Annual report and accounts - Cattles Limited

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48 Cattles plc Annual Report and Financial Statements 2004 Notes to the Accounts 1 Accounting policies continued (h) (i) (j) (k) (l) Pensions The group operates a defined benefit pension scheme, the assets of which are held in a separate trustee administered fund. The expected cost of pensions is charged to the profit and loss account so as to spread the cost of pensions over the expected service lives of employees in the scheme. Variations from the regular costs are spread over the average expected remaining working lives of current members in the scheme. The pension cost is assessed in accordance with the advice of qualified actuaries. The transitional disclosure requirements under FRS 17 ‘Retirement benefits’ have been adopted in these financial statements and are explained more fully in note 8. The scheme was closed to new entrants from 1998. The group also operates several defined contribution schemes. The pension cost in respect of these schemes is the contributions payable. Payments made to personal pension plans are charged to the profit and loss account as they become payable. The group provides no other post-retirement benefits to its employees or directors. Deferred tax Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise, based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in different periods from those in which they are included in the financial statements. Deferred tax assets are recognised only to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. Stocks Stocks comprise motor vehicles held for resale and are valued at the lower of cost and net realisable value. Investments in subsidiary undertakings Investments in subsidiary undertakings are included at cost, unless, in the opinion of the directors, a permanent diminution in value has occurred, in which case the deficiency is provided for and charged in the company’s profit and loss account. Investments – own shares held UITF 38 ‘Accounting for ESOP Trusts’ and UITF 17 ‘Employee share schemes’ (revised 2003) have been adopted for the first time in 2004. As a result of adopting UITF 38, shares in Cattles plc held by the Employee Benefit Trust have been reclassified from fixed asset investments to the profit and loss reserve within equity shareholders’ funds. This change has been accounted for as a prior year adjustment and previously reported figures have been restated accordingly. As a result, equity shareholders’ funds at 31 December 2004 have decreased by £3.7 million (31 December 2003: £3.7 million) and consideration in respect of the purchase and sale of own shares has been reclassified in the cash flow statement as financing cash flows. The prior year adjustment has had no impact on the profit and loss account in the current or previous year. There has been no impact to the group’s financial statements as a result of the revision to UITF 17 because the charge to the profit and loss account on the granting of applicable share awards is already based on the fair value of the shares at the date of grant. The fair value of the shares is estimated to be the market value of the shares at that time. (m) Tangible fixed assets and depreciation The cost of fixed assets is their purchase cost together with any incidental costs of acquisition. Depreciation is calculated so as to write off the cost of tangible fixed assets on a straight line basis by reference to the estimated useful economic life and residual value of the assets concerned, at the following principal rates: Freehold buildings Long leasehold buildings Short leasehold expenditure Fixtures and equipment Computer equipment and software licenses Motor vehicles Assets held for rental 2% per annum 2% per annum 5% to 20% per annum 10% to 20% per annum 20% to 33 1 ⁄3% per annum 20% per annum 20% per annum Assets held for rental comprise audio-visual electrical appliances, such as televisions, DVD and VCR players, which are hired by customers under a rental agreement. Depreciation is not provided on freehold and long leasehold land. As permitted under the transitional arrangements of FRS 15 ‘Tangible fixed assets’, the group has chosen to retain the book values of land and buildings which were previously revalued, and not to revalue the assets in the future. Fixed assets are reviewed for impairment, in accordance with FRS 11 ‘Impairment of fixed assets and goodwill’. If events or changes in circumstances indicate that the carrying value may not be recoverable, any impairment in value is charged to the revaluation reserve or the profit and loss account, as appropriate.
Cattles plc Annual Report and Financial Statements 2004 49 1 Accounting policies continued (n) (o) (p) (q) Leasing Assets held under finance leases and hire purchase contracts are capitalised at their fair value on the inception of the agreement and depreciated over the shorter of the period of the agreement and the estimated useful economic lives of the assets. The finance charges are allocated over the period of the agreement in proportion to the capital amount outstanding and are charged to the profit and loss account. Rentals payable under operating leases are charged to the profit and loss account over the period of the lease on a straight line basis. Borrowings Interest payable on bank borrowings, debenture loans and other borrowings is charged to the profit and loss account as it is incurred. Accrued finance charges and issue costs in relation to debenture loans, and facility fees in relation to bank borrowings, are charged to the profit and loss account over the term of the loan and facility respectively. Hedging (i) Interest rate hedging The group manages the risk of the exposure of floating rate borrowings to adverse interest rate fluctuations by the use of financial hedging instruments, primarily swaps. Amounts payable or receivable in respect of these hedging instruments are recognised as adjustments to the interest expense over the period of the contracts. The cost of any premium paid for the purchase of other financial hedging instruments, such as interest rate caps or collars, is amortised on a straight line basis over the life of the contract and reflected in the profit and loss account in the total charge for interest on borrowings. (ii) Foreign currencies All foreign currency denominated borrowings are immediately swapped into Sterling at the commencement of the facility agreement. Consequently, the group is not exposed to currency rate fluctuations. These borrowings are translated at the hedged rate. Current asset investments During 2004 the reinsurance company changed its current asset investment policy from a managed fund of mainly fixed interest securities and bonds to wholly fixed interest bank deposits. Prior to the change, the managed fund investments were stated at market value, in accordance with the Association of British Insurers Statement of Recommended Practice on accounting for insurance business, with unrealised gains and losses arising from changes in the market value of such securities and bonds being credited or charged to the profit and loss account. 2 Profit before taxation 2004 2003 The profit before taxation for the year is stated after charging/(crediting): £’000 £’000 Interest on borrowings included in cost of sales – bank borrowings and overdrafts 32,358 35,424 – debenture loans and other borrowings 42,479 20,305 Depreciation – on tangible fixed assets held under finance leases and hire purchase contracts 2,233 2,291 – on owned tangible fixed assets 7,759 8,734 Amortisation of goodwill 3,170 3,211 (Profit)/loss on disposal of tangible fixed assets (763) 755 Finance lease charges 584 444 Operating lease rentals – land and buildings 6,009 6,021 – motor vehicles 5,157 3,686 – other plant and machinery 118 127 Pensions to former directors 4 11 Allocations to employee share incentive schemes 3,274 3,024
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Annual report and accounts - Cattles Limited

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