enl commercial limited annual report 2011 - Investing In Africa

Notes to the Financial Statements
Year ended June 30, 2011
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(j)
Retirement benefit obligations
Defined benefit plans
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee
will receive on retirement, usually dependant on one or more factors such as age, years of service
and compensation. Some subsidiaries of the group contribute to a defined benefit plan for certain
employees. The cost of providing benefits is determined using the projected unit credit method
so as to spread the regular cost over the service lives of employees in accordance with the advice
of actuaries.
Cumulative actuarial gains and losses arising from experienced adjustments, changes in actuarial
assumptions and amendments to pension plans in excess of the greater of 10 % of the value of the
plan assets or 10% of the defined benefit obligations are spread to income over the remaining lives of
the related employees.
Defined contribution plans
A defined contribution plan is a pension plan under which a company pays fixed contributions into a
separate entity. Some subsidiaries operate a defined contribution plan for all qualifying employees.
Payments to defined contribution plans are charged as expense as they fall due.
Retirement gratuity
For employees who are not covered under a pension plan, the net present value of retirement gratuities
payable under the Employment Rights Act 2008 is calculated by actuaries and provided for. The
obligations arising under this item are not funded.
Cumulative actuarial gains and losses arising from experienced adjustments, changes in actuarial
assumptions and the greater of 10% of the retirement obligation are spread to income over the
remaining lives of the related employees.
Profit-sharing
Certain subsidiary companies recognise a liability and an expense for bonuses and profit-sharing. The
subsidiary companies recognise a provision when a contractual obligation has arisen.
(k)
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
(l) Revenue recognition
Turnover for the group is based on the invoiced value (net of value added taxes) of all sales of goods
and services less discounts, allowances and returns and after eliminating intra-group sales.
Turnover also includes interest and dividend receivable which are recognised on the following bases:
• Interest income is taken to the statement of comprehensive income 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.
• Dividend income is accounted for when the shareholder’s right to receive payment is established.
(m) Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the group’s financial
statements in the period in which the dividends are declared.
76
ENL Commercial Limited
Annual Report 2011