Available for sale financial assets 2,248 2,141 4,757 4,456

Total Investments – non current 10,693 6,392

Available-for-sale financial assets Listed equity shares 1,894 1,804 Unlisted equity shares 354 337 2,248 2,141

Available-for-sale financial assets consist of investments in equity shares, which by their nature have no fixed maturity date or coupon rate. For details on how these instruments are fair valued please refer to note 23.



106

Investments (continued) 4 Sch 1, 3, 17 For all subsidiary undertakings held by the parent company and the group (shown separately if different) at the end of the year disclose:

the name of the undertaking;

the country of incorporation if it is outside the UK;

if unincorporated, the address of its principal place of business; and

the number, description, and amount (proportion) of the shares in the company held by or on behalf of subsidiary undertakings.

IAS 27.42

When separate financial statements are prepared for a parent that, in accordance with paragraph 10, elects not to prepare consolidated financial statements, those separate financial statements shall disclose: (a) the fact that the financial

statements are separate financial statements; that the exemption from consolidation has been used; the name and country of incorporation or residence of the entity whose consolidated financial statements that comply with International Financial Reporting Standards have been produced for public use; and the address where those consolidated financial statements are obtainable;

(b) a list of significant investments in subsidiaries, jointly controlled entities and associates, including the name, country of incorporation or residence, proportion of ownership interest and, if different, proportion of voting power held; and

(c) a description of the method used to account for the investments listed under (b).

4 Sch 4-5, 20

For all “significant holdings (more than 20% of the nominal value of any class of shares or if the carrying amount of holding in the company’s individual or group accounts exceeds one-fifth of the company’s or group’s assets) which are not subsidiaries, joint ventures or associates at the end of the financial year for undertakings which are not subsidiaries, disclose:

the name of the undertaking; the country of incorporation,

if outside UK; if unincorporated, the

address of its principal place of business; and

the identity of each class of shares in the undertaking held and the proportion of the nominal value of the shares of that class represented by those shares.

4 Sch 6, 20

For all significant holdings which are not subsidiaries, joint ventures or associated undertakings held by the company or group disclose:

the aggregate amount of its capital and reserves as at the end of its relevant financial year; and

its profit or loss for that year;

The information is also not required if not material or if the subsidiary undertaking is not required to deliver a copy of its balance sheet for its relevant financial year and does not otherwise publish it and the company’s holding is less than 50% of the nominal value of the shares in the undertaking.

s410 When the number of related undertakings is such that the directors are of the opinion that compliance would result in information of excessive length, the information need only be given in respect of those undertakings whose results or financial position principally affected the financial statements and of those subsidiary

undertakings* excluded from consolidation under s405(3) (undertakings excluded on grounds other than materiality). If advantage is taken of this exemption, disclosure of that fact must be made and the full information (both that included in the notes to the accounts and that excluded) must be annexed to the company’s next annual return.

s409(3)-(5) The information required by 4 Sch about related undertakings need not be given if disclosure of an investment in an undertaking incorporated, or carrying on business, outside the UK would be seriously prejudicial and the Secretary of State agrees that the information need not be disclosed. The fact that advantage has been taken of the exemption must be stated.

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15. Investments – non-current (continued)

(a) Investments in subsidiaries

£000

At 1 January 2013 1,000 Additions 4,000 At 31 December 2013 5,000 On 28 November the Company acquired 80% of the voting shares of Caledonian Circuits Limited, a private company based in Scotland. Caledonian Circuits Limited was acquired for consideration of £4m satisfied in equity shares. (b) Investment in associates The Company has a 25% interest in Power Works Limited, a private company which manufactures fire prevention equipment for power stations in the UK. (c) Investment in joint ventures The Company has a 50% interest in Showers Limited, a jointly controlled entity whose principal activity is in the manufacture of fire prevention equipment in the UK.

(d) Details of Group undertakings Details of the investments in which the Company holds 20% or more of the nominal value of any class of share capital at 31 December 2012 and 2013, with the exception of Caledonian circuits which was acquired in 2013, are as follows:

Proportion of voting

rights and

Name of company Holding shares held Nature of Business Subsidiary undertakings: Caledonian Circuits Limited† Ordinary shares 80% Electronics Bright Sparks Limited Ordinary shares 95% Electronics Preference shares 45% Wireworks Inc. Common stock 98% Electronics Sprinklers Inc. Common stock 100% Fire prevention equipment Lightbulbs Limited Ordinary shares 100% Investment property Joint venture: Showers Limited Ordinary shares 50% Fire prevention equipment Associate: Power Works Limited Ordinary shares 25% Electronics † Acquired on 28 November 2013



108

Business Combinations IFRS 3.59 An acquirer shall disclose information that enables users of its financial statements to evaluate the nature and financial effect of business combinations that were effected:

during the period; and

after the balance sheet date but before the financial statements are authorised for issue.

IFRS 3.61 The acquirer shall disclose information that enables users of its financial statements to evaluate the financial effects of adjustments recognised in the current reporting period that relate to business combinations that occurred in the period or previous reporting periods. IFRS 3.B67 To meet the objective in IFRS 3.61, the acquirer shall disclose the following information for each material business combination or in the aggregate for individually immaterial business combinations that are material collectively:

if the initial accounting for a business combination is incomplete for particular assets, liabilities, non-controlling interests or items of consideration and the amounts recognised in the financial statements for the business combination thus have been determined only provisionally:

- the reasons why the initial accounting for the business combination is incomplete;

- the assets, liabilities, equity interests or items of consideration for which the initial accounting is incomplete; and

- the nature and amount of any measurement period adjustments recognised during the reporting period in accordance with IFRS 3.49.

for each reporting period after the acquisition date until the entity collects, sells or otherwise loses the right to a contingent consideration asset, or until the entity settles a contingent consideration liability or the liability is cancelled or expires:

- any changes in the recognised amounts, including any differences arising upon settlement;

- any changes in the range of outcomes (undiscounted) and the reasons for those changes; and

- the valuation techniques and key model inputs used to measure contingent consideration.

for contingent liabilities recognised in a business combination, the acquirer shall disclose the information required by IAS 37.84-85 for each class of provision.

the amount and an explanation of any gain or loss recognised in the current reporting period that both:

- relates to the identifiable assets acquired or liabilities assumed in a business combination that was effected in the current or previous reporting period; and

- is of such a size, nature or incidence that disclosure is relevant to understanding the combined entity's financial statements.

IFRS 3.B64 For business combinations effected during the period, disclose the following:

the name and a description of the acquiree;

the acquisition date;

the percentage of voting equity instruments acquired;

the primary reasons for the business combination and a description of how the acquirer obtained control of the acquire;

a qualitative description of the factors that make up the goodwill recognised, such as expected synergies from combining operations of the acquiree and the acquirer, intangible assets that do not qualify for separate recognition or other factors.

the acquisition-date fair value of the total consideration transferred and the acquisition-date fair value of each major class of consideration, such as

– cash; – other tangible or intangible

assets, including a business or subsidiary of the acquirer;

- liabilities incurred, for example, a liability for contingent consideration; and

- equity interests of the acquirer, including the number of instruments or interests issued or issuable and the method of determining the fair value of those instruments or interests

for contingent consideration arrangements and indemnification assets:

– the amount recognised as of the acquisition date;

- a description of the arrangement and the basis for determining the amount of the payment; and

- an estimate of the range of outcomes (undiscounted) or, if a range cannot be estimated, that fact and the reasons why a range cannot be estimated. If the maximum amount of the payment is unlimited, the acquirer shall disclose that fact.

Entity UK Limited


109

16. Business combinations On 16 July 2013, the company acquired a fire extinguisher consulting business Ring Circuits (the business). The purchase was made to strengthen the company’s offering in this area. The consideration of £5,000,000 was satisfied in cash. The fair values of the identifiable assets and liabilities of the business as at the date of acquisition were:

Book value Fair value

£000 £000 Property, plant and equipment 800 1,000 Trade receivables 1,736 1,736 Cash and short-term deposits 750 750 Trade payables (561) (561) Net assets 2,725 2,925

Goodwill arising on acquisition 2,075 5,000

Discharged by: Cash 4,940 Costs associated with the acquisition, settled in cash 60 5,000

Included in the £2,075,000 of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured due to their nature. These items include customer loyalty and an assembled workforce. None of the goodwill is expected to be deducted for income tax purposes.

The fair value of trade receivables amounts to £1,736,000. None of the trade receivables have been impaired and it is expected that the full contractual amount can be collected.

Transaction costs of £60,000 have been expensed and are included in administrative expenses. From the date of acquisition to 31 December 2013, the Ring circuits business has contributed £10,000,000 of revenue and £750,000 to profit after tax. If the combination had taken place at the beginning of the financial year, the profit of the company would have been £16,840,000 and revenue from continuing operations would have been £209,545,000.



110

IFRS 3.B64 (continued) for acquired receivables:

– the fair value of the receivables;

- the gross contractual amounts receivable; and

- the best estimate at the acquisition date of the contractual cash flows not expected to be collected.

The disclosures shall be provided by major class of receivable, such as loans, direct finance leases and any other class of receivables.

the amounts recognised as of the acquisition date for each major class of assets acquired and liabilities assumed;

for each contingent liability recognised in accordance with IFRS 3.23, the information required in IAS 37.85. If a contingent liability is not recognised because its fair value cannot be measured reliably, the acquirer shall disclose the information required by IAS 37.86 and the reasons why the liability cannot be reliably measured;

the total amount of goodwill that is expected to be deductible for tax purposes;

for transactions that are recognised separately from the acquisition of assets and assumption of liabilities in the business combination in accordance with IFRS 3.51:

– a description of each transaction;

- how the acquirer accounted for each transaction;

- the amounts recognised for each transaction and the line item in the financial statements in which each amount is recognised; and

- if the transaction is the effective settlement of a pre-existing relationship, the method used to determine the settlement amount.

the amount of acquisition related costs recognised as an expense and the line item or items in the statement of comprehensive income in which those expenses are recognised. The amount of

any issue costs not recognised as an expense and how they were recognised shall also be disclosed.

in a bargain purchase, the amount of any gain recognised in accordance with IFRS 3.34 on the face of the statement of financial position and a description of the reasons why the transaction resulted in a gain.

for each business combination in which the acquirer holds less than 100 per cent of the equity interests in the acquiree at the acquisition date:

- the amount of the non-controlling interest in the acquiree recognised at the acquisition date and the measurement basis for that amount; and

- for each non-controlling interest in an acquiree measured at fair value, the valuation techniques and key model inputs used for determining that value.

the following information: - the amounts of revenue and

profit or loss of the acquiree since the acquisition date included in the consolidated statement of comprehensive income for the reporting period; and

- the revenue and profit or loss of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period.

If disclosure of any of the information required above is impracticable, the acquirer shall disclose that fact and explain why the disclosure is impracticable.

Author’s note Paragraph 34 of IFRS 3 has been amended by FRS 102 AG1(c), whereby in a bargain purchase the resulting excess is recognised on the face of the statement of financial position.

Paragraphs 39 and 40 of IFRS 3 have also been amended by FRS 102 AG1 (d) as follows: When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the acquirer shall include the estimated amount of the that adjustment in the cost of the combination at the acquisition date if the adjustment is probable and can be measured reliably. However, if the potential adjustment is not recognised at the acquisition date but subsequently becomes probable and can be measured reliably, the additional consideration shall be treated as a cost to the combination. IFRS 3.B65 For individually immaterial business combinations occurring during the reporting period that are material collectively, the acquirer shall disclose in aggregate the information required by IFRS 3.B64(e)-(q).

IFRS 3.B66 If the acquisition date of a business combination is after the end of the reporting period but before the financial statements are authorised for issue, the acquirer shall disclose the information required by paragraph B64 unless the initial accounting for the business combination is incomplete at the time the financial statements are authorised for issue. In that situation, the acquirer shall describe which disclosures could not be made and the reasons why they cannot be made.

Investments - current Author’s note For disclosure requirements for current investments see pages 105 and 107.

Trade and other debtors IAS 1.78(b) The detail provided in subclassifications depends on the requirements of IFRSs and on the size, nature and function of the amounts involved. The factors set out in IAS 1.58 are also used to decide the basis of subclassification. The disclosures vary for each item, for example: receivables are disaggregated into amounts receivable from trade customers, receivables from related parties, prepayments and other amounts.

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17. Investments – current

2013

2012 £000 £000

Financial assets – current Forward currency derivative contracts 102 91 Forward currency hedging contracts 58 61 Loan notes 1,208 1,225 1,368 1,377 Loan notes The loan notes are classified as loans and receivables and have a maturity date of 30 June 2014. Interest is earned at a fixed rate of 6.3% per annum. The loan notes are neither past due nor impaired and at 31 December 2013 (31 December 2012: neither past due nor impaired), the loan notes had an investment grade credit rating, with an average Standard and Poor’s or equivalent rating of A (2012: A).

Forward currency contracts

The fair value of forward currency exchange contracts was determined using quoted forward exchange rates matching the maturity of the contracts. While for the interest rate swaps the fair value was determined using discounted cash flow analysis at quoted interest rates.

The cash flow hedges of the expected future sales in January 2014 was assessed as effective and an unrealised gain of £37,000 was included within other comprehensive income.

18. Other debtors

Other debtors comprise directors loans (see note 32).



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Stocks 1 Sch formats, Show separate amounts for all significant stock categories.

1 Sch 28(3)-(5) Disclose the difference, if material, for each category of stock, between carrying value and replacement cost. The most recent purchase price or production cost may be used but only if it constitutes, in the directors’ opinion, a more appropriate standard of comparison than replacement cost. This need not be given if the stock is stated at actual cost.

IAS 2.36(b), (c), (h) The financial statements shall disclose:

the total carrying amount of inventories and the carrying amount in classifications appropriate to the entity;

the carrying amount of inventories carried at fair value less costs to sell; and

the carrying amount of inventories pledged as security for liabilities.

Creditors 1 Sch formats note 13 Show separately amounts due within one year and amounts due in more than one year.

1 Sch formats

Where applicable, disclose separately amounts should in the company’s balance sheet due to group undertakings.

1 Sch 60 The amounts of any provisions for taxation other than deferred taxation should be shown.

1 Sch 61 For each item, also disclose the aggregate amount of secured liabilities and give an indication of the nature of the securities.

Taxation and social security costs 1 Sch formats note 9 The amount for creditors in respect of taxation and social security costs

must be shown separately from the amounts for other creditors.

Financial liabilities IAS 16.74(a) The financial statements should also disclose the existence and amounts of restrictions on title, and property, plant and equipment pledged as security for liabilities.

IFRS 7.7 An entity shall disclose information that enables users of its financial statements to evaluate the significance of financial instruments for its financial position and performance.

IFRS 7.8 (e) – (f) The carrying amounts of each of the following categories, as defined in IAS 39, shall be disclosed either on the face of the balance sheet or in the notes:

financial liabilities at fair value through profit or loss, showing separately (i) those designated as such upon initial recognition and (ii) those classified as held for trading in accordance with IAS 39; and

financial liabilities measured at amortised cost.

IFRS 7.10 (a), (b) If the entity has designated a financial liability as at fair value through profit or loss in accordance with IAS 39.9, it shall disclose:

the amount of change, during the period and cumulatively, in the fair value of the financial liability that is attributable to changes in the credit risk of that liability determined either:

- as the amount of change in its fair value that is not attributable to changes in market conditions that give rise to market risk (see Appendix B, paragraph B4); or

- using an alternative method the entity believes more faithfully represents the amount of change in its fair value that is attributable to changes in the credit risk of the liability.

