Annual Report - JD Group

Accounting policies continued
Provisions
Provisions are recognised when the Group has a present,
constructive or legal obligation as a result of a past event and it is
probable that it will result in an outflow of economic benefits that
can be reasonably estimated.
An onerous contract is a contract under which the unavoidable
costs of meeting the obligation exceeds the economic benefit
expected to be received under it. When a contract becomes
onerous, the present obligation under a contract is recognised and
measured as a provision.
If the effect is material, provisions are determined by discounting
the expected future cash flows that reflect current market
assessments of the time value of money and, where appropriate,
the risks specific to the liability.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents comprise cash on hand and deposits held on call with
banks and investment banks, net of bank overdrafts. In the
balance sheet, bank overdrafts are included in current liabilities.
Treasury shares
Shares purchased by wholly owned Group companies in their
holding company and by the employee share trusts are classified
as treasury shares, held at cost and presented in equity.
Dividends received on treasury shares are eliminated on
consolidation.
Treasury shares are taken into account in the calculation of
earnings per share.
Discontinued operations
A discontinued operation is a significant distinguishable component
of the Group’s business that is abandoned or terminated pursuant
to a single formal plan, and which represents a separate major line
of business or a geographical area of operation.
The profit or loss on sale or abandonment of a discontinued
operation is determined from the formalised discontinuance date.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets (i.e. assets that
necessarily take a substantial period of time to get ready for their
intended use or sale) are capitalised as part of the cost of those
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assets. The capitalisation rate applied is the weighted average of
the net borrowing costs applicable to the net borrowings of the
Company. Capitalisation of such borrowing costs ceases when the
assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying assets
is deducted from borrowing costs capitalised.
All other borrowing costs are expensed in the period in which they
are incurred.
Exceptional items
All items of income and expense are taken into account in arriving
at income before taxation. Where items of income and expense
are of such size, nature or incidence that their disclosure is relevant
to explain the performance of the Group or Company, they are
separately disclosed and appropriate explanations are provided.
Research and development costs
Research costs are recognised as an expense in the period in which
they are incurred.
Expenditure on development is charged to income in the year in
which it is incurred except where a clearly defined project is
undertaken and it is reasonably anticipated that development
costs will be recovered through future commercial activity. Such
development costs are capitalised as an intangible asset and
amortised on a straight line basis over the life of the project from
the date of commencement of commercial operation.
Property, plant and equipment
Property, plant and equipment is stated at cost and is depreciated
on the straight line basis over the estimated useful lives of the
assets concerned. Rates of depreciation vary between 10% and
33,3% per annum and are disclosed in note 9.
Surplus or loss arising on disposal of assets is determined as the
difference between the sale proceeds and carrying value of the
asset and is recognised in the income statement.
Leased assets
Lease agreements which transfer substantially all the risks and
rewards associated with ownership of an asset to the lessee are
regarded as finance leases. Assets subject to finance lease
agreements are capitalised at the lower of the present value of
the minimum lease payment and their cash cost equivalent and
the corresponding liability to the lessor is raised. Lease payments