Download full Annual Report and Accounts - Kingfisher

98
1 Principal accounting policies continued
e. Employee benefi ts
(i) Pensions
Notes to the Company
fi nancial statements
Kingfi sher plc
Annual Report
and Accounts
2009/10
The Company operates defi ned benefi t and defi ned contribution pension schemes for its employees. A defi ned benefi t scheme is a pension scheme that defi nes
an amount of pension benefi t that an employee will receive on retirement. A defi ned contribution scheme is a pension scheme under which the Company usually
pays fi xed contributions into a separate entity. In all cases a separate fund is being accumulated to meet the accruing liabilities. The assets of each of these funds
are either held under trusts or managed by insurance companies and are held entirely separate from the Company’s assets.
The asset or liability recognised in the balance sheet in respect of defi ned benefi t pension schemes is the fair value of scheme assets less the present value of
the defi ned benefi t obligation at the balance sheet date, together with an adjustment for any past service costs not yet recognised. The defi ned benefi t obligation
is calculated annually by independent actuaries using the projected unit credit method. The present value of the defi ned benefi t obligation is determined by
discounting the estimated future cash outfl ows using interest rates of high quality corporate bonds which are denominated in the currency in which the benefi ts
will be paid and which have terms to maturity approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited directly to the profi t and loss
reserve as they arise.
Past service costs are recognised immediately in the profi t and loss account, unless the changes to the pension scheme are conditional on the employees
remaining in service for a specifi ed period of time (the vesting period). In this case, the past service costs are amortised on a straight line basis over the vesting
period.
For defi ned contribution schemes, the Company pays contributions to privately administered pension schemes on a contractual basis. The Company has
no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefi t expense when they are due.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
(ii) Share-based compensation
The Company operates several equity-settled, share-based compensation schemes. The fair value of the employee services received in exchange for the grant of
options or deferred shares is recognised as an expense and is calculated using Black-Scholes and stochastic models. The total amount to be expensed over the
vesting period is determined by reference to the fair value of the options or deferred shares granted, excluding the impact of any non-market vesting conditions.
The value of the charge is adjusted to refl ect expected and actual levels of options vesting due to non-market vesting conditions.
(iii) Employee Share Ownership Plan Trust (‘ESOP’)
The ESOP is a separately administered discretionary trust. Liabilities of the ESOP are guaranteed by the Company and the assets of the ESOP mainly comprise
shares in the Company.
Own shares held by the ESOP are deducted from equity shareholders’ funds and the shares are held at historical cost until they are sold. The assets, liabilities,
income and costs of the ESOP are included in both the Company’s and the consolidated fi nancial statements.
f. Deferred tax
Provision is made for deferred tax using the incremental provision approach and is measured on an undiscounted basis at the tax rates that are expected to
apply in the periods in which timing differences reverse, based on tax rates and laws substantively enacted at the balance sheet date.
Deferred tax is recognised in respect of timing differences that have originated but not reversed by the balance sheet date subject to the following:
– Deferred tax is not recognised on the revaluation of non-monetary assets such as property unless a binding sale agreement exists at the balance sheet date.
Where rollover relief is available on an asset then deferred tax is not recognised.
– Deferred tax is recognised on unremitted earnings of overseas subsidiaries and associates only where dividends are accrued as receivable or there is an
intention to remit these in the foreseeable future.
– Deferred tax assets are recognised to the extent that they are regarded as recoverable. Assets are regarded as recoverable when it is regarded as more
likely than not that there will be suitable taxable profi ts from which the future reversal of the underlying timing differences can be deducted.
– Deferred tax is not recognised on permanent differences.
g. Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outfl ow
of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.