Changes in market conditions that give rise to market risk include changes in a benchmark interest rate, the price of another entity’s financial instrument, a commodity price, a foreign exchange rate or an index of prices or rates. For contracts that include a unit-linking feature, changes in market conditions include changes in the performance of the related internal or external investment fund; and

the difference between the financial liability’s carrying amount and the amount the entity would be contractually required to pay at maturity to the holder of the obligation.

IFRS 7.11 (a), (b) The entity shall disclose:

the methods used to comply with the requirements in IFRS 7.10(a).

if the entity believes that the disclosure it has given to comply with the requirements in IFRS 7.10(a) does not faithfully represent the change in the fair value of the financial liability attributable to changes in its credit risk, the reasons for reaching this conclusion and the factors it believes are relevant.

IFRS 7.14 Any entity shall disclose:

the carrying amount of financial assets it has pledged as collateral for liabilities or contingent liabilities, including amounts that have been reclassified in accordance with IAS 39.37(a); and

the terms and conditions relating to its pledge.

IFRS 7.18 For loans payable recognised at the reporting date, an entity shall disclose:

details of any defaults during the period of principal, interest, sinking fund, or redemption terms of those loans payable;

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19. Stocks 2013 2012

£000 £000 Raw materials 8,800 7,018 Work in progress 14,594 9,017 Finished goods and goods for resale 5,177 4,930 28,571 20,965

20. Trade creditors

Trade creditors are non-interest bearing and are normally settled on 60 day terms. Other creditors are non-interest bearing and have an average term of six months.

21. Financial liabilities 2013 2012 £000 £000 Current Forward currency derivative contracts 179 170 Interest rate swap 4 4 183 174

Non-current Interest rate swap 33 31

Bank loans

Current 1,927 1,411 Non-current 16,506 19,620 Total 18,433 21,031 Bank overdrafts 1,874 966

The bank overdrafts are secured by a floating charge over certain of the Company’s assets.



114

Financial liabilities (continued) the carrying amount of the

loans payable in default at the reporting date; and

whether the default was remedied, or the terms of the loans payable were renegotiated, before the financial statements were authorised for issue.

IFRS 7.19 If, during the period, there were breaches of loan agreement terms other than those described in IFRS 7.18 an entity shall disclose the same information as required by IFRS 7.18 if those breaches permitted the lender to demand accelerated repayment (unless the breaches were remedied, or the terms of the loan were renegotiated, on or before the reporting date). IFRS 7.B11F (f) Other factors that an entity might consider in providing disclosure required in IFRS 7.39(c) include, but are not limited to, whether the entity:

has instruments that include accelerated repayment terms (e.g. on downgrade of the entity’s credit rating).

1 Sch 55







Where any amount is transferred to or from the fair value reserve during the financial year, there must be stated in tabular form: The amount of the reserve as at the date of the beginning of the financial

year and as at the balance sheet date respectively, The amount transferred to or from reserves during that year, and

The source and application respectively of the amounts so transferred. 1 Sch 36

(1) Subject to the paragraphs below, financial instruments may be included at fair value.

(2) If the financial instruments are held as part of a trading

portfolio derivatives financial instruments falling

within subparagraph 4 below (3) unless they are financial instruments falling within sub-paragraph 4, subparagraph 1 does not apply to

financial instruments (other than derivatives) held to maturity, loans and receivables originated by the company and not held for trading purposes

interests in subsidiary undertakings, associated undertakings and joint ventures

equity instruments issued by the company

contracts for contingent consideration in a business combination; or

other financial instruments with such special characteristics that the instruments, according to generally accepted accounting principles or practice, should be accounted for differently from other financial instruments.

(4) Financial instruments that, under international accounting standards adopted by the European commission on or before 5 September 2006 in accordance with IAS Regulation, may be included in accounts at fair value, may be so included, provided that the disclosures required by such accounting standards are made.

1 Sch 61(1) In respect of the aggregate of all items shown under creditors in the balance sheet disclose the aggregate of the following amounts: (a) the amount of any debts

included under creditors which are payable or repayable otherwise than by instalments and fall due for payment or repayment after the end of the

period of five years beginning with the day next following the end of the financial year; and

(b) for debts which are payable or repayable by instalments, the amount of any which fall due for payment after the end of that period.

1 Sch 61(2)-(3) Repayment terms and rates of interest must be given for each debt wholly or partly repayable later than five years from the balance sheet date. Where, in the opinion of the directors, a statement would be of excessive length, only a general indication of the repayment terms and rates of interest is required. 1 Sch 61(4) For each item shown under creditors, also disclose the aggregate amount of secured liabilities and give an indication of the nature of the securities. Convertible non-cumulative redeemable preference shares IAS 32.15 The issuer of a financial instrument shall classify the instrument, or its component parts, on initial recognition as a financial liability, a financial asset or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument. IAS 32.18, IAS 32.20 When a preference share provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date, or gives the holder the right to require the issuer to redeem the share at or after a particular date for a fixed or determinable amount, the instrument meets the definition of a financial liability and is classified as such. A preference share that does not establish such a contractual obligation explicitly may establish an obligation through its terms and conditions. For example:

a financial instrument may contain a non-financial obligation that must be settled if, and only if, the entity fails to make distributions or to redeem the instrument. If the entity can avoid a transfer of cash or another financial asset only by settling the non-financial obligation, the financial instrument is a financial liability;

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21. Financial liabilities (continued) Bank loans Bank loans comprise the following: 2013 2012 £000 £000

£5,809,000 fixed rate loan 2016 – 5,809 £3,000,000 variable rate loan 2023 2,830 – £1,600,000 variable rate loan 2014 1,580 – £1,500,000 variable rate loan 2013 – 1,411 £2,500,000 variable rate loan 2015-2017 2,495 2,486 £2,700,000 variable rate loan 2015-2017 2,602 2,588 £3,500,000 8% Debentures 2014-2023 3,475 3,374 US$3,600,000 8.25% secured loan 2019 1,972 1,894 Variable rate multi-option facility 2019 3,479 3,469 18,433 21,031 Less: current instalments due on bank loans 1,927 1,411

16,506 19,620 £5,809,000 fixed rate loan This fixed rate loan having an effective interest rate of 7.5% is repayable in full on 1 January 2016. This loan is held by Hose, and has been included in the disposal group held for sale in 2013. £3,000,000 variable rate loan This unsecured loan is repayable on 1 November 2023 and bears interest at LIBOR + 0.6%. £1,600,000 variable rate loan This loan is unsecured and is repayable in one instalment on 1 December 2014 and bears interest at LIBOR + 0.5%. £1,500,000 variable rate loan This unsecured loan was repaid on 1 November 2013. Interest was previously charged at LIBOR + 0.5%. £2,500,000 variable rate loan The £2,500,000 bank loan bears interest at 1.1% above LIBOR and is repayable in two equal instalments of £1,250,000 due on 31 December 2015 and 31 December 2017. £2,700,000 variable rate loan This loan is unsecured with a payment of £74,000 due on 31 March 2015 and the balance due on 31 March 2017. Interest is charged at 2.2% above LIBOR. 8% debentures The 8% debentures are repayable in 10 equal annual instalments of £350,000 commencing on 1 March 2014. 8.25% secured loan The loan is secured by a first charge over land and buildings in the United States and is repayable on 31 May 2019. An interest rate swap has been purchased which results in the effective interest charge being 0.2% above LIBOR. Variable rate multi-option facility This loan has been drawn down under a six-year multi-option facility (MOF) bearing interest at 2% above LIBOR. The loan is repayable within 12 months of the balance sheet date, but has been classified as long-term because the Company expects to exercise its rights under the MOF to refinance this funding. Such immediate replacement funding is available through to 31 July 2019. The total amount repayable on maturity is US$3,600,000. The facility is secured by a first charge over certain of the Company’s properties.

The Company is subject to a number of covenants in relation to its borrowing covenants which, if breached, would result in its loans becoming immediately repayable. These covenants specify certain maximum limits in terms of net debt as a multiple of EBITDA. At the year end the Company was not in breach of any bank covenants.



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Convertible non-cumulative redeemable preference shares (continued)

a financial instrument is a financial liability if it provides that on settlement the entity will deliver either: – cash or another financial

asset; or – its own shares whose value is

determined to exceed substantially the value of the cash or other financial asset.

Although the entity does not have an explicit contractual obligation to deliver cash or another financial asset, the value of the share settlement alternative is such that the entity will settle in cash. In any event, the holder has in substance been guaranteed receipt of an amount that is at least equal to the cash settlement option.

1 Sch formats Note 7

The amount of any convertible loan shall be shown separately.

Obligations under leases and hire purchase contracts Finance lease commitments

IAS 17.31(b)-(e) Lessees shall, in addition to the requirements of IFRS 7, make the following disclosures for finance leases:

a reconciliation between the total of future minimum lease payments at the end of the reporting period, and their present value. In addition, an entity shall disclose the total of future minimum lease payments at the end of the reporting period, and their present value, for each of the following periods:

– not later than one year; – later than one year and

not later than five years; and

– later than five years; contingent rents recognised as

an expense in the period;

the total of future minimum sublease payments expected to be received under non-cancellable subleases at the end of the reporting period; and

a general description of the lessee’s material leasing

arrangements including, but not limited to, the following:

– the basis on which contingent rent payable is determined;

– the existence and terms of renewal or purchase options and escalation clauses; and

– restrictions imposed by lease arrangements, such as those concerning dividends, additional debt, and further leasing.

IAS 17.47 Lessors shall, in addition to the requirements in IFRS 7, disclose the following for finance leases:

a reconciliation between the gross investment in the lease at the end of the reporting period, and the present value of minimum lease payments receivable at the end of the reporting period. In addition, an entity shall disclose the gross investment in the lease and the present value of minimum lease payments receivable at the end of the reporting period, for each of the following periods:



– later than five years; unearned finance income;

the unguaranteed residual values accruing to the benefit of the lessor;

the accumulated allowance for uncollectible minimum lease payments receivable;

contingent rents recognised as income in the period; and

a general description of the lessor’s material leasing arrangements.

IAS 17.65 Disclosure requirements for lessees and lessors apply equally to sale and leaseback transactions. The required description of material leasing arrangements leads to disclosure of unique or unusual provisions of the agreement or terms of the sale and leaseback transactions.

Operating lease commitments

IAS 17.35(a), (b), (d)

Lessees shall, in addition to meeting the requirements of IFRS 7, make the following disclosures for operating leases:

the total of future minimum lease payments under non-cancellable operating leases for each of the following periods:

– not later than one year; – later than one year and not

later than five years; and – later than five years;

the total of future minimum sublease payments expected to be received under non-cancellable subleases at the end of the reporting period; and

a general description of the lessee’s significant leasing arrangements including, but not limited to, the following:

– the basis on which contingent rent payable is determined;

– the existence and terms of renewal or purchase options and escalation clauses; and

– restrictions imposed by lease arrangements, such as those concerning dividends, additional debt, and further leasing.

SIC-27.10 All aspects of an arrangement that does not, in substance, involve a lease under IAS 17 shall be considered in determining the appropriate disclosures that are necessary to understand the arrangement and the accounting treatment adopted. An entity shall disclose the following in each period that an arrangement exists:

a description of the arrangement including:

– the underlying asset and any restrictions on its use;

– the life and other significant terms of the arrangement;

– the transactions that are linked together, including any options; and

– the accounting treatment applied to any fee received, the amount recognised as income in the period, and the line item of the statement of comprehensive income in which it is included.

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21. Financial liabilities (continued) Convertible non-cumulative redeemable preference shares At 31 December 2013 and 2012, there were 2,500,000 convertible non-cumulative redeemable preference shares in issue. Each share has a nominal value of £1 and is convertible at the option of the shareholder into ordinary shares on 1 January 2015 on the basis of one ordinary share for every three preference shares held. The preference shares are redeemable at the option of the shareholder for a price of £1.20 per share on 1 January 2016. Any preference shares not converted will be redeemed on 31 December 2019 at a price of £1.20 per share. The preference shares carry a dividend of 7% per annum, payable half-yearly in arrears on 30 June and 31 December. When the preference shares were issued, the prevailing market interest rate for similar shares without conversion option was higher than the interest rate at which the preference shares were issued. The effective interest rate on the shares is 10.46%. The dividend rights are non-cumulative.

22. Obligations under leases and hire purchase contracts Obligations under finance leases and hire purchase contracts

The Company uses finance leases and hire purchase contracts to acquire plant and machinery. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the lessee. Future minimum lease payments under finance leases and hire purchase contracts are as follows:

2013 2012 £000 £000

Future minimum lease payments due: Not later than one year 89 85 After one year but not more than five years 991 944 1,080 1,029 Less finance charges allocated to future periods (43) (41) Present value of minimum lease payments 1,037 988

The present value of minimum lease payments is analysed as follows:

Not later than one year 87 83 After one year but not more than five years 950 905 1,037 988

Operating lease agreements where the Company is lessee

The Company has entered into commercial leases on certain properties, motor vehicles and items of machinery. These leases have an average duration of between 3 and 10 years. Only the property lease agreements contain an option for renewal, with such options being exercisable three months before the expiry of the lease term at rentals based on market prices at the time of exercise. There are no restrictions placed upon the lessee by entering into these leases.



118

Obligations under leases and hire purchase contracts (continued) SIC-27.11

The disclosures required in SIC 27.10 should be provided individually for each arrangement or in aggregate for each class of arrangement. A class is a grouping of arrangements with underlying assets of a similar nature (e.g. power plants).

Operating lease commitments – lessors

IAS 17.56 Lessors shall, in addition to the requirements of IFRS 7, disclose the following for operating leases:

the future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following periods;



– later than five years; total contingent rents

recognised as income in the period; and

a general description of the lessor’s leasing arrangements.

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22. Obligations under leases and hire purchase contracts (continued) Future minimum rentals payable under non-cancellable operating leases are as follows:

2013 2012 £000 £000

Not later than one year 268 255 After one year but not more than five years 643 612 After five years 428 408 1,339 1,275

The future minimum sublease payments expected to be received under non-cancellable sublease agreements as at 31 December 2013 is £47,000 (2012: £45,000).

Operating lease agreements where the Company is lessor

The Company holds surplus office and manufacturing buildings as investment properties, as disclosed in note 16, which are let to third parties. These non-cancellable leases have remaining terms of between 5 and 10 years. All leases include a provision for five-yearly upward rent reviews according to prevailing market conditions.

Future minimum rentals receivable under non-cancellable operating leases are as follows:

2013 2012 £000 £000

Not later than one year 1,344 1,309 After one year but not more than five years 2,656 2,515 After five years 1,696 1,601 5,696 5,425



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Financial instruments IFRS 7.B6 The disclosures required by IFRS 7.31-42 shall be given either in the financial statements or incorporated by cross-reference from the financial statements to some other statement, such as a management commentary or risk report, that is available to users of the financial statements on the same terms as the financial statements and at the same time. Without the information incorporated by cross-reference, the financial statements are incomplete.

IFRS 7.31 Any entity shall disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period.

IFRS 7.34 For each type of risk arising from financial instruments, an entity shall disclose:

summary quantitative data about its exposure to that risk at the end of the reporting period. This disclosure shall be based on the information provided internally to key management personnel of the entity for example the entity’s board of directors or chief executive officer;

the disclosures required by IFRS 7.36-42, to the extent not provided in (a), unless the risk is not material; and

concentrations of risk if not apparent from (a) and (b).

IFRS 7.B7 IFRS 7.34(a) requires disclosures of summary quantitative data about an entity’s exposure to risks based on the information provided internally to key management personnel of the entity. When an entity uses several methods to manage a risk exposure, the entity shall disclose information using the method or methods that provide the most relevant and reliable information.

