Cosalt plc Annual report & financial statements 2008

Financial statements Notes to the financial statements
Notes to the financial statements
continued
30. Accounting estimates and judgements
Management discussed with the Audit Committee the development, selection and disclosure of the Group’s critical accounting
policies and estimates and the application of these policies and estimates.
Key sources of estimation uncertainty
Note 13 contains information about the assumptions and their risk factors relating to goodwill impairment. In note 20 detailed
analysis is given of the foreign exchange exposure of the Group and risks in relation to foreign exchange movements.
Pension assumptions
The assumptions used are the best estimates from a range of possible assumptions which due to the timescales may not
necessarily be borne out in practice. Assumptions include inflation, future salary increases, discount rates and mortality rates.
Deferred taxation
The likelihood that assets are received is based on assumptions of future actions.
Critical accounting judgements in applying the Group’s accounting policies
Certain critical accounting judgements in applying the Group’s accounting policies are described below.
Investment property
Investment properties are valued at fair value based upon professional valuations. Given the Group’s strategy for development
and its progress, a revaluation model is appropriate.
Provisions
The Group’s reorganisation provisions are based on the best information available at the balance sheet date. However future costs
are only estimates which may differ from those actually incurred.
Finance and operating leases
The inception of the leases of the Group took place many years ago. They are combined leases of land and buildings. It is not
possible to obtain a reliable estimate of the split of the fair values of the lease interest between land and buildings at inception.
Therefore, in determining lease classification the Group evaluated whether both parts are clearly operating leases or finance leases.
Firstly, land title does not pass. Secondly, because the rent paid to the landlord for the building is increased to market rent at regular
intervals, and the Group does not participate in the residual value of the building it is judged that substantially all the risks and
rewards of the building are with the landlord. Based on these qualitative factors it is concluded that the leases are operating leases.
Intangible assets
The valuation of intangible assets is based on a number of assumptions which includes future discounted cash flows in respect
of customer and supplier relationships over the expected useful lives of those relationships.
31. Group entities
The principal subsidiary undertakings at 26 October 2008 were as follows:
Company Country of incorporation
Proportion
of issued
ordinary
shares held
Cosalt International Limited United Kingdom 100
GTC Holdings Limited* United Kingdom 100
GTC Group Limited* United Kingdom 100
Cosalt GmbH** Germany 100
Cosalt NV** Belgium 100
Cosalt BV** Netherlands 100
Cosalt Sistemas Maritima SL** Spain 100
Cosalt Srl** Italy 100
Cosalt Offshore Norway A/S Norway 100
All subsidiary undertakings are consolidated within the Consolidated financial statements.
* Subsidiary companies acquired with the GTC Group acquisition.
** Subsidiary companies acquired with the Bofort and SSM acquisitions.
74 Cosalt plc Annual report & financial statements 2008