Ardagh Glass Finance plc - Irish Stock Exchange

ACCOUNTING POLICIES (Continued)
balance sheet date. It is the Group’s policy to sell its products to the end customer with a right of
return. Accumulated experience is used to estimate and provide for such returns at the time of sale.
Revenue is included net of cash, value added tax and other discounts.
Pallet deposits are not recognised in revenue.
(ii) Construction contracts
The Group uses the ‘percentage-of-completion method’ to determine the appropriate amount to
recognise in a given period. The stage of completion is measured by reference to the contract costs
incurred up to the balance sheet date as a percentage of total estimated costs for each contract. Costs
incurred in the year in connection with future activity on a contract are excluded from contract costs in
determining the stage of completion. They are presented as inventories, pre-payments or other assets,
depending on their nature.
The Group presents as an asset the gross amount due from customers for contract work for all
contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed
progress billings. Progress billings not yet paid by customers and retention are included within ‘trade
and other receivables’.
The Group presents as a liability the gross amount due to customers for contract work for all
contracts in progress for which progress billings exceed costs incurred plus recognised profits (less
recognised losses).
(iii) Government grants
Capital grants are recorded in deferred income and released to the income statement on a
straight-line basis over the estimated useful lives of the related property, plant and equipment.
(iv) Finance income
Interest income is recognised on a time-proportion basis using the effective interest method. When
a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the
estimated future cash flow discounted at original effective interest rate of the instrument, and continues
unwinding the discount as interest income. Interest income on impaired loans is recognised using the
original effective interest rate.
(v)
Dividend income
Dividend income is recognised when the right to receive payment is established.
(vi) Royalty income
Royalty income is recognised on an accruals basis in accordance with the substance of the relevant
agreements.
FINANCE EXPENSE
Financing costs comprise interest payable on borrowings calculated using the effective interest rate
method, foreign exchange losses, and losses on hedging instruments that are recognised in the income
statement.
The interest expense component of finance lease payments is recognised in the income statement
using the effective interest rate method.
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