IFRS 7.B8 IFRS 7.34(c) requires disclosures about concentrations of risk. Concentrations of risk arise from financial instruments that have similar characteristics and are affected similarly by changes in

economic or other conditions. The identification of concentrations of risk requires judgement taking into account the circumstances of the entity. Disclosure of concentrations of risk shall include:

a description of how management determines concentrations;

a description of the shared characteristic that identifies each concentration (e.g., counterparty, geographical area, currency or market); and

the amount of the risk exposure associated with all financial instruments sharing that characteristic.

IFRS 7.35 If the quantitative data disclosed as at the end of the reporting period are unrepresentative of an entity’s exposure to risk during the period, an entity shall provide further information that is representative.

Interest rate risk, Price risk, Foreign currency risk IFRS 7.40 Unless an entity complies with IFRS 7.41 (i.e., it prepares a sensitivity analysis such as value-at-risk that reflects interdependencies between risk variables), it shall disclose:

a sensitivity analysis for each type of market risk to which the entity is exposed at the end of the reporting period, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date;

the methods and assumptions used in preparing the sensitivity analysis; and

changes from the previous period in the methods and assumptions used, and the reasons for such changes.

Author’s note Paragraph B19 of IFRS 7 outlines the factors an entity should consider in determining a reasonably possible change in the relevant risk variable, being: the economic environments in which it operates; and the time frame over which it is marking the assessment.

Author’s note

The term ‘profit or loss’ is used in IAS 1 to mean profit after tax. Therefore, it might well be argued that the amounts disclosed should take account of any related tax effects, a view corroborated by the illustrative disclosures in the implementation guidance to IFRS 7. However, the application guidance suggests this requirement should (and the implementation guidance might suggest it could) be met by disclosing the impact on interest expense, a pre-tax measure of profit. Given this conflicting guidance, it is difficult to say that a pre-tax approach fails to comply with the standard and, in practice, both approaches are seen.

IFRS 7.42 When the sensitivity analyses disclosed in accordance with IFRS 7.40 or 41 are unrepresentative of a risk inherent in a financial instrument (for example because the year-end exposure does not reflect the exposure during the year), the entity shall disclose that fact and the reason it believes the sensitivity analyses are unrepresentative.

Credit risk IFRS 7.36

An entity shall disclose by class of financial instrument:

the amount that best represents its maximum exposure to credit risk at the end of the reporting period without taking account of any collateral held or other credit enhancements (e.g., netting agreements that do not qualify for offset in accordance with IAS 32);

in respect of the amount disclosed in (a), a description of collateral held as security and other credit enhancements;

information about the credit quality of financial assets that are neither past due nor impaired; and

the carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated.

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23. Financial instruments An explanation of the Company’s financial instrument risk management objectives, policies and strategies are set out in the Directors Report on page 13.

Interest rate risk

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Company’s profit before tax (through the impact on floating rate borrowings).

The sensitivity analysis excludes all non-derivative fixed rate financial instruments carried at amortised cost but includes those recognised at fair value as well as all non-derivative floating rate financial instruments.

Fair value interest rate hedges, that are part of a hedging relationship, have been excluded from the analysis, as gains and losses from fair valuing both the hedging item and hedging instrument almost cancel one another out completely in the income statement. However, for the purpose of the sensitivity analysis hedged loans are treated as floating rate borrowings as a result of the swap relationship, which exposes them to a variable interest expense in the income statement.

Currency derivatives have not been included in the sensitivity analysis below as they are not considered to be exposed to interest rate risk.

The analysis below reflects a reasonably possible change in interest rates compared to 2012.

Increase/ decrease in

basis points

Effect on profit

before tax 2013 £000

Sterling +75 (95) US dollar +125 (29) Sterling -75 95 US dollar -125 29 2012 Sterling +50 (46) US dollar +100 (23) Sterling -50 46 US dollar -100 23 Equity price risk

The Company holds listed equity investments classified as available-for-sale. The Company’s listed equity investments consist of a diverse portfolio of FTSE 250 companies. The sensitivity analysis, in respect of listed equity investments, is based on the assumption that if the FTSE 250 index increased/decreased by 4% with all other variables held constant, the equity share price of the relevant companies would move according to historical correlation with the FTSE 250 index. Profit before tax would not be effected by increases/decreases in the index as all the listed equity investments have been classified as available-for-sale.



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Financial instruments Credit risk (continued) IFRS 7.B9

IFRS 7.36(a) requires disclosure of the amount that best represents the entity’s maximum exposure to credit risk. For a financial asset, this is typically the gross carrying amount, net of:

any amounts offset in accordance with IAS 32; and

any impairment losses recognised in accordance with IAS 39.

Liquidity risk IFRS 7.39

An entity shall disclose: a maturity analysis for non-

derivative financial liabilities (including issued financial guarantee contracts) that shows the remaining contractual maturities;

a maturity analysis for derivative financial liabilities. The maturity analysis shall include the remaining contractual maturities for those derivative financial liabilities for which contractual maturities are essential for an understanding of the timing of the cash flows (see IFRS 7, B11B).

a description of how it manages the liquidity risk inherent in the above.

IFRS 7.B10A In accordance with IFRS7.34(a) an entity discloses summary quantitative data about its exposure to liquidity risk on the basis of the information provided internally to key management personnel. An entity shall explain how those data are determined. If the outflows of cash (or another financial asset) included in those data could either:

occur significantly earlier than indicated in the data, or

be for significantly different amounts from those indicated in the data (e.g. for a derivative that is included in the data on a net settlement basis but for which the counterparty has the option to require gross settlement),

the entity shall state that fact and provide quantitative information that enables users of its financial

statements to evaluate the extent of this risk unless that information is included in the contractual maturity analyses required by IFRS7.39(a) or (b). IFRS 7.B11B IFRS7.39(b) requires an entity to disclose a quantitative maturity analysis for derivative financial liabilities that shows remaining contractual maturities if the contractual maturities are essential for an understanding of the timing of the cash flows. For example, this would be the case for:

an interest rate swap with a remaining maturity of five years in a cash flow hedge of a variable rate financial asset or liability.

all loan commitments. IFRS 7.B11C IFRS7.39(a) and (b) requires an entity to disclose maturity analyses for financial liabilities that show the remaining contractual maturities for some financial liabilities. In this disclosure:

when a counterparty has a choice of when an amount is paid, the liability is allocated to the earliest period in which the entity can be required to pay. For example, financial liabilities that an entity can be required to repay on

demand (e.g. demand deposits) are included in the earliest time band.

when an entity is committed to make amounts available in instalments, each instalment is allocated to the earliest period in which the entity can be required to pay. For example, an undrawn loan commitment is included in the time band containing the earliest date it can be drawn down.

for issued financial guarantee contracts the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

IFRS 7.B11E

IFRS7.39(c) requires an entity to describe how it manages the liquidity risk inherent in the items disclosed in the quantitative disclosures required in IFRS7.39(a) and (b). An entity shall disclose a

maturity analysis of financial assets it holds for managing liquidity risk (e.g. financial assets that are readily saleable or expected to generate cash inflows to meet cash outflows on financial liabilities), if that information is necessary to enable users of its financial statements to evaluate the nature and extent of liquidity risk.

IFRS7.B11F (a) – (i)

Other factors that an entity might consider in providing the disclosure required in IFRS7.39(c) include, but are not limited to, whether the entity:

has committed borrowing facilities (e.g. commercial paper facilities) or other lines of credit (e.g. stand-by credit facilities) that it can access to meet liquidity needs.

holds deposits at central banks to meet liquidity needs;

has very diverse funding sources;

has significant concentrations of liquidity risk in either its assets or its funding sources;

has internal control processes and contingency plans for managing liquidity risk;

has instruments that include accelerated repayment terms (e.g. on the downgrade of the entity's credit rating);

has instruments that could require the posting of collateral (e.g. margin calls for derivatives);

has instruments that allow the entity to choose whether it settles its financial liabilities by delivering cash (or another financial asset) or by delivering its own shares; or

has instruments that are subject to master netting agreements.

IAS 32.AG12

Liabilities or assets that are not contractual (such as income taxes that are created as a result of statutory requirements imposed by governments) are not financial liabilities or financial assets.

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23. Financial instruments (continued) The following table shows the effect of a reasonably possible change in the FTSE 250 index.

Increase/ decrease in

FTSE 250 index

Effect on equity

Sterling % £000

2013 +5% 130 -5% (130) 2012 +4% 100 -4% (100) Foreign currency risk The following table demonstrates the sensitivity to a reasonably possible change in the Sterling against the US dollar and Euro exchange rates with all other variables held constant, of the Company’s profit before tax (due to foreign exchange translation of monetary assets and liabilities and fair value movements on forward currency contracts) and the Company’s equity (due to changes in the fair value of forward currency hedges).

Change in Sterling vs.

US dollar/ Euro rate

Effect on profit

before tax Effect on

equity £000 £000

2013 US dollar/Sterling +15% (75) (385) -15% 75 385 Euro/Sterling +8% (24) – -8% 26 – US dollar/Euro +10% (36) – -10% 39 – 2012 US dollar/Sterling +15% (100) (365) -15% 100 365 Euro/Sterling +8% (40) – -8% 42 – US dollar/Euro +10% (26) – -10% 28 – Credit risk

There are no significant concentrations of credit risk within the Company unless otherwise disclosed. The maximum credit risk exposure relating to financial assets is represented by carrying value as at the balance sheet date.

The Company has established procedures to minimise the risk of default by trade debtors including detailed credit checks undertaken before a customer is accepted. Historically, these procedures have proved effective in minimising the level of impaired and past due debtors.



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Financial instruments (continued) Categories of financial instruments IFRS 7.8 The carrying amounts of each of the following categories, as defined in IAS 39, shall be disclosed either in the statement of financial position or in the notes:

financial assets at fair value through profit or loss, showing separately;

- those designated as such upon initial recognition; and - those classified as held for trading in accordance with IAS 39;

financial liabilities at fair value through profit or loss, showing separately;

- those designated as such upon initial recognition; and - those classified as held for trading in accordance with IAS 39;

financial liabilities measured at amortised cost.

Fair values IFRS 7.25 Except as set out in IFRS 7.29, for each class of financial assets and financial liabilities, an entity shall disclose the fair value of that class of assets and liabilities in a way that permits it to be compared with its carrying amount.

IFRS 7.26 In disclosing fair values, an entity shall group financial assets and financial liabilities into classes, but shall offset them only to the extent that their carrying amounts are offset in the statement of financial position.

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23. Financial instruments (continued) Liquidity risk

The table below summarises the maturity profile of the Company’s financial liabilities at 31 December 2013 and 2012 based on contractual undiscounted payments. In the table below interest rates on variable rate loans have been based on a forward curve.

Year ended 31 December 2013 On

demand Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years Total

£000 £000 £000 £000 £000 £000 Non-derivative Financial Liabilities Interest bearing loans and borrowings* 1,014 6,032 6,498 19,209 9,948 42,701 Convertible preference shares – – 175 3,175 – 3,350 Trade and other creditors 2,497 7,682 2,772 – – 12,951 3,511 13,714 9,445 22,384 9,948 59,002

On


3 to 12 months

1 to 5 years

Over 5 years Total

£000 £000 £000 £000 £000 £000 Derivative Financial Liabilities Net settled Interest rate swap – 1 3 28 9 41 Gross settled Foreign exchange forward contracts

outflow – 1,400 – – – 1,400 Foreign exchange forward contracts

inflow – (1,221) – – – (1,221) – 180 3 28 9 220 Total 3,511 13,894 9,448 22,412 9,957 59,222

* Includes finance lease obligations.

Year ended 31 December 2012 On


3 to 12 months

1 to 5 years

Over 5 years Total

£000 £000 £000 £000 £000 £000 Non-derivative financial liabilities Interest bearing loans and

borrowings† 966 352 6,484 21,650 11,066 40,518 Convertible preference shares^ – – 175 3,350 – 3,525 Trade and other creditors 2,610 7,970 1,566 – – 12,146 3,576 8,322 8,225 25,000 11,066 56,189 Derivative financial liabilities Net settled Interest swaps – 1 3 27 8 39 Gross settled Foreign exchange forward contracts

outflow – 1,580 – – – 1,580 Foreign exchange forward contracts

inflow – (1,410) – – – (1,410) – 171 3 27 8 209 Total 3,576 8,493 8,228 25,027 11,074 56,398

† Includes finance lease obligation ^ Ignoring conversion option



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Financial instruments (continued) Fair values (continued) IFRS 7.29 Disclosures of fair value are not required:

when the carrying amount is a reasonable approximation of fair value, for example, for financial instruments such as short-term trade receivables and payables; or

for a contract containing a discretionary participation feature (as described in IFRS 4) if the fair value of that feature cannot be measured reliably.

IFRS 7.30 In the cases described in IFRS 7.29(b) and (c), an entity shall disclose information to help users of the financial statements make their own judgements about the extent of possible differences between the carrying amount of those financial assets or financial liabilities and their fair value, including:

the fact that fair value information has not been disclosed for these instruments because their fair value cannot be measured reliably;

a description of the financial instruments, their carrying amount, and a explanation of why fair value cannot be measured reliably;

information about the market for the instruments;

information about whether and how the entity intends to dispose of the financial instruments; and

if financial instruments whose fair value previously could not be reliably measured are derecognised, that fact, their carrying amount at the time of derecognition, and the amount of gain or loss recognised.


(a) for assets and liabilities that are measured at fair value on a recurring or non-recurring basis in

the statement of financial position after initial recognition, the valuation techniques and inputs used to develop those measurements.

(b) for recurring fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other comprehensive income for the period.

IFRS 13.92 To meet the objectives in paragraph 91, an entity shall consider all the following:

(a) the level of detail necessary to satisfy the disclosure requirements;

(b) how much emphasis to place on each of the various requirements;

(c) how much aggregation or disaggregation to undertake; and

(d) whether users of financial statements need additional information to evaluate the quantitative information disclosed.

If the disclosures provided in accordance with this IFRS and other IFRSs are insufficient to meet the objectives in paragraph 91, an entity shall disclose additional information necessary to meet those objectives.

IFRS 13.93 To meet the objectives in paragraph 91, an entity shall disclose, at a minimum, the following information for each class of assets and liabilities (see paragraph 94 for information on determining appropriate classes of assets and liabilities) measured at fair value (including measurements based on fair value within the scope of this IFRS) in the statement of financial position after initial recognition:

(a) for recurring and non-recurring fair value measurements, the fair value measurement at the end of the reporting period, and for non-recurring fair value measurements, the reasons for the measurement. Recurring fair value measurements of assets or liabilities are those that other IFRSs require or permit in the statement of financial position at the end of each reporting period. Non-recurring fair value measurements of assets or liabilities are those that other IFRSs require or permit in the statement of financial position in particular

circumstances (eg when an entity measures an asset held for sale at fair value less costs to sell in accordance with IFRS 5

Non-current Assets Held for Sale and Discontinued Operations because the asset’s fair value less costs to sell is lower than its carrying amount).

(b) for recurring and non-recurring fair value measurements, the level of the fair value hierarchy within which the fair value measurements are categorised in their entirety (Level 1, 2 or 3).

(c) for assets and liabilities held at the end of the reporting period that are measured at fair value on a recurring basis, the amounts of any transfers between Level 1 and Level 2 of the fair value hierarchy, the reasons for those transfers and the entity’s policy for determining when transfers between levels are deemed to have occurred (see paragraph 95). Transfers into each level shall be disclosed and discussed separately from transfers out of each level.

(d) for recurring and non-recurring fair value measurements categorised within Level 2 and Level 3 of the fair value hierarchy, a description of the valuation technique(s) and the inputs used in the fair value measurement. If there has been a change in valuation technique (eg changing from a market approach to an income approach or the use of an additional valuation technique), the entity shall disclose that change and the reason(s) for making it. For fair value measurements categorised within Level 3 of the fair value hierarchy, an entity shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. An entity is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the entity when measuring fair value (eg when an entity uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure an entity cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the entity.

