Enterprise Inns plc Annual Report and Accounts 2012

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Notes to the Accounts at 30 September 2012 2. Presentation of Financial Statements (continued) New standards and interpretations not yet adopted As at 30 September 2012 there are a number of standards, amendments and interpretations in issue (some of which have not yet been adopted by the EU) with an effective date for financial years beginning on or after the dates disclosed below and which have not been early adopted by the Parent Company or Group. • IFRS 7: Financial Instruments: Disclosures – Offsetting financial assets and financial liabilities 1 January 2013 • IFRS 9: Financial Instruments 1 January 2015 • IFRS 10: Consolidated Financial Statements, IAS 27: Separate Financial Statements 1 January 2013 • IFRS 11: Joint Arrangements, IAS 28: Investments in Associates and Joint Ventures 1 January 2013 • IFRS 12: Disclosure of Interests in Other Entities 1 January 2013 • IFRS 13: Fair Value Measurement 1 January 2013 • Amendments to IAS 1: Presentation of Financial Statements – Other Comprehensive Income 1 July 2012 • Amendments to IAS 12 : Income Taxes 1 January 2012 • IAS 19: Employee Benefits (revised) 1 January 2013 • Amendments to IAS 32: Financial Instruments: Presentation – Offsetting financial assets and financial liabilities 1 January 2014 • Annual Improvements to International Financial Reporting Standards 2011 1 January 2013 The adoption of IFRS 13, which is expected to be implemented prospectively in the 30 September 2014 financial statements, addresses fair value measurement including specific rules for determining the fair value of non-financial assets and related disclosures. As the Group and Company carry property, plant and equipment at valuation, implementation of the standard may have an impact on the financial statements. The Group and Company are assessing the impact of this standard and are presently unable to quantify its potential impact. Annual Report 2011 2012 Our Accounts 3. Accounting Policies Goodwill Goodwill represents the excess of consideration over the fair value of identifiable assets and liabilities acquired in a business combination. Goodwill is not amortised but is tested for impairment annually, or more frequently where events or changes in circumstances indicate that the carrying value may be impaired. Goodwill is stated at cost less any impairment. On disposal of a pub, an attributable amount of goodwill is included in the determination of profit or loss on sale. Goodwill arising on acquisitions prior to 1 October 1998 was written off against reserves and has not been subsequently reversed. Any such goodwill is not included in determining the profit or loss on disposal. Fixed asset investments Fixed asset investments in the Parent Company Balance Sheet are initially recognised at fair value and then held at this value subject to an annual impairment test. Property, plant and equipment Licensed land and buildings are held at their fair value and landlord’s fixtures and fittings and other assets are held at cost. The Group’s licensed land and buildings, except for those non-current assets held for sale, are revalued each year by external valuers or employees who are professionally qualified to carry out such valuations. Surpluses arising from the revaluation exercise are taken through Other Comprehensive Income to the revaluation reserve except where they reverse a revaluation decrease relating to the same asset previously recognised as an expense in the Income Statement. Any deficit arising from the revaluation exercise is taken through Other Comprehensive Income to the revaluation reserve to the extent that there is a surplus in place relating to the same asset. Any further decrease in value is recognised in the Income Statement as an expense. Freehold land is not depreciated. Freehold buildings are depreciated so as to write off the difference between their carrying value and residual value over their useful economic life of 50 years. Residual value is reviewed at least at each financial year end and there is no depreciable amount if residual value is the same as, or exceeds, book value. 60
Notes to the Accounts at 30 September 2012 3. Accounting Policies (continued) Landlord’s fixtures and fittings are split into two categories, long life landlord’s fixtures and fittings and short life landlord’s fixtures and fittings. Both are held at cost less accumulated depreciation. The useful economic life of additions to long life landlord’s fixtures and fittings has been calculated at 30 years and short life landlord’s fixtures and fittings has been calculated at 5 years. Depreciation is charged on a straight line basis to write off the total cost less residual value over their useful economic life. Properties held under finance leases are depreciated on a straight line basis over the shorter of the remaining lease term and their useful economic life of 50 years. Depreciation is provided on other categories of property, plant and equipment over 3 to 50 years on a straight line basis to residual value. Property, plant and equipment are reviewed annually for indications of impairment. Where any indications are identified, assets are assessed fully for impairment. Impairment occurs where the recoverable amount of the asset is less than its carrying amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Any impairment loss is treated as a revaluation decrease to the extent that a surplus exists for the same asset, and thereafter as an expense in the Income Statement. Non-current assets held for sale Non-current assets held for sale are held at the lower of their carrying value and expected sale proceeds, net of selling costs. Licensed land and buildings and operating lease intangibles are classified as held for sale when they have been identified for disposal by the Group. They must be available for immediate sale in their present condition and the sale should be highly probable. These conditions are met when management are committed to the sale, the pub or lease is actively marketed and the sale is expected to occur within one year. Licensed land and buildings held for sale are not depreciated and operating lease intangible assets held for sale are not amortised. Profits or losses on disposal of property, plant and equipment are calculated as the difference between the net sales proceeds and the carrying amount of the asset within non-current assets held for sale at the date of disposal. Leases Leases where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Pubs acquired under finance leases are capitalised at the lower of their fair value and the present value of future minimum lease payments. The corresponding liability is included in the Balance Sheet as a finance lease payable. Pubs held under finance leases are revalued along with the freehold estate on an annual basis. Lease payments are apportioned between finance charges and reduction of the lease liability so as to obtain a constant rate of interest on the remaining balance of the liability. Finance charges are taken as an expense to the Income Statement. Leases where substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rentals paid under operating leases are charged on a straight line basis to the Income Statement over the lease term. The fair value attributed to pubs acquired as part of business combinations that are held as operating leases are classified in the Balance Sheet as ‘intangible assets: operating lease premiums’ within noncurrent assets and are amortised over the lease term. The Group enters into sale and leaseback transactions where licensed land and buildings have been sold and the Group has immediately entered into a lease agreement with the acquiree. These land and buildings have been classified as operating leases. They are no longer included within property, plant and equipment and the rentals paid are charged on a straight line basis to the Income Statement over the lease term. Current assets held for sale Current assets held for sale comprises tenants’ fixtures and fittings and are held at the lower of cost and net realisable value. Net realisable value is based on estimated selling price less further costs expected to be incurred on disposal. Our Accounts Annual Report 2011 2012 Repairs and Maintenance Repairs and maintenance expenditure is charged to the Income Statement as incurred. 61
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