Download full Annual Report and Accounts - Kingfisher

Kingfi sher plc
Annual Report
and Accounts
2009/10
61
The following amendments to standards and interpretation, which are mandatory for the fi rst time for the fi nancial year beginning 1 February 2009, are either not
currently relevant or material for the Group:
– IAS 39 (amendment), ‘Financial instruments: Recognition and measurement’;
– IAS 39 and IFRS 7 (amendment), ‘Reclassifi cation of fi nancial assets’; and
– IFRIC 16, ‘Hedges of a net investment in a foreign operation’.
At the date of authorisation of these fi nancial statements, the following new standard and amendments, which are expected to be relevant to the Group’s results,
were issued but not yet effective:
IAS 27
(amendment)
IFRS 3
(amendment)
Consolidated and separate fi nancial
statements - Non-controlling interests
(effective from 1 July 2009)
Business combinations
(effective from 1 July 2009)
IFRS 9 Financial instruments
(effective from 1 January 2013)
The consolidated fi nancial statements have been prepared under the historical
cost convention, as modifi ed by the use of valuations for certain fi nancial
instruments, share-based payments and post employment benefi ts.
A summary of the Group’s principal accounting policies is set out below.
The preparation of fi nancial statements in conformity with IFRS requires
the use of certain accounting estimates and assumptions. It also requires
management to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving critical accounting estimates and
judgements, which are signifi cant to the consolidated fi nancial statements,
are disclosed in note 3.
Use of non-GAAP measures
Kingfi sher believes that retail profi t, adjusted pre-tax profi t, effective tax rate,
adjusted post-tax profi t and adjusted earnings per share provide additional
useful information on underlying trends to shareholders. These and other
non-GAAP measures such as net debt are used by Kingfi sher for internal
performance analysis and incentive compensation arrangements for
employees. The terms ‘retail profi t’, ‘exceptional items’, ‘adjusted’, ‘effective
tax rate’ and ‘net debt’ are not defi ned terms under IFRS and may therefore
not be comparable with similarly titled measures reported by other companies.
They are not intended to be a substitute for, or superior to, GAAP measures.
Retail profi t is defi ned as continuing operating profi t before central costs
(principally the costs of the Group’s head offi ce), exceptional items,
amortisation of acquisition intangibles and the Group’s share of interest
and tax of joint ventures and associates.
The separate reporting of non-recurring exceptional items, which are
presented as exceptional within their relevant income statement category,
helps provide an indication of the Group’s underlying business performance.
The principal items which are included as exceptional items are:
– non trading items included in operating profi t such as profi ts and losses on
the disposal, closure or impairment of subsidiaries, joint ventures, associates
and investments which do not form part of the Group’s trading activities;
– profi ts and losses on the disposal of properties; and
– the costs of signifi cant restructuring and incremental acquisition
integration costs.
Requires the effects of all transactions with non-controlling (minority) interests to be recorded in equity
if there is no change in control. They will no longer result in goodwill or gains and losses. The
amended standard also specifi es the accounting when control is lost. Any remaining interest in the
entity is remeasured to fair value and a gain or loss is recognised in profi t or loss. This will be applied in
the Group’s 2010/11 fi nancial statements.
Harmonises business combination accounting with US GAAP. The amended standard will continue to
apply the acquisitions method to business combinations, but with certain signifi cant changes. All
payments to purchase a business will be recorded at fair value at the acquisition date, with some
contingent payments subsequently remeasured at fair value through income. Goodwill and noncontrolling
(minority) interests may be calculated on a gross or net basis. All transaction costs will be
expensed. This will be applied in the Group’s 2010/11 fi nancial statements.
Introduces new requirements for classifying and measuring fi nancial assets. This includes the removal of
available-for-sale fi nancial assets and held-to-maturity investments, and the introduction of a new category
of fi nancial assets at fair value through other comprehensive income. This is still subject to endorsement by
the European Union, but is currently expected to be applied in the Group’s 2013/14 fi nancial statements.
The term ‘adjusted’ refers to the relevant measure being reported for continuing
operations excluding exceptional items, fi nancing fair value remeasurements,
amortisation of acquisition intangibles, related tax items and prior year tax items.
Financing fair value remeasurements represent changes in the fair value of
fi nancing derivatives, excluding interest accruals, offset by fair value adjustments to
the carrying amount of borrowings and other hedged items under fair value
hedge relationships. Financing derivatives are those that relate to underlying
items of a fi nancing nature.
The effective tax rate represents the effective income tax expense as a
percentage of continuing profi t before taxation excluding exceptional items.
Effective income tax expense is the continuing income tax expense excluding tax
on exceptional items and tax adjustments in respect of prior years and changes
in tax rates.
Net debt comprises borrowings and fi nancing derivatives (excluding accrued
interest), less cash and cash equivalents and current other investments.
b. Basis of consolidation
The consolidated fi nancial statements incorporate the fi nancial statements
of the Company, its subsidiaries, joint ventures and associates.
(i) Subsidiaries
Subsidiary undertakings are all entities over which the Group has the power
to govern the fi nancial and operating policies, generally accompanying a
shareholding of more than one half of the voting rights. Subsidiary undertakings
acquired during the period are recorded under the acquisition method of
accounting and their results included from the date of acquisition. The results of
subsidiaries which have been disposed of during the period are included
up to the effective date of disposal.
The acquisition method of accounting is used to account for the acquisition
of subsidiaries by the Group. The cost of an acquisition is measured as the
fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifi able assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date, irrespective of the extent of any minority interest.
The excess of the cost of acquisition over the fair value of the Group’s share