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23. Financial instruments (continued) As noted in the Directors Report, the Company has a further $3,900,000 of undrawn facilities available to it under the terms of its seven year multi-option facility. The maturity profile in the above table, reflects only one side of the Company’s liquidity position. Interest bearing loans and borrowings and trade and other Creditors mainly originate from the financing of assets used in the Company’s ongoing operations such as property, plant and equipment and working capital such as stocks. These assets are considered part of the Company’s overall liquidity risk.

Fair values of financial assets and financial liabilities Set out below is a comparison by category of carrying amounts and fair values of all of the Company’s financial instruments, including those classified under discontinued operations, that are carried in the financial statements.

Carrying Amount Fair Value

2013 2012 2013 2012 £000 £000 £000 £000 Financial assets Loans and receivables Cash 23,338 16,460 23,338 16,460 Trade and other debtors 21,962 26,678 * * Restricted cash deposits 2,509 2,315 * * Loan notes 1,208 1,225 1,999 1,302 Available-for-sale financial assets Available-for-sale investments 2,248 2,141 2,248 2,141 Fair value through profit and loss Foreign currency derivative contracts 102 91 102 91 Derivatives used for hedging Foreign currency hedging contracts 58 61 58 61 Financial liabilities Amortised cost Bank overdraft (6,614) (966) * * Interest-bearing loans and borrowings: Finance lease and hire purchase obligations (1,037) (988) (1,107) (1,083) Floating rate borrowings (14,958) (11,848) (14,794) (12,550) Fixed rate borrowings (3,475) (9,183) (3,475) (9,250) Convertible non-cumulative redeemable

preference shares (2,839) (2,696) (2,696) (2,623) Trade and other creditors (26,515) (14,352) * * Fair value through profit and loss Foreign currency derivative contracts (179) (170) (179) (170) Derivatives used for hedging Interest rate swap (37) (35) (37) (35)

* The carrying amount is a reasonable approximation of the fair value



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Financial instruments (continued) Fair values (continued)

(e) for recurring fair value measurements categorised within Level 3 of the fair value hierarchy, a reconciliation from the opening balances to the closing balances, disclosing separately changes during the period attributable to the following:

(i) total gains or losses for the period recognised in profit or loss, and the line item(s) in profit or loss in which those gains or losses are recognised.

(ii) total gains or losses for the period recognised in other comprehensive income, and the line item(s) in other comprehensive income in which those gains or losses are recognised.

(iii) purchases, sales, issues and settlements (each of those types of changes disclosed separately).

(iv) the amounts of any transfers into or out of Level 3 of the fair value hierarchy, the reasons for those transfers and the entity’s policy for determining when transfers between levels are deemed to have occurred (see paragraph 95). Transfers into Level 3 shall be disclosed and discussed separately from transfers out of Level 3.

(f) for recurring fair value measurements categorised within Level 3 of the fair value hierarchy, the amount of the total gains or losses for the period in (e)(i) included in profit or loss that is attributable to the change in unrealised gains or losses relating to those assets and liabilities held at the end of the reporting period, and the line item(s) in profit or loss in which those unrealised gains or losses are recognised.

(g) for recurring and non-recurring fair value measurements categorised within Level 3 of the fair value hierarchy, a description of the valuation processes used by the entity (including, for example, how an entity decides its valuation policies and procedures and analyses changes in fair value

measurements from period to period).

(h) for recurring fair value measurements categorised within Level 3 of the fair value hierarchy:

(i) for all such measurements, a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. If there are interrelationships between those inputs and other unobservable inputs used in the fair value measurement, an entity shall also provide a description of those interrelationships and of how they might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement. To comply with that disclosure requirement, the narrative description of the sensitivity to changes in unobservable inputs shall include, at a minimum, the unobservable inputs disclosed when complying with (d).

(ii) for financial assets and financial liabilities, if changing one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would change fair value significantly, an entity shall state that fact and disclose the effect of those changes. The entity shall disclose how the effect of a change to reflect a reasonably possible alternative assumption was calculated. For that purpose, significance shall be judged with respect to profit or loss, and total assets or total liabilities, or, when changes in fair value are recognised in other comprehensive income, total equity.

(i) for recurring and non-recurring fair value measurements, if the highest and best use of a non-financial asset differs from its current use, an entity shall disclose that fact and why the non-financial asset is being used in a manner that differs from its highest and best use.

IFRS 13.95 An entity shall disclose and consistently follow its policy for

determining when transfers between levels of the fair value hierarchy are deemed to have occurred in accordance with paragraph 93(c) and (e)(iv). The policy about the timing of recognising transfers shall be the same for transfers into the levels as for transfers out of the levels. Examples of policies for determining the timing of transfers include the following:

(a) the date of the event or change in circumstances that caused the transfer.

(b) the beginning of the reporting period.

(c) the end of the reporting period.

IFRS 13.96 If an entity makes an accounting policy decision to use the exception in paragraph 48, it shall disclose that fact.

IFRS 13.97 For each class of assets and liabilities not measured at fair value in the statement of financial position but for which the fair value is disclosed, an entity shall disclose the information required by paragraph 93(b), (d) and (i). However, an entity is not required to provide the quantitative disclosures about significant unobservable inputs used in fair value measurements categorised within Level 3 of the fair value hierarchy required by paragraph 93(d). For such assets and liabilities, an entity does not need to provide the other disclosures required by this IFRS.

IFRS13.98 For a liability measured at fair value and issued with an inseparable third-party credit enhancement, an issuer shall disclose the existence of that credit enhancement and whether it is reflected in the fair value measurement of the liability.

IFRS 13.99

An entity shall present the quantitative disclosures required by this IFRS in a tabular format unless another format is more appropriate.

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23. Financial instruments (continued) Fair value of financial assets and liabilities (continued) Floating rate borrowings for the Company includes the 8.25% fixed rate loan carried at amortised cost adjusted for fair value movements due to the risk hedged. Quoted market prices, current bid price for financial assets and current offer price for financial liabilities, have been used to determine the fair value of financial instruments traded in an active market, listed convertible non-cumulative redeemable preference shares and listed available-for-sale financial assets.

For financial instruments not traded in active market for which not quoted market price is available the fair value was determined using valuation techniques. The fair value of unlisted available-for-sale equity shares has been estimated using valuation guidelines issued by the British Venture Capital Association and is based on assumptions regarding expected future earnings rather than observable market prices or rates. Management has estimated the potential effect of using reasonably possible alternatives for price-earnings ratios would result in the range of difference in fair value from a reduction of approximately £35,000 (2012: £33,000) using less favourable assumptions to an increase of approximately £49,000 (2012: £44,000) using more favourable assumptions. For available-for-sale financial investments, the Company assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the Company evaluates, among other factors, historical share price movements and the duration or extent to which the fair value of an investment is less than its cost.

Based on these criteria, no impairment losses have been recognised on available for sale financial investments at the year end.

Forward currency exchange contracts fair value was determined using quoted forward exchange rates matching the maturities of the contracts. While for interest rate swaps fair value was determined using discounted cash flow analysis at quoted interest rates. The fair value of loan notes, other financial assets and borrowings has been calculated by discounting the expected future cash flows at prevailing market interest rates for instruments with substantially the same terms and characteristics. The carrying value of short term receivables and payables are assumed to approximate their fair values where discounting is not material.

Fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

Level 3: techniques which use inputs which have a significant effect on the recorder fair value that are not based on observable market data.



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Financial instruments (continued)

Hedges IFRS 7.33 For each type of risk arising from financial instruments, an entity shall disclose:

the exposures to risk and how they arise;

its objectives, policies and processes for managing the risk and the methods used to measure the risk; and

any changes in the above from the previous period.

IFRS 7.22 An entity shall disclose the following separately for each type of hedge described in IAS 39 (i.e. fair value hedges, cash flow hedges, and hedges of net investments in foreign operations):

a description of each type of hedge;

a description of the financial instruments designated as hedging instruments and their fair values at the end of the reporting period; and

the nature of the risks being hedged.

IFRS 7.23 For cash flow hedges, an entity shall disclose:

the periods when the cash flows are expected to occur and when they are expected to affect profit or loss;

a description of any forecast transaction for which hedge accounting had previously been used, but which is no longer expected to occur;

the amount that was recognised in other comprehensive income during the period;

the amount that was reclassified from equity to profit or loss for the period, showing the amount included in each line item in the statement of comprehensive income; and

the amount that was removed from equity during the period and

included in the initial cost or other carrying amount of a non-financial asset or non-financial liability whose acquisition or incurrence was a hedged highly probable forecast transaction. IFRS 7.24 An entity shall disclose separately:

in fair value hedges, gains or losses:

- on the hedging instrument; and

- on the hedged item attributable to the hedged risk.

the ineffectiveness recognised in profit or loss that arises from cash flow hedges; and

the ineffectiveness recognised in profit or loss that arises from hedges of net investments in foreign operations.

IAS 39.98 If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, or a forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, then the entity shall adopt either of the following:

It reclassifies the associated gains and losses that were recognised in other comprehensive income in accordance with IAS 39.95 into profit or loss as a reclassification adjustment in the same period or periods during which the asset acquired or liability assumed affects profit or loss (such as in the periods that depreciation expense or cost of sales is recognised). However, if an entity expects that all or a portion of a loss recognised in other comprehensive income will not be recovered in one or more future periods, it shall reclassify from equity to profit or loss as a reclassification adjustment the amount that is not expected to be recovered.

It removes the associated gains and losses that were

recognised in other comprehensive income equity in accordance with IAS 39.95, and includes them in the initial cost or other carrying amount of the asset or liability.

Items of income, expenses, gains or losses IFRS 7.20 An entity shall disclose the following items of income, expense, gains or losses either in the statement of comprehensive income or in the notes:

Net gains or net losses on:

- financial assets or financial liabilities at fair value through profit or loss, showing separately those on financial assets or financial liabilities designated as such upon initial recognition, and those on financial assets or financial liabilities that are classified as held for trading in accordance with IAS 39;

- financial liabilities measured at amortised cost;

Total interest income and total interest expense (calculated using the effective interest method) for financial assets or financial liabilities that are not at fair value through profit or loss;

Fee income and expense (other than amounts included in determining the effective interest rate) arising from:

- financial assets or financial liabilities that are not at fair value through profit or loss; and

- trust and other fiduciary activities that result in the holding or investing of assets on behalf of individuals, trust, retirement benefit plans, and other institutions;

Interest income on impaired financial assets accrued in accordance with IAS 39.AG93; and

The amount of any impairment loss for each class of financial asset.

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23. Financial instruments (continued) As at 31 December 2013, the Company held the following financial instruments measured at fair value:

2013 £000

Level 1 £000

Level 2 £000

Level 3 £000

Assets measured at fair value Financial assets at fair value through profit or loss Forward currency derivative contracts 102 – 102 – Forward currency hedging contracts 58 – 58 – Available-for-sale financial assets

Equity shares – listed 1,894 1,894 – – Equity shares – unlisted 354 – – 354

Liabilities measured at fair value

Financial liabilities at fair value through profit or loss Forward currency derivative contracts 179 – 179 – Interest rate swap 37 – 37 –

During the reporting period ending 31 December 2013, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of the Level 3 fair value measurements. A reconciliation of fair value measurements of Level 3 financial instruments is disclosed below:

2013 2012 £000 £000

At 1 January 337 645 Total gains and losses recognised in other comprehensive income 12 10 Sales (152) (318) Purchases 157 – At 31 December 354 337

Hedges Fair value hedges At 31 December 2013 and 31 December 2012, the Company had an interest rate swap in place with a notional amount of US$ 3,600,000 whereby it receives a fixed rate of interest of 8.25% and pays a variable rate based on LIBOR on the notional amount. The swap is being used to hedge the exposure to changes in the fair value of its 8.25% secured loan. The secured loan and interest rate swap have the same critical terms. The Company recognised a gain on the hedged item of £3,000 (2012: £36,000) and a loss on the hedging instrument of £2,000 (2012: £35,000) in the income statement. The fair value of the interest rate swap at the balance sheet date was £37,000 (2012: £35,000).

In November 2013 a cash flow hedge relating to a forecast sale in March 2014 was terminated. Cash flow hedge accounting was discontinued prospectively from this date and the fair value of the hedging instrument of £10,000 at the date of termination will remain in equity until the forecast transaction occurs in 2014.



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Financial instruments (continued) IFRS 7.BC34 Some entities include interest and dividend income in gains and losses on financial assets and financial liabilities held for trading and others do not. To assist users in comparing income arising from financial instruments across different entities, the Board decided that an entity should disclose how the income statement amounts are determined. For example, an entity should disclose whether net gains and losses on financial assets or financial liabilities held for trading include interest and dividend income.

1 Sch 55

Where financial instruments have been recorded at fair value, there must be stated:










1 Sch 56 Where a company has derivatives that it has not included at fair value, there must be stated for each class of such derivatives:

(a) the fair value, if that can be determined; and

(b) the extent and nature of the derivatives.

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23. Financial instruments (continued) Cash flow hedges

Year ended 31 December 2013 At 31 December 2013, the Company held forward currency hedging contracts designated as hedges of expected future sales to customers in the United States for which the Company has firm commitments. The Company also has forward currency hedging contracts outstanding at 31 December 2013 designated as hedges of expected future purchases from US suppliers for which the Company has firm commitments. The forward currency contracts are being used to hedge the foreign currency risk of the firm commitments.

The terms of the forward currency hedging contracts have been negotiated to match the terms of the commitments.

The cash flow hedges of the expected future sales in January 2014 was assessed to be highly effective and an unrealised gain of £21,000, with a deferred tax charge of £6,000 relating to the hedging instruments is included in other comprehensive income.

The cash flow hedges of the expected future purchases in February and March 2014 were assessed to be highly effective and as at 31 December 2013, a net unrealised gain of £37,000, with a related deferred tax charge of £11,000 was included in other comprehensive income in respect of these hedging contracts.

A customer with whom a sale transaction was expected to be settled on 1 February 2014 has recently gone into liquidation and as the transaction is no longer expected to occur, the Company discontinued hedge accounting prospectively for that transaction. As a consequence, the cumulative gain of £20,000 relating to the February 2014 forward currency hedging contract which remained in equity from the period when the hedge was effective is included in other operating income.

The highly probable forecast transactions in 2012 which were expected to occur during 2013 were either sold or settled in March 2013. In relation to this the amount removed from other comprehensive income during the year was £45,000.

Year ended 31 December 2012 At 31 December 2012, the Company held forward currency hedging contracts which were designated as cash flow hedges of the foreign currency risk of firm commitments to sell goods to customers in the United States, and forward currency hedging contracts which were designated in cash flow hedges of the foreign currency risk arising from firm commitments to purchase goods from suppliers in the United States.

The terms of the forward currency hedging contracts were negotiated to match the terms of the related sale and purchase commitments.

The cash flow hedges of the expected future sale in February 2013 and the purchases expected to be settled in February and March 2013 were assessed to be highly effective as at 31 December 2012, and net unrealised gains of £61,000, with a deferred tax charge of £18,000 relating to the hedging instrument were included in other comprehensive income in respect of these contracts.

Following a customer’s acquisition by another company, a sale transaction that was expected to be settled in January 2013 was cancelled. As a result, the Company discontinued hedge accounting prospectively for that transaction and the cumulative gain of £47,000 on the related forward currency hedging contract was transferred out of equity and into the income statement for the year ended 31 December 2013.



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Provisions IAS 37.84 For each class of provision, an entity shall disclose:

the carrying amount at the beginning and end of the period;

additional provisions made in the period, including increases to existing provisions;

amounts used (i.e. incurred and charged against the provision) during the period;

unused amounts reversed during the period; and

the increase during the period in the discounted amount arising from the passage of time and the effect of any change in the discount rate.

Comparative information is not required.

IAS 37.85 An entity shall disclose the following for each class of provision:

a brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits;

an indication of the uncertainties about the amount or timing of those outflows. Where necessary to provide adequate information, an entity shall disclose the major assumptions made concerning future events; and

the amount of any expected reimbursement, stating the amount of any asset that has been recognised for that expected reimbursement.

IAS 37.92 In extremely rare cases, disclosure of some or all of the information required by IAS 37.84-89 can be expected to prejudice seriously the position of the entity in a dispute with other parties on the subject matter of the provision. In such cases, an entity need not disclose the information, but should disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed.

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23. Financial instruments (continued) The fair value disclosures in respect of financial instruments measured at amortised cost are as follows:

2013 £000

Level 1 £000

Level 2 £000

Level 3 £000

Financial assets measured at amortised cost

Loan notes 1,208 - 1,208 -

Financial liabilities at amortised cost

Interest-bearing loans and borrowings:

Finance lease and hire purchase obligations (1,037) - (1,037) -

Floating rate borrowings (14,958) - (14,958) -

Fixed rate borrowings (3,475) - (3,475) - Convertible non-cumulative redeemable

preference shares (2,839) - (2,839) -

24. Provisions

Maintenance

warrantiesNational

Insurance Restructuring

Waste electrical

and electronic

equipment

Deferred tax (Note 10) Total

£000 £000 £000 £000 £000 £000 At 1 January 2013 Current 449 – 200 – - 649 Non-current 110 30 228 – 4,170 4,538 559 30 428 – 4,170 5,187 Arising during the year 38 27 – 26 2,093 2,184 Utilised (11) – (49) – (143) (203) Reversal of unused amounts (5) – (27) – - (32) Movement in discount rate 45 – – – (57) (12 At 31 December 2013 626 57 352 26 6,063 7,124 Analysed as: Current 515 – 200 8 - 723 Non-current 111 57 152 18 6,063 6,401 626 57 352 26 6,063 7,124

Maintenance warranties

A provision is recognised for expected warranty claims on products sold during the last two years, based on past experience of the level of repairs and returns. It is expected that most of these costs will be incurred in the next financial year and all will have been incurred within two years of the balance sheet date. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the two-year warranty period for all products sold.

National Insurance contributions on share options Provision has been made for National Insurance contributions on share options awarded since 5 April 1999 under unapproved share option schemes, which are expected to be exercised. The provision has been calculated based on the difference between the year-end share price of £4.45 and the exercise price of the outstanding options and is being allocated over the period from the date of award to the date the employee will become unconditionally entitled to the options. It is expected that the costs will be incurred during the exercise period of 1 January 2014 to 31 December 2015.



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Authorised and issued share capital IAS 1.76(a) An entity shall disclose the following, either in the statement of financial position or in the notes.

For each class of share capital:

the number of shares authorised;

the number of shares issued and fully paid, and issued but not fully paid;

par value per share, or that the shares have no par value;

a reconciliation of the number of shares outstanding at the beginning and at the end of the period;

the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital;

shares in the entity held by the entity or by its subsidiaries or associates; and

shares reserved for issue under options and contracts for the sale of shares, including the terms and amounts.

1 Sch 47(1) In respect of the company’s share capital disclose:

the number and aggregate nominal value of each class of shares allotted; and

where shares are held as treasury shares, the number and aggregate nominal value of the treasury shares and, where shares of more than one class have been allotted, the number and aggregate nominal value of the shares of each class held as treasury shares.

1 Sch 47(2) In the case of any part of the allotted share capital that consists of redeemable shares disclose:

the earliest and latest dates on which the company has power to redeem those shares;

whether those shares must be redeemed in any event or are liable to be redeemed at the option of the company or of the shareholder; and

whether any (and, if so, what) premium is payable upon redemption.

1 Sch 48 For all shares allotted during the year give, class by class, the classes of shares, the number allotted, the aggregate nominal value and the consideration received.

1 Sch 49 For any contingent right to the allotment of shares in the company disclose:

the number, description and amount of the shares in relation to which the right is exercisable;

the period during which it is exercisable; and

the price to be paid for the shares allotted.

The ‘contingent right to the allotment of shares’ means any option to subscribe for shares and any other right to require the allotment of shares to any person whether arising on the conversion into shares or securities of any other description or otherwise.

1 Sch 50(1) Where debentures have been issued during the year, disclose:

the classes of debenture issued; and

the amount of each class of debenture issued and the consideration received.

1 Sch 50(2) The nominal amount and book value of any of the company’s debentures held by a nominee of, or trustee for, the company should be disclosed.

1 Sch 59 Disclose the amount of each of the provisions at the beginning and end of the year and the movements during the year and the source or application of the movements.

1 Sch formats note 12 The amount of allotted share capital and the amount of called up share

capital which has been paid up should be shown separately.

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24. Provisions (continued) Restructuring This restructuring provision relates to the elimination of certain product lines of the Extinguishers. The restructuring plan was drawn up and announced to the employees of the Extinguishers business during 2013. The restructuring plan is expected to be completed by February 2015.

Waste electrical and electronic equipment The provision for waste electrical and electronic equipment is calculated based on sales in the current year (new waste) and expected disposals of old waste (sales before August 2006). It is expected that the costs for which the provision has been raised, will be incurred over the next 5 years.

25. Authorised, issued and called up share capital 2013 2012 2013 2012 thousands thousands £000 £000 Authorised

Ordinary shares of £1 each 30,000 27,500 30,000 27,500 7% convertible non-cumulative redeemable

preference shares of £1 each 2,500 2,500 2,500 2,500 32,500 30,000 32,500 30,000 Allotted, called up and fully paid

Ordinary shares of £1 each At 1 January 22,028 19,436 22,028 19,436 Issued on exercise of share options (2012:

share issue) 135 92 135 92 Issued for cash - 2,500 - 2,500 Issued on acquisition of subsidiary 3,000 - 3,000 - At 31 December 25,163 22,028 25,163 25,881 7% convertible non-cumulative redeemable

preference shares of £1 each 2,500 2,500 2,500 2,500 27,663 24,528 27,663 28,381

On 28 November 2013, 1,696,927 ordinary shares with aggregate nominal value of £1,696,927 were issued at £3.58 each in exchange for 80% of the issued share capital of Caledonian Circuits Limited (note 15). On 28 November 2013, 1,303,073 ordinary shares with aggregate nominal value of £1,303,073 were issued for cash at £3.58 each. On 1 November 2013, 135,000 ordinary shares with aggregate nominal value of £135,000 were allotted for cash at £2.62 each on the exercise of share options. On 1 May 2012, 2,500,000 ordinary shares with aggregate nominal value of £2,500,000 were issued for cash at £3.46 each. On 1 November 2012, 92,000 ordinary shares with aggregate nominal value of £92,000 were allotted for cash at £3.20. On 10 January 2012 options over 75,000 shares vested and were exercised immediately at £2.33 per share, with total proceeds of £175,000. The award was satisfied by shares previously purchased in the market held by the Employee Benefit Trust. The 7% convertible non-cumulative redeemable preference shares, which were issued at par on 1 January 2004, are convertible at the option of the shareholder into ordinary shares on 1 January 2015 on the basis of one ordinary share for every three preference shares. They are redeemable at the option of the shareholder on 1 January 2016 at £1.20 per share. Any preference shares not converted are redeemable at £1.20 per share on 31 December 2019. The preference shares carry a dividend of 7% per annum, payable half-yearly in arrears on 30 June and 31 December. The dividend rights are not cumulative. The preference shares carry no votes at meetings unless the dividend thereon is six months or more in arrears or the Company fails to redeem the shares on the redemption date or the business of the meeting includes a resolution for the winding up of the company or reducing its share capital, in which event each holder will be entitled to one vote on a show of hands or one vote per share on a poll. On a winding up of the Company the preference shareholders have a right to receive, in preference to payments to ordinary shareholders, £1 per share plus any accrued dividend.



138

Share-based payments IFRS 2.44 An entity shall disclose information that enables users of the financial statements to understand the nature and extent of share-based payment arrangements that existed during the period.

IFRS 2.45(a-d) To give effect to the principle in paragraph 44, the entity shall disclose at least the following:

a description of each type of share-based payment arrangement that existed at any time during the period, including the general terms and conditions of each arrangement, such as vesting requirements, the maximum term of options granted, and the method of settlement (e.g. whether in cash or equity). An entity with substantially similar types of share-based payment arrangements may aggregate this information, unless separate disclosure of each arrangement is necessary to satisfy the principle in paragraph 44;

for share options exercised during the period, the weighted average share price at the date of exercise. If options were exercised on a regular basis throughout the period, the entity may instead disclose the weighted average share price during the period; and

for share options outstanding at the end of the period, the range of exercise prices and weighted average remaining contractual life. If the range of exercise prices is wide, the outstanding options shall be divided into ranges that are meaningful for assessing the number and timing of additional shares that may be issued and the cash that may be received upon exercise of those options.

IFRS 2.46 An entity shall disclose information that enables users of the financial statements to understand how the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period was determined.

IFRS 2.47 If the entity has measured the fair value of goods or services received as consideration for equity instruments of the entity indirectly, by reference to the fair value of the equity instruments granted, to give effect to the principle in paragraph 46 of IFRS 2, the entity shall disclose at least the information given in paragraphs (a) to (c) overleaf.

IFRS 2.47(a) For share options granted during the period, the weighted average fair value of those options at the measurement date and information on how that fair value was measured, including:

the option pricing model used and the inputs to that model, including the weighted average share price, exercise price, expected volatility, option life, expected dividends, the risk-free interest rate and any other inputs to the model, including the method used and the assumptions made to incorporate the effects of expected early exercise;

how expected volatility was determined, including an explanation of the extent to which expected volatility was based on historical volatility; and

whether and how any other features of the option grant were incorporated into the measurement of fair value, such as a market condition.

IFRS 2.47(b) For other equity instruments granted during the period (i.e. other than share options), the number and weighted average fair value of those equity instruments at the measurement date, and information on how that fair value was measured, including:

if fair value was not measured on the basis of an observable market price, how it was determined;

whether and how expected dividends were incorporated into the measurement of fair value; and

out above, where applicable. whether and how any other

features of the equity instruments granted were

incorporated into the measurement of fair value.

IFRS 2.47(c) For share-based payment arrangements that were modified during the period:

an explanation of those modifications;

the incremental fair value granted (as a result of those modifications); and

information on how the incremental fair value granted was measured, consistently with the requirements set

IFRS 2.48 If the entity has measured directly the fair value of goods or services received during the period, the entity shall disclose how that fair value was determined, e.g. whether fair value was measured at a market price for those goods or services. IFRS 2.50 An entity shall disclose information that enables users of the financial statements to understand the effect of share-based payment transactions on the entity’s profit or loss for the period and on its financial position.

IFRS 2.51 To give effect to the principle in the paragraph above, the entity shall disclose at least the following:

the total expense recognised for the period arising from share-based payment transactions in which the goods or services received did not qualify for recognition as assets and hence were recognised immediately as an expense, including separate disclosure of that portion of the total expense that arises from transactions accounted for as equity-settled share-based payment transactions;

for liabilities arising from share-based payment transactions:

– the total carrying amount at the end of the period;

– the total intrinsic value at the end of the period of liabilities for which the counterparty’s right to cash or other assets had vested by the end of the period (e.g. vested share appreciation rights).

Entity UK Limited


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26. Share-based payments Senior Executive Plan (‘SEP’) Share options are granted to senior executives with more than 12 months’ service. The exercise price of the options is equal to the market price of the shares on the date of grant. The options vest if and when the Company’s basic earnings per share increases by 10% more than the increase in the RPI over a period starting from the grant date of the options. The options will not vest unless this targeted increase is achieved within three years of the date of grant and the employee remains in the company’s employment. The contractual life of each option is five years. There are no cash settlement alternatives. All Employee Share-option Plan (‘AESOP’) All other employees are entitled to a grant of options once they have been in service for two years. The options will vest if the employee remains in service for a period of three years from the date of grant, the volume of sales of a particular product increases by an average of 6% per year during the three-year service period and the share price attains an average increase of 5% per year during the three-year period from the date of grant. The contractual life of the options is five years and there are no cash settlement alternatives. Save-as-you-earn (SAYE) scheme In November 2011 Entity UK Limited introduced a SAYE scheme. Under the scheme employees may elect to save between £5 and £250 per month over three or five years. The option exercise price is set at the date the employee enters into the scheme and is at a 20% discount to the share price at that date. Long-term incentive plan The awards to the long-term incentive plan have been made to executive directors and are awarded an annual bonus of up to 50% of basic salary based on the achievement of personal and business objectives. The vesting of awards under the long-term incentive plan is subject to the attainment of performance conditions as described in the directors’ remuneration report. Share-based payment plan for employees working in the business development group (‘SPP’) Employees in the business development group within the electronics segment are granted share options, which may only be settled in cash. These will vest when a specified target number of new sales contracts are closed, with a maximum number of three years from grant date and provided the employee remains in the company’s employment. The contractual life of the options is six years. The expense recognised for share-based payments in respect of employee services received during the year to 31 December 2013 is £433,000 (2012: £412,000). The portion of that expense arising from equity-settled share-based payment transactions is £322,000 (2012: £307,000). The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.

2013 2013 2012 2012 No. WAEP(£) No. WAEP(£)

Outstanding as at 1 January1 725,000 3.28 575,000 2.85 Granted during the year 200,000 2.52 250,000 3.85 Exercised (135,000) 2.622 (75,000) 2.333 Expired during the year (50,000) 2.13 (25,000) 2.13 Outstanding at 31 December1 740,000 3.27 725,000 3.28

1. Included within this balance at 1January 2012 were options over 5,000 shares that were not recognised in accordance with IFRS 2 as the options were granted on or before 7 November 2002. These options were exercised in the year to 31 December 2012.

2. The weighted average share price at the date of exercise for the options exercised in 2013 is £2.98.

3. The weighted average share price at the date of exercise for the options exercised in 2012 is £3.13.



140

Share-based payments (continued) IFRS 2.52

If the information required to be disclosed by this IFRS does not satisfy the principles in paragraphs 44, 46 and 50, the entity shall disclose such additional information as is necessary to satisfy them.

Entity UK Limited


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26. Share-based payments (continued) For the share options outstanding as at 31 December 2013, the weighted average remaining contractual life is 3.70 years (2012: 2.94 years).

The weighted average fair value of options granted during the year was £1.21 (2012: £1.32). The range of exercise prices for options outstanding at the end of the year was £2.52-£3.85 (2012: £2.13-£3.85).

The following table lists the inputs to the models used for the years ended 31 December 2013 and 31 December 2012.

SAYE SEP/AESOP/SPP 2013 2012 2013 2012

Dividend yield (%) 3.29 – 3.29 3.13 Expected share price volatility (%) 15.00 – 15.25 15.00 Historical volatility (%) 20.00 – 25.00 15.00 Expected comparator group volatility (%) 14.00 – 14.00 13.95 Risk-free interest rate (%) 5.00 – 5.00 5.10 Expected life of option (years) 4.00 – 4.00 4.25 Weighted average share price (£) 3.00 – 3.05 3.10 Exercise price 2.75 – 2.52 3.85 Model used Monte-Carlo – Monte-Carlo Monte-Carlo

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

No other features of options grant were incorporated into the measurement of fair value.

The fair value of the cash-settled options is measured at the grant date using the Black-Scholes option pricing model taking into account the terms and conditions upon which the instruments were granted. The services received and a liability to pay for those services are recognised over the expected vesting period. Until the liability is settled it is remeasured at each reporting date with changes in fair value recognised in profit or loss.

The carrying amount of the liability relating to the cash-settled options at 31 December 2013 is £410,000 (2012: £299,000). No cash-settled options had vested at 31 December 2013 (2012: nil).



142

Reserves1 Sch 55




The source and application respectively of the amounts so transferred. 1 Sch 59 Disclose the amount of each of the provisions at the beginning and end of the year and the movements during the year and the source or application of the movements.

IAS 1.79(b) An entity shall provide a description of the nature and purpose of each reserve within equity, either on the face of the balance sheet or in the notes.

s610(1) If a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account called “the share premium account”. s610(2)(3) There are restrictions on the use of the share premium account. When on issuing shares, a company has transferred a sum to the share premium account it may use that sum only:

to write off the expenses of the issue of those shares;

to write off any commissions paid on the issue of those shares; or

to pay up new shares to be allotted to members as fully paid bonus shares.

s612 Where the issuing company has secured at least a 90% equity holding in another company in

pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for shares allotted is to be provided:

by the issue or transfer to the issuing company of equity shares in the other company; or

by the cancellation of any such shares not held by the issuing company.

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27. Reserves

Revaluation

reserve AFS Reserve

Cash flow hedge

reserve Retained earnings

Total Equity

£000 £000 £000 £000 £000 2012 Revaluation of land and buildings

(net of tax) 609 – – – 609 Net loss on available for sale

financial assets (net of tax) – (34) – – (34) Net movement on cash flow

hedges (net of tax) – – 10 – 10 Actuarial gains on defined benefit

pension plans (net of tax) – – – 402 402 Other Comprehensive Income for

the year 609 (34) 10 402 987 2013 Revaluation of land and buildings

(net of tax) 639 – – – 639 Net loss on available for sale

financial assets (net of tax) – (4) – – (4) Net movement on cash flow

hedges (net of tax) – – (2) – (2) Actuarial gains on defined benefit

pension plans (net of tax) – – – 221 221 Other Comprehensive Income for

the year 639 (4) (2) 221 854

Revaluation reserve

The revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity.

AFS reserve

This reserve records fair value changes on available-for-sale investments.

Cash flow hedge reserve

The cash flow hedge reserve is used to record the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Equity share capital

The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company’s equity share capital, comprising £1 ordinary shares.



144

Post balance sheet events IAS 10.10 An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the balance sheet date.

IAS 10.19 If an entity receives information after the reporting period about conditions that existed at the end of the reporting period, it shall update disclosures that relate to those conditions, in the light of the new information.

IAS 10.21 If non-adjusting events after the reporting period are material, non-disclosure could influence the economic decisions that users make on the basis of the financial statements. Accordingly, an entity shall disclose the following for each material category of non-adjusting event after the reporting period:

the nature of the event; and

an estimate of its financial effect or a statement that such an estimate cannot be made.

Capital commitments IAS 16.74(c) The financial statements shall also disclose the amount of contractual commitments for the acquisition of property, plant and equipment.

IAS 38.122(e)

The entity shall also disclose the amount of contractual commitments for the acquisition of intangible assets.

1 Sch 63(3) Give, as far as is practicable, details of the aggregate amount of contracted commitments for capital expenditure not provided for.

1 Sch 73 Separate disclosure should be made in respect of any commitments undertaken on behalf of or for the benefit of:

any parent or fellow subsidiary undertaking*;

any subsidiary undertaking*; and

any other person.

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28. Post balance sheet event On 14 January 2014, a short leasehold property with a net book value of £880,000 was severely damaged by flooding. It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of stocks by some £350,000. No provision has been made in these financial statements for this loss.

29. Capital commitments At 31 December 2013, amounts contracted for but not provided in the financial statements for the acquisition of property, plant and equipment amounted to £5,500,000 (2012: £4,500,000).



146

Contingent liabilities 1 Sch 63(2), All material contingent losses should be disclosed with an estimate of the financial effect, its legal nature and details of any security. Unless the possibility of any transfer in settlement is remote, an indication of the uncertainties relating to the amount or timing of any outflow and the possibility of any reimbursement should be disclosed. If this is not practicable, that fact should be stated. Since the Companies Act requires disclosure of all material contingent liabilities, the exemption in IAS 37 from disclosing remote contingent losses is not available to entities reporting under the Companies Act.

IAS 37.86 Unless the possibility of any outflow in settlement is remote, an entity shall disclose for each class of contingent liability at the end of the reporting period a brief description of the nature of the contingent liability and, where practicable:

an estimate of its financial effect, measured using the principles set out for provisions;

an indication of the uncertainties relating to the amount or timing of any outflow; and

the possibility of any reimbursement.

IAS 37.89 Where an inflow of economic benefits is probable, an entity shall disclose a brief description of the nature of the contingent assets at the end of the reporting period, and, where practicable, an estimate of their financial effect, measured using the principles set out for provisions.

IAS 37.91 Where the information required by IAS 37.86 or 89 is not disclosed because it is not practicable to do so, that fact shall be stated.

IAS 37.92 In extremely rare cases, disclosure of some or all of the information required by IAS 37.84-89 can be expected to prejudice seriously the position of the entity in a dispute

with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, an entity need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed. IAS 12.88 An entity discloses any tax-related contingent liabilities and contingent assets in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Contingent liabilities and contingent assets may arise, for example, from unresolved disputes with taxation authorities.

IAS 11.45 An entity discloses any contingent liabilities and contingent assets in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Contingent liabilities and contingent assets may arise from such items as warranty costs, claims, penalties or possible losses.

IAS 39.47(c) After initial recognition, an issuer of financial guarantee contracts as defined in paragraph 9, shall unless paragraph 47(a) or (b) applies measure it at the higher of:

(i) the amount determined in accordance with IAS 37; and

(ii) the amount initially recognised (see paragraph 43) less, when appropriate, cumulative amortisation recognised in accordance with IAS 18.

Pensions and other post retirement benefits IAS 19.131 An entity shall offset an asset relating to one plan against a liability relating to another plan when, an only when, the entity (a) has a legally enforceable right to

use a surplus in one plan to settle obligations under the other plan; and

(b) intends either to settle the obligations on a net basis, or to realise the surplus in one plan

and settle its obligation under the other plan simultaneously.

IAS 19.135 An entity shall disclose information that: (a) explains the characteristics of its

defined benefit plans and risks associated with them (see paragraph 139).

(b) identifies and explains the amounts in its financial statements arising from its defined benefit plans (see paragraphs 140-144).

(c) describes how its defined benefit plans may affect the amount, timing and uncertainty of the entity’s future cash flows (see paragraphs 145-147).

IAS 19.136 To meet the objectives of paragraph 135, an entity shall consider the following: (a) the level of detail necessary to

satisfy the disclosure requirements.

(b) how much emphasis to place on each of the various requirements.

(c) how much aggregation or disaggregation to undertake; and

(d) whether users of the financial statements need additional information to evaluate the quantitative information disclosed. IAS 19.138 An entity assess whether all or some disclosures should be disaggregated to distinguish plans or groups of plans with materially different risks. For example, an entity may disaggregate disclosure about plans showing one or more of the following features:

a) different geographical locations. b) different characteristics such as

flat salary pension plans, final salary pension plans or post employment medical plans.

c) Different regulatory environments.

d) Different reporting segments. e) Different funding requirements

(eg wholly unfunded, wholly or partly funded).

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30. Contingent liabilities An overseas customer has commenced an action against the Company in respect of equipment claimed to be defective. It has been estimated that the maximum liability should the action be successful is £850,000. A trial date has not yet been set and therefore it is not practicable to state the timing of any payment.

The Company has been advised by Counsel that it is possible, but not probable, the action will succeed and accordingly no provision for any liability has been made in these financial statements.

31. Pensions and other post-employment benefits The Company is the sponsoring employer of two final salary defined benefit pension schemes; one is operated by the Company in the United Kingdom, the Entity UK Employee Pension Scheme, and one by the Company for staff in the United States, the Entity US Pension Plan. Both schemes are funded by the payment of contributions to separately administered trust funds.

The pension scheme assets are held in a separate Trustee administered fund to meet long-term pension liabilities to past and present employees. The trustees of the fund are required to act in the best interest of the fund’s beneficiaries. The appointment of trustees to the fund is determined by the scheme’s trust documentation. The Company has a policy that one-third of all trustees should be nominated by members of the fund, including at least one member by current pensioners.

In addition to its statutory duties the board of trustees have been granted the power to ‘call’ for additional contributions in the event of certain circumstances. The circumstances in which the trustees can exercise this power include a disposal that accounts for more than 15% of the net assets, as reported in the consolidated Balance Sheet or when the funding position of the scheme falls below 65% of the scheme liabilities.

In 2013 a surplus of £9,000 (2012: deficit of £277,000) has been recognised in respect of the US Defined Benefit pension plan. The Company is able to recover the surplus through a reduction in future contributions.

The Company also provides certain additional post-retirement healthcare benefits to senior employees in the United States. These benefits are unfunded.



148

Pensions and other post-retirement benefits (continued) IAS 19.131 An entity shall offset an asset relating to one plan against a liability relating to another plan when, and only when, the entity: (a) has a legally enforceable right to use a surplus in on plan to settle obligations under the other plan; and (b) intends either to settle the obligation on a net basis, or to realise the surplus in one plan and settle the obligation under the other plan simultaneously. IAS 19.137 If the disclosures provided in accordance with the requirements of this standard and other IFRSs are insufficient to meet the objectives in paragraph 135, an entity shall disclose additional information necessary to meet those objectives. IAS 19.139 (a) For defined benefit plans, an entity shall disclose information about the characteristics of its defined benefit plans, including:

i. The nature of the benefits provided by the plan (eg final salary defined benefit plan or contribution based plan with guarantee).

ii. A description of the regulatory framework in which the plan operates, for example the level of any minimum funding requirements, and any effect of the regulatory framework on the plan, such as the asset ceiling.

iii. A description of any other entity’s responsibilities for the governance of the plan, for example responsibilities of trustees or of board members of the plan.

(b) a description of the risks to which the plan exposes the entity, focused on any unusual, entity specific or plan specific risks, and of any significant concentrations of risk. For example, if plan assets are invested primarily in one class of investments, eg property, the plan may expose the entity to a concentration of property market risk.

(c) a description of any plan amendments, curtailments and settlements. IFRIC 14.11 A refund is available to an entity only if the entity has an unconditional right to a refund:

during the life of the plan, without assuming that the plan liabilities must be settled in order to obtain the refund (e.g. in some jurisdictions, the entity may have a right to a refund during the life of the plan, irrespective of whether the plan liabilities are settled); or

assuming the gradual settlement of the plan liabilities over time until all members have left the plan; or

assuming the full settlement of the plan liabilities in a single event (i.e. as a plan wind-up)

Entity UK Limited


149

31. Pensions and other post-employment benefits (continued) The assets and liabilities of the schemes at 31 December are:

At 31 December 2013 UK Pensions US Pensions US Medical Total £000 £000 £000 £000

Scheme assets at fair value Equities 3,163 225 – 3,388Bonds 866 576 – 1,442Properties 303 360 – 663Fair value of scheme assets 4,332 1,161 – 5,493Present value of scheme liabilities (4,926) (1,152) (139) (6,217)Defined benefit pension plan

surplus/(deficit) (594) 9 (139) (724)

At 31 December 2012 Scheme assets at fair value Equities 2,167 174 – 2,341Bonds 594 410 – 1,004Properties 208 205 – 413Fair value of scheme assets 2,969 789 – 3,758Present value of scheme liabilities (3,767) (1,066) (117) (4,950)Defined benefit pension plan deficit (798) (277) (117) (1,192)

The pension schemes have not invested in any of the Company’s own financial instruments nor in properties or other assets used by the Company.



150

Pensions and other post-employment benefits (continued)

IAS 19.140

An entity shall provide a reconciliation from the opening balance to the closing balance for each of the following, if applicable:

(a) the net defined benefit liability (asset) showing separate reconciliations for:

(i) plan assets

(ii) the present value of the defined benefit obligation

(iii) the effect of the asset ceiling

(b) any reimbursement rights . An entity shall also describe the relationship between any reimbursement right and the related obligation.

IAS 19.141

Each reconciliation listed in paragraph 140 shall show each of the following, if applicable:

(a) current service cost

(b) interest income or expense.

(c) remeasurements of the net defined benefit liability (asset), showing separately:

(i) the return of plan assets excluding amounts included in interest in (b).

(ii) actuarial gains and losses arising from changes in demographic assumptions (see 76(a)).

(iii) actuarial gains and losses arising from changes in financial assumptions (see 76(b)).

(iv) changes in the effect of limiting a net defined benefit asset to the asset ceiling, excluding amounts included in interest in (b). An entity shall also disclose how it determined the maximum economic benefit available, ie whether those benefits would be in the form of refunds, reductions in future combinations or a combination of both.

(d) past service cost gains and losses arising from settlements. As permitted by paragraph 100, past service cost and gains and losses arising from settlements need not be distinguished if they occur together.

(e) the effect of changes in foreign exchange rates

(f) contributions to the plan, showing separately those by the employer and by plan participants

(g) payments from the plan, showing separately the amount paid in respect of any settlements

(h) the effects of business combinations and disposals

IAS 19.142

An entity shall disaggregate the fair value of plan assets into classes that distinguish the nature and the risks of those assets, subdividing each class of plan asset into those that have a quoted market price in an active market (as defined in IFRS 13 Fair Value measurement) and those that do not. For example an entity could distinguish between:

(a) cash and cash equivalents (b) equity instruments (segregated by industry type , company size, geography etc) (c) debt instruments (segregated by type of issuer, credit quality, geography etc) (d) real estate (segregated by geography etc) (e) derivatives (segregated by type of underlying risk in the contract, for example, interest rate contracts, foreign exchange contracts, equity contracts, credit contracts, longevity swaps etc) (f) investment funds (segregated by type of fund) (g) asset-backed securities: and (h) structured debt IAS 19.143

An entity shall disclose the fair value of the entity’s own transferable financial instruments held as plan assets, and the fair value of the plan assets that are property occupied by, or other assets used by, the entity.

1 Sch 63(4) Disclose any pension commitment provided or not provided for. Disclose any pension provisions or unprovided pension commitments in respect of past directors separately.

1 Sch 73 Separate disclosure should be made in respect of any commitments undertaken on behalf of or for the benefit of: (i) any parent or fellow subsidiary undertaking; (ii) any subsidiary undertaking; and (iii) any other person.

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31. Pensions and other post-employment benefits (continued) The amounts recognised in the Income Statement and in the Statement of Comprehensive Income for the year are analysed as follows:

Year ended 31 December 2013 UK Pensions US Pensions US Medical Total £000 £000 £000 £000

Recognised in the Income Statement Current service cost 729 452 29 1,210 Past service cost 22 – – 22 Recognised in arriving at operating profit 751 452 29 1,232

Of the total charge, £983,000 was included in cost of sales and £249,000 was included in administrative expenses. Net interest on defined benefit liability 38 17 5 60

Taken to the Statement of Comprehensive

Income Return on plan assets (excluding amounts

included in net interest expense) 707 283 – 990 Actuarial changes arising from changes in

demographic assumptions (300) 50 4 (246) Actuarial changes arising from changes in

financial assumptions (441) 74 8 (359) Recognised in the Statement of

Comprehensive Income (34) 407 12 385

Year ended 31 December 2012 Recognised in the Income Statement Current service cost 660 430 28 1,118 Past service cost 55 – – 55 Recognised in arriving at operating profit 715 430 28 1,173

Of the total charge, £963,000 was included in cost of sales and £210,000 was included in administrative expenses.

Net interest on defined benefit liability 68 29 5 102

Taken to the Statement of Comprehensive Income

Return on plan assets (excluding amounts included in net interest expense) 683 239 – 922

Actuarial changes arising from changes in demographic assumptions (196) 55 4 (137)

Actuarial changes arising from changes in financial assumptions (200) 60 5 (133)

Recognised in the Statement of Comprehensive Income 287 354 11 652


152

Entity UK Limited


153

31. Pensions and other post-employment benefits (continued) Changes in the present value of the defined benefit pension obligations are analysed as follows:

UK Pensions US Pensions US Medical Total £000 £000 £000 £000

As at 1 January 2012 3,017 984 95 4,096 Current service cost 660 430 28 1,118 Past service cost 55 – – 55 Interest on benefit obligation 208 66 5 279 Benefits paid (569) (299) – (868) Actuarial gains and losses 396 (104) – 292 Foreign currency differences – (11) (11) (22) Defined benefit obligation at

31 December 2012 and 1 January 2013 3,767 1,066 117 4,950

Current service cost 729 452 29 1,210 Past service cost 22 – – 22 Interest cost 264 72 5 341 Benefits paid (597) (314) – (911) Actuarial gains and losses 741 (112) – 629 Foreign currency differences – (12) (12) (24) Defined benefit obligation at

31 December 2013 4,926 1,152 139 6,217

The defined benefit obligation comprises £139,000 (2012: £117,000) arising from unfunded plans and £6,078,000 (2012: £4,833,000) from plans that are wholly or partly funded.

Changes in the fair value of plan assets are analysed as follows:

UK Pensions US Pensions US Medical Total £000 £000 £000 £000

As at 1 January 2012 1,737 481 – 2,218 Interest income on plan assets 140 37 – 177 Contributions by employer 720 256 – 976 Contributions by employees 258 75 – 333 Benefits paid (569) (299) – (868) Actuarial gains and losses 683 245 – 928 Foreign currency differences – (6) – (6) Fair value of plan assets at 31 December

2012 and 1 January 2013 2,969 789 – 3,758 Interest income on plan assets 226 55 – 281 Contributions by employer 756 269 – 1,025 Contributions by employees 271 79 – 350 Benefits paid (597) (314) – (911) Actuarial gains and losses 707 289 – 996 Foreign currency differences – (6) – (6) Fair value of plan assets at

31 December 2013 4,332 1,161 – 5,493



154

Pensions and other post-employment benefits (continued) IAS 19.144

An entity shall disclose the significant actuarial assumptions used to determine the present value of the defined benefit obligation (see para 76). Such disclosure shall be in absolute terms (eg as an absolute percentage and not just as a margin between different percentages and other variables). When an entity provides disclosures in total for a grouping of plans, it shall provide such disclosures in the form of weighted averages or relatively narrow ranges.

IAS 19.145

An entity shall disclose:

(a) a sensitivity analysis for each significant actuarial assumption (as disclosed under paragraph 144) as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumptions that were reasonably possible at that date.

(b) the methods and assumptions used in preparing the sensitivity analyses required by (a) and limitations of those methods.

(c) changes from the previous period in the methods and assumptions used in preparing the sensitivity analyses and the reasons for such changes.

IAS 19.146

An entity shall disclose a description of any asset-liability matching strategies used by the plan or the entity, including the use of annuities and other techniques, such as longevity swaps, to manage risk.

IAS 19.147 To provide an indication of the effect of the defined benefit plan on the entity’s future cash flows, an entity shall disclose:

(a) a description of any funding arrangements and funding policy that affect future contributions.

(b) the expected contributions to the plan for the next annual reporting period

(c) information about the maturity profile of the defined benefit obligation. This will include the weighted average duration of the defined benefit obligation and may include other information about the distribution of the timing of benefit payments, such as analysis of the benefit payments.

Entity UK Limited


155

31. Pensions and other post-employment benefits (continued) Pension contributions are determined with the advice of independent qualified actuaries, Actuary & Co, on the basis of annual valuations using the projected unit credit method. The projected unit credit method is an accrued benefits valuation method in which the scheme liabilities make allowance for future earnings. Scheme assets are stated at their market values at the respective balance sheet dates and overall expected rates of return are established by applying published brokers’ forecasts to each category of scheme assets.

United Kingdom United States 2013 2012 2013 2012 % % % %

Main assumptions: Rate of salary increases 4.0 3.8 3.9 3.7 Rate of increase in pensions in payment 3.3 3.2 3.2 3.0 Discount rate 6.5 5.9 6.3 5.8 Inflation assumption 3.8 3.2 3.3 3.1 Post-retirement mortality (in years) Current pensioners at 65 – male 19.0 19.0 17.7 17.7 Current pensioners at 65 – female 21.0 21.0 20.3 20.3 Future pensioners at 65 – male 22.0 22.0 20.0 20.0 Future pensioners at 65 – female 25.0 25.0 22.0 22.0 Claim rates for medical plans 34.0 35.0 Rate of increase in healthcare costs 7.3 7.2 The UK discount rate is based on published indices for 15 year AA bonds and the US discount rate is derived from corporate bond yields which reflect the term of the expected benefit payments. Outlying items in the market population are ignored. The assumptions for inflation and for increases in pensions are based on the yield gap between long-term index-linked and long-term fixed interest gilt securities. In the UK, mortality rates are based on PA92 tables, adjusted to reflect recent experience in the scheme, and projected reflect improvements in life expectancy assumed to continue to 2021 with minimum improvement thereafter. Mortality rates in the US are based on the RP2000 fully generational table, with values projected using the scale AA without any white collar adjustment.

The post-retirement mortality assumptions allow for expected increases in longevity. The “current” disclosures above relate to assumptions based on longevity (in years) following retirement at the balance sheet date, with “future” being that relating to an employee retiring in 2036.

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:

Assumption Change in assumption Impact on scheme liabilities

Discount rate Increase/decrease by 1.0% Decrease/Increase by 9.5% Inflation assumption Increase/decrease by 1.0% Increase/decrease by 5.5% Rate of salary increases Increase/decrease by 0.5% Increase/decrease by 3% Post retirement mortality Increase by 1 year Increase by 4.5%



156

Pensions and other post-employment benefits (continued)

Multi-employer plans Author’s note If a multi-employer plan is a defined benefit plan and the entity has sufficient information available to account for the plan as a defined benefit plan then the disclosures for defined benefit plans should be made accordingly.

IAS 19.34 When sufficient information is not available to use defined benefit accounting for a multi-employer plan that is a defined benefit plan, an entity shall:

account for the plan as if it were a defined contribution plan;

disclose the information required by paragraph 148.

IAS 19.148

If an entity participates in a multi-employer defined benefit plan, it shall disclose:

a description of the funding arrangements, including the method used to determine the entity’s rate of contributions and any minimum funding requirements.

A description of the extent to which the entity can be liable to the plan for other entities’ obligations under the terms and conditions of the multi-employer plan.

A description of any agreed allocation of a deficit or surplus on:

Wind up of the plan; or

The entity’s withdrawal from the plan.

If the entity accounts for that plan as if it were a defined contribution plan in accordance with paragraph 34, it shall disclose the following, in addition to the information required above and instead of the information required by paragraphs 139-147:

The fact that the plan is a defined benefit plan.

The reason why sufficient information is not available to enable the entity to account for the plan as a defined benefit plan.

The expected contributions to the plan for the next annual reporting period

Information about any deficit or surplus in the plan that may affect the amount of future contributions, including the basis used to determine that deficit or surplus and the implications, if any, for the entity.

An indication of the level of participation of the entity in the plan compared with other participating entities.

Defined benefit plans under common control IAS 19.40 Defined benefit plans that share risks between various entities under common control, for example, a parent and its subsidiaries, are not multi-employer plans.

IAS 19.41 An entity participating in such a plan, shall obtain information about the plan as a whole measured in accordance with the Standard on the basis of assumptions that apply to the plan as a whole. If there is a contractual agreement or stated policy for charging to individual group entities the net defined benefit cost for the plan as a whole measured in accordance with the Standard the entity shall , in its separate or individual financial statements recognise the defined benefit cost so charged. If there is no such agreement or policy, the net defined benefit cost shall be recognised in the separate or individual financial statements of the group entity that is legally the sponsoring employer for the plan. The other group entities shall, in their separate or individual financial statements, recognise a cost equal to their contribution payable for the period.

IAS 19.42

Participation in such a plan is a related party transaction for each individual group entity. An entity shall therefore, in its separate or individual financial statements disclose the information required by paragraph 149.

IAS 19.149

If an entity participates in a defined benefit plan that shares risks between entities under common control, it shall disclose:

(a) the contractual agreement or stated policy for charging the net defined benefit cost or the fact that there is no such policy

(b) the policy for determining the contribution to be paid by the entity

(c) if the entity accounts for an allocation of the net defined benefit cost as noted in paragraph 41, all the information about the plan as a whole required by paragraphs 135-147

(d) if the entity accounts for the contribution payable for the period as noted in paragraph 41, the information about the plan as a whole required by paragraphs 135-137, 139, 142-144 and 147 (a) and (b).

Defined contributions plans IAS 19.53 An entity shall disclose the amount recognised as an expense for defined contribution plans.

Refer to note 8 for the disclosures.

Author’s note Neither IAS 19 nor IFRS 1 makes any transitional relief available from this disclosure requirement. Companies may therefore have difficulty in obtaining the information necessary to meet this requirement.

Entity UK Limited


157

31. Pensions and other post-employment benefits (continued) A one percentage point change in the assumed rate of increase in healthcare costs would have the following effects:

Increase Decrease £000 £000

Effect on aggregate service cost and interest cost 6 (2) Effect on defined benefit obligation 12 (8)

The most recently completed actuarial valuation of the Company’s main retirement benefits schemes was carried out as at 31 December 2013. Following the valuation, the Company’s ordinary contributions rate increased, with effect from 1 January 2012, from 11.8% of pensionable salaries to 12.0% representing regular contributions. In addition the Company is contributing a further 3% of pensionable earnings to the scheme as a contribution towards the current deficit in the UK scheme. The Company has agreed with the trustees it will aim to eliminate the deficit over the next 3 years. The Company will monitor funding levels on an annual basis. The next valuation is due to be completed as at 31 December 2016. The Company considers that the contribution rates agreed with trustees at the last valuation date are sufficient to eliminate the deficit in the UK scheme over the agreed period and that regular contributions, which are based on service costs, will not increase significantly.

The total contributions to the defined benefit schemes in 2014 are expected to be £1,200,000 (2013: £1,000,000).

The Company has agreed the following funding objectives with trustees:

1. To return the ongoing funding level of the schemes to 100% of the projected past service liabilities within a period of 3 years measured in accordance with IAS 19;

2. Once the funding level of the schemes are 100% of the projected past service liabilities to maintain funding at least at this level; and

3. To meet the liabilities of the schemes in the event that the schemes are wound-up.

The levels of contributions are based on the current service costs and the expected future cash flows of the defined benefit schemes. The Company estimates the present value of the duration of UK scheme liabilities on average fall due over 35 years and the US scheme over 31 years.

The acquisition of Caledonian Circuits Limited does not have an effect on the position of the Company’s pension schemes as it only provides money purchase pensions benefits.

In conjunction with the trustees, the Company has recently conducted an asset-liability review for its major schemes. These studies are used to assist the trustees and the Company to determine the optimal long-term asset allocation with regard to the structure of liabilities within the schemes. The results of the study are used to assist the trustees in managing the volatility in the underlying investment performance and risk of a significant increase in any scheme deficit by providing information used to determine the pension schemes investment strategy.

The majority of the equities held by the schemes are in international blue chip entities. The aim is to hold a globally diversified portfolio of equities, with a target of 60% of equities being held in UK and Europe, 30% in US equities and the remainder in emerging markets. To maintain a wide range of diversification and to improve return opportunities, up to approximately 15% of equity assets are allocated to high risk markets such as Private Equity and Emerging Markets.



158

Director’s loan and other directors’ interests Author’s note Companies preparing financial statements under IFRSs are not exempt from providing in the financial statements the information required by the Companies Act regarding certain transactions with directors. Entity UK Limited has chosen to keep this information separate from that required under IAS 24 on transactions with related parties. The requirement to name the individuals concerned arises from the Companies Act and not IAS 24.

s413(1)-(2) Disclose details of:

advances and credit granted to directors of the company by the company or any of its subsidiary undertakings; and

guarantees of any kind entered into on behalf of the directors of the parent company, by that company, or any of its subsidiary undertakings.

s413(3) Details required to be disclosed for an advance or credit are:

the amount;

an indication of the interest rate

the main conditions; and

any amounts repaid

The totals of such amounts must also be disclosed.

s413(4) Details required to be disclosed for guarantees are:

its main terms;

the amount of the maximum liability that may be incurred by the company (or its subsidiary); and

any amount paid and any liability incurred by the company (or its subsidiary) for the purpose of fulfilling the guarantee (including any loss incurred by reason of enforcement of the guarantee).

any amounts repaid

The totals of such amounts must also be disclosed.

s413(6)-(7) Disclosure is required in respect of transactions with any person who was (or was connected with) a director of the company or any holding company thereof at any time during the period, irrespective of whether he was (or was connected with) such a director at any time that the transaction or arrangement was made.

s413(7) References to a ‘subsidiary’ include any company which was a subsidiary of the company at any time during the period, irrespective of whether or not it was a subsidiary at the time that the transaction or arrangement was made.

Off-balance sheet arrangements s410A If the company is or has been party to arrangements that are not reflected in its balance sheet and the risks or benefits arising from these arrangements are material at the balance sheet date disclose:

the nature and purpose of the arrangements; and

the financial impact of the arrangements on the company (large companies only).

The information need only be given to the extent necessary for enabling the financial position of the company to be assessed.

Author’s note

Neither the Companies Act nor the related EC Directive provides a definition of an “Off-balance sheet arrangement”. The UITF has issued the following points by way of guidance:

- When a company provides disclosures in accordance with s410A it should consider the types of transactions envisaged by the EC and the aim of the legislation;

- s410A only applies where the risks or benefits arising from the arrangements are material;

- disclosure need only be given to the extent necessary for enabling the financial position of the company to be assessed; and

- some accounting standards, already require disclosures of off-balance sheet items. Companies will, in addition, need to consider whether arrangements outside of the scope of these standards quire disclosure in the financial statements.

Examples of the types of transactions that the EC envisaged for disclosure include risk and benefit-sharing arrangements or obligations arising from a contract such as debt factoring, combined sale and repurchase arrangements, consignment stock arrangements, securitisation arranged through separate companies, and unincorporated entities, pledged assets, operating lease arrangements, outsourcing and the like.

Entity UK Limited


159

32. Directors’ loans and other directors’ interests Directors’ loans

At the Annual General Meeting held on 21 April 2011 approval was given for an interest-free loan up to a maximum of £18,000 to be made as necessary to J N Smith to enable him to meet expenditure to be incurred in his capacity as chief executive at marketing exhibitions and tours in the United States. Details of transactions on that loan account, included in receivables, are as follows: 2013 2012 £000 £000

As at 1 January 13 12 Advances 12 13 Repayments (11) (12) As at 31 December 14 13

The maximum outstanding balance during the year was £15,000 (2012: £17,000).

Other directors’ interests

During the year, purchases totalling £525,000 (2012: £510,000), at normal market prices have been made by the company from UK Gnome Industries Limited, of which P A MacBryde’s wife is a director and controlling shareholder. £12,000 was outstanding at 31 December 2013 (2012: £10,000).

Sir David Connor was interested throughout the year, through his 25% equity interest in Home Fires Limited, in a contract for the supply of fire extinguishers to that company. During the year the Company supplied extinguishers to Home Fires Limited to a value of £250,000 (2012: £225,000) at normal market prices. At 31 December 2013, Home Fires Limited owed £25,000 (2012: £20,000) to the Company.

33. Off-balance sheet arrangements The Company enters into operating lease arrangements for the hire of buildings and plant & equipment as these arrangements are a cost effective way of obtaining the short-term benefits of these assets. The annual commitments under these arrangements are disclosed in Note 22. There are no other material off-balance sheet arrangements.



160

Other related party transactions IAS 24.18 If there have been transactions between related parties, an entity shall disclose the nature of the related party relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements. These disclosure requirements are in addition to the requirements in paragraph 16 of IAS 24 to disclose key management personnel compensation. At a minimum, disclosures shall include:

the amount of the transactions; the amount of outstanding

balances; and: – their terms and conditions,

including whether they are secured, and the nature of the consideration to be provided in settlement; and

– details of any guarantees given or received;

provisions for doubtful debts related to the amount of outstanding balances; and

the expense recognised during the period in respect of bad or doubtful debts due from related parties.

IAS 24.19 The disclosures required by the above paragraph shall be made separately for each of the following categories:

the parent; entities with joint control or

significant influence over the entity;

subsidiaries; associates; joint ventures in which the

entity is a venturer; key management personnel of

the entity or its parent; and other related parties.

IAS 24.20 The classification of amounts payable to, and receivable from, related parties in the different categories is an extension of the disclosure requirement in IAS 1 for information to be presented either in the statement of financial position or in the notes. The categories are extended to provide a more

comprehensive analysis of related party balances and apply to related party transactions.

IAS 24.24 Items of a similar nature may be disclosed in aggregate except when separate disclosure is necessary for an understanding of the effects of related party transactions on the financial statements of the entity.

IAS 24.23 Disclosures that related party transactions were made on terms equivalent to those that prevail in arm’s length transactions are made only if such terms can be substantiated.

IAS 24.4 Related party transactions and outstanding balances with other entities in a group are disclosed in an entity’s financial statements. Intra group related party transactions and outstanding balances are eliminated in the preparation of consolidated financial statements of the group.

Author’s note Paragraph 8 (k) of FRS 101, exempts a qualifying entity for the requirements in IAS 24 to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member. IAS 24.13 Relationships between parents and subsidiaries shall be disclosed irrespective of whether there have been transactions between those related parties. An entity shall disclose the name of the entity’s parent and, if different, the ultimate controlling party. If neither the entity’s parent nor the ultimate controlling party produces financial statements available for public use, the name of the next most senior parent that does so shall also be disclosed.

Author’s note “Other long-term benefits” include payments made in respect of long-service awards. The FRRP Annual Report 2010 noted that many companies cross reference the requirements of IAS 24.16 to their remuneration report but some additional disclosures are likely to be

necessary however, as employers’ national insurance is not included in the short-term employee benefits disclosed in the remuneration report, and total share-based payment is often not disclosed in the remuneration report. IAS 24.13 Relationships between a parent and its subsidiaries shall be disclosed irrespective of whether there have been transactions between them. An entity shall disclose the name of its parent and, if different, the ultimate controlling party. If neither the entity's parent nor the ultimate controlling party produces consolidated financial statements available for public use, the name of the next most senior parent that does so shall also be disclosed. IAS 1.138(c) An entity shall disclose, if not disclosed elsewhere in the in information published with the financial statements: The name of the parent and the ultimate parent of the group.

Transition Author’s note

As Entity UK has transitioned to FRS 101 from EU-adopted IFRS without material effect a transition note is not required. An example of a transition note for an entity transitioning to FRS 101 from previous UK GAAP is contained in the FRS 101 Illustrative financial statements, Listed UK group plc, also available on GAAIT.

Entity UK Limited


161

34. Other related party transactions During the year the Company entered into transactions, in the ordinary course of business, with other related parties. Those transactions with directors are disclosed in note 32. The Company has taken advantage of the exemption under paragraph 8(k) of FRS101 not to disclose transactions with fellow wholly owned subsidiaries. Transactions entered into, and trading balances outstanding at 31 December with other related parties, are as follows:

Purchases Amounts Amounts Sales to from owed by owed to related related related related party party party party

£000 £000 £000 £000 Related party Associates 2013 2,940 – 2,048 – 2012 2,800 – 1,951 – Joint ventures 2013 – 609 – 32 2012 – 580 – 30 Other related parties 2013 – 403 – 45 2012 – 207 – 10

Terms and conditions of transactions with related parties Sales and purchases between related parties are made on an arm’s length basis. Outstanding balances with entities other than subsidiaries are unsecured, interest free and cash settlement is expected within 60 days of invoice. Terms and conditions for transactions with subsidiaries are the same, with the exception that balances are placed on intercompany accounts with no specified credit period. The Company has not provided or benefited from any guarantees for any related party receivables or payables. During the year ended 31 December 2013, the Company has not made any provision for doubtful debts relating to amounts owed by related parties (2012: nil).

35. Ultimate Group undertaking The Company’s immediate and ultimate parent undertaking is Listed Group UK plc. The company is included within these group accounts which are publicly available.


162

.

TThe Companies Act 2006 financial statement formats Balance Sheet

163

The formats contained in Schedule 1 are for an individual company. Schedule 6 supplements this by adding items relevant to group financial statements. The following formats include such group financial statements items.

Format 1 A Called up share capital not paid (1) B Fixed assets I Intangible assets 1 Development costs 2 Concessions, patents, licences, trademarks and similar rights and assets (2) 3 Goodwill (3) 4 Payments on account II Tangible assets 1 Land and buildings 2 Plant and machinery 3 Fixtures, fittings, tools and equipment 4 Payments on account and assets in course of construction III Investments 1 Shares in group undertakings 2 Loans to group undertakings † Interests in associated undertakings † Other participating interests 4 Loans to undertakings in which the company has a participating interest 5 Other investments other than loans 6 Other loans 7 Own shares (4) C Current assets I Stocks 1 Raw materials and consumables 2 Work in progress 3 Finished goods and goods for resale 4 Payments on account II Debtors (5) 1 Trade debtors 2 Amounts owed by group undertakings 3 Amounts owed by undertakings in which the company has a participating interest 4 Other debtors 5 Called up share capital not paid (1) 6 Prepayments and accrued income (6) III Investments 1 Shares in group undertakings 2 Own shares (4) 3 Other investments IV Cash at bank and in hand D Prepayments and accrued income (6)

Appendices

The Companies Act 2006 financial statements formats Balance sheet

164

† These items, which are inserted by 6 Sch and, although not assigned references, are to be treated as if they had been assigned Arabic numbers, replace the item ‘Participating interests’ for an individual company.

E Creditors: amounts falling due within one year 1 Debenture loans (7) 2 Bank loans and overdrafts 3 Payments received on account (8) 4 Trade creditors 5 Bills of exchange payable 6 Amounts owed to group undertakings 7 Amounts owed to undertakings in which the company has a participating interest 8 Other creditors including taxation and social security (9) 9 Accruals and deferred income (10) F Net current assets (liabilities) (11) G Total assets less current liabilities H Creditors: amounts falling due after more than one year 1 Debenture loans (7) 2 Bank loans and overdrafts 3 Payments received on account (8) 4 Trade creditors 5 Bills of exchange payable 6 Amounts owed to group undertakings 7 Amounts owed to undertakings in which the company has a participating interest 8 Other creditors including taxation and social security (9) 9 Accruals and deferred income (10) I Provisions for liabilities 1 Pensions and similar obligations 2 Taxation, including deferred taxation 3 Other provisions J Accruals and deferred income (10) †† Minority interests

K Capital and reserves I Called up share capital (12) II Share premium account III Revaluation reserve IV Other reserves 1 Capital redemption reserve 2 Reserve for own shares 3 Reserves provided for by the articles of association 4 Other reserves V Profit and loss account †† Minority interests


165

†† This item, which is inserted in either position by 6 Sch, although not assigned a reference, is to be treated as if it had been assigned a letter.

Appendices


166

Format 2 Assets A Called up share capital not paid (1) B Fixed assets I Intangible assets 1 Development costs 2 Concessions, patents, licences, trademarks and similar rights and assets (2) 3 Goodwill (3) 4 Payments on account II Tangible assets 1 Land and buildings 2 Plant and machinery 3 Fixtures, fittings, tools and equipment 4 Payments on account and assets in course of construction III Investments 1 Shares in group undertakings 2 Loans to group undertakings † Interests in associated undertakings † Other participating interests 4 Loans to undertakings in which the company has a participating interest 5 Other investments other than loans 6 Other loans 7 Own shares (4) C Current assets I Stocks 1 Raw materials and consumables 2 Work in progress 3 Finished goods and goods for resale 4 Payments on account II Debtors (5) 1 Trade debtors 2 Amounts owed by group undertakings 3 Amounts owed by undertakings in which the company has a participating interest 4 Other debtors 5 Called up share capital not paid (1) 6 Prepayments and accrued income (6) III Investments 1 Shares in group undertakings 2 Own shares (4) 3 Other investments IV Cash at bank and in hand D Prepayments and accrued income (6) † These items, which are inserted by 6 Sch and, although not assigned references, are to be treated

as if they had been assigned Arabic numbers, replace the item ‘Participating interests’ for an individual company.


167

Liabilities A Capital and reserves I Called up share capital (12) II Share premium account III Revaluation reserve IV Other reserves 1 Capital redemption reserve 2 Reserve for own shares 3 Reserves provided for by the articles of association 4 Other reserves V Profit and loss account †† Minority interests

B Provisions for liabilities 1 Pensions and similar obligations 2 Taxation, including deferred taxation 3 Other provisions C Creditors (13) 1 Debenture loans (7) 2 Bank loans and overdrafts 3 Payments received on account (8) 4 Trade creditors 5 Bills of exchange payable 6 Amounts owed to group undertakings 7 Amounts owed to undertakings in which the company has a participating interest 8 Other creditors including taxation and social security (9) 9 Accruals and deferred income (10) D Accruals and deferred income (10)

†† This item, which is inserted in either position by 6 Sch, although not assigned a reference, is to be treated as if it had been assigned a letter.

Appendices


168

Notes

1 This item may be shown in either of the two positions given in formats 1 and 2.

2 Amounts in respect of assets shall only be included in a company’s balance sheet under this item if either:

(a) the assets were acquired for valuable consideration and are not required to be shown under goodwill; or

(b) the assets in question were created by the company itself.

3 Amounts representing goodwill are only be included to the extent that the goodwill was acquired for valuable consideration.

4 The nominal value of the shares held must be shown separately.

5 The amount falling due after more than one year must be shown separately for each item included under debtors.

6 This item may be shown in either of the two positions given in formats 1 and 2.

7 The amount of any convertible loans must be shown separately.

8 Payments received on account of orders shall be shown for each of these items in so far as they are not shown as deductions from stocks.

9 The amount for creditors in respect of taxation and social security must be shown separately from the amount for other creditors.

10 The two positions given for this item in format 1 of the balance sheet at E.9 and H.9 are an alternative to J. If the item is not shown at J it may be shown in either or both of the other two positions (as the case may require). The two positions given for this item in format 2 of the balance sheet are alternatives.

11 In determining the amount to be shown for this item any amounts shown under ‘prepayments and accrued income’ must be taken into account wherever shown.

12 The amount of allotted share capital and the amount of called up share capital which has been paid up must be shown separately.

13 Amounts falling due within one year and after one year shall be shown separately for each item included under creditors in format 2 and their aggregate must be shown separately for all of these items.

Formats

TThe Companies Act 2006 financial statements formats Profit and loss account

169

Format 1

1 Turnover 2 Cost of sales (2) 3 Gross profit or loss 4 Distribution costs (2) 5 Administrative expenses (2) 6 Other operating income 7 Income from shares in group undertakings † Income from interests in

associated undertakings † Income from other participating interests 9 Income from other fixed asset investments (3)

10 Other interest receivable and similar income (3) 11 Amounts written off investments 12 Interest payable and similar charges (4) 13 Tax on profit or loss on ordinary activities 14 Profit or loss on ordinary activities after

taxation †† Minority interests 15 Extraordinary income 16 Extraordinary charges 17 Extraordinary profit or loss 18 Tax on extraordinary profit or loss †† Minority interests 19 Other taxes not shown under the above items 20 Profit or loss for the financial year

Format 2

1 Turnover 2 Change in stocks of finished goods and in work

in progress 3 Own work capitalised 4 Other operating income 5 (a) Raw materials and consumables

(b) Other external charges 6 Staff costs:

(a) wages and salaries (b) social security costs (c) other pension costs

7 (a) Depreciation and other amounts written off tangible and intangible fixed assets

(b) Exceptional amounts written off current assets

8 Other operating charges 9 Income from shares in group undertakings † Income from interests in

associated undertakings † Income from other participating interests

11 Income from other fixed asset investments (3) 12 Other interest receivable and similar income (3) 13 Amounts written off investments 14 Interest payable and similar charges (4) 15 Tax on profit or loss on ordinary activities 16 Profit or loss on ordinary activities after

taxation †† Minority interests 17 Extraordinary income 18 Extraordinary charges 19 Extraordinary profit or loss 20 Tax on extraordinary profit or loss †† Minority interests 21 Other taxes not shown under the above items 22 Profit or loss for the financial year

In each format, 6 Sch:

† replaces the item ‘Income from participating interests’ with these items and

†† adds this item in either position

which, although not assigned references are to be treated as if they had been assigned an Arabic number.

Appendices


170

Format 3 (1)

A Charges 1 Cost of sales (2) 2 Distribution costs (2) 3 Administrative expenses (2) 4 Amounts written off investments 5 Interest payable and similar charges (4) 6 Tax on profit or loss on ordinary activities 7 Profit or loss on ordinary activities

after taxation †† Minority interests

8 Extraordinary charges 9 Tax on extraordinary profit or loss

†† Minority interests 10 Other taxes not shown under the

above items 11 Profit or loss for the financial year

B Income 1 Turnover 2 Other operating income 3 Income from shares in group undertakings † Income from interests in associated

undertakings † Income from other participating interests 5 Income from other fixed

asset investments (3) 6 Other interest receivable and

similar income (3) 7 Profit or loss on ordinary activities

after taxation †† Minority interests

8 Extraordinary income †† Minority interests

9 Profit or loss for the financial year

Format 4

A Charges 1 Reduction in stocks of finished goods and

in work in progress 2 (a) Raw materials and consumables

(b) Other external charges 3 Staff costs:

(a) wages and salaries (b) social security costs (c) other pension costs

4 (a) Depreciation and other amounts written off tangible and intangible fixed assets

(b) Exceptional amounts written off current assets

5 Other operating charges 6 Amounts written off investments 7 Interest payable and similar charges (4) 8 Tax on profit or loss on ordinary activities 9 Profit or loss on ordinary activities

after taxation †† Minority interests 10 Extraordinary charges 11 Tax on extraordinary profit or loss †† Minority interests 12 Other taxes not shown under the

above items 13 Profit or loss for the financial year

B Income 1 Turnover 2 Increase in stocks of finished goods and in

work in progress 3 Own work capitalised 4 Other operating income 5 Income from shares in group undertakings † Income from interests in associated

undertakings † Income from other participating interests 7 Income from other fixed

asset investments (3) 8 Other interest receivable and

similar income (3) 9 Profit or loss on ordinary activities

after taxation †† Minority interests 10 Extraordinary income †† Minority interests 11 Profit or loss for the financial year

Formats


171

Notes

1 The amount of any provisions for depreciation and diminution in value of tangible and intangible fixed assets falling to be shown under items 7(a) and A.4(a) respectively in formats 2 and 4 shall be disclosed in a note to the financial statements in any case where the profit and loss account is prepared by reference to format 1 or format 3.

2 These items shall be stated after taking into account any necessary provisions for depreciation or diminution in value of assets.

3 Income and interest derived from group undertakings must be shown separately from income and interest derived from other sources.

4 The amount payable to group undertakings must be shown separately.

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