Jupiter Annual Report 2010 - Jupiter Asset Management

Financial statements – continuation | Notes to the financial statements
2. Accounting policies continued
recoverable and, therefore, recognised only
when, on the basis of all available evidence,
it can be regarded as probable that there will
be suitable taxable profits against which to
recover carried forward tax losses and from
which the future reversal of underlying
temporary differences can be deducted.
Deferred tax is measured at the average tax
rates that are expected to apply in the periods
in which the temporary differences are
expected to reverse based on tax rates and
laws that have been enacted or substantively
enacted by the balance sheet date. Deferred
tax is measured on an undiscounted basis.
Current and deferred tax relating to items
recognised in other comprehensive income
is recognised in other comprehensive income
and not in the consolidated income statement.
Deferred tax that has arisen in respect of
equity items is recognised in equity and not
in the consolidated income statement.
Expenses and assets are recognised net of
the amount of value added tax, except where
this tax is not recoverable, in which case the
value added tax is recognised as part of the
cost of acquisition of the asset or as part of
expenses. Receivables and payables are
stated with the amount of value added tax
included. The net amount of value added tax
recoverable from, or payable to, the taxation
authority is included as part of receivables or
payables in the consolidated balance sheet.
■■Foreign currency
Functional and presentational currency
Items included in the financial information of
each of the Group’s entities are measured
using the currency of the primary economic
environment in which the entity operates
(the “functional currency”). The consolidated
financial statements are presented in sterling
(‘£’), which is both the Company’s functional
and presentational currency as well as
the currency in which the majority of the
Group’s revenue streams, assets and
liabilities are denominated.
Transactions and balances
Foreign currency transactions are translated
into the functional currency using the
exchange rates prevailing at the dates of
the transactions. Foreign exchange gains
and losses resulting from the settlement of
such transactions and from the translation
at year end exchange rates of monetary
assets and liabilities denominated in
foreign currencies are recognised in the
consolidated income statement within
administrative expenses.
Translation differences on non-monetary
financial assets and liabilities are reported as
part of the fair value gain or loss. Translation
differences on non-monetary financial assets
and liabilities such as equities held at fair
value through profit or loss are recognised
in the consolidated income statement as part
of other gains/(losses).
Group companies
The results and financial position of all Group
entities that have a functional currency
different from the presentation currency are
translated into the presentation currency
as follows:
■■
■■
■■
assets and liabilities for each balance
sheet presented are translated at the
closing rate at the date of that
balance sheet;
income and expenses for each
consolidated income statement are
translated at average exchange rates; and
all resulting exchange differences are
recognised as a separate component
of other comprehensive income.
■■Operating leases
Operating leases are leases where the lessor
retains substantially all the risks and benefits
of ownership of the asset. All of the Group’s
leases are operating leases and rental
payments are charged to the consolidated
income statement on a straight line basis
over the term of the lease.
■■Own shares
The Group operates an employee benefit
trust for the purpose of satisfying certain
retention awards to employees. The holdings
of this trust include certain shares that have
not vested unconditionally in employees of
the Group. These shares are classified as
own shares. They are held for the short term
to meet future award requirements and are
recorded, at cost, as own shares.
■■Dividend recognition
Dividend distributions to the Company’s
shareholders are recognised in the
accounting period in which the dividends are
paid and, in the case of final dividends, when
these are approved by the Company’s
shareholders.
■■Exceptional items
Exceptional items are those significant items
which are required to be separately disclosed
due to their size or incidence in order to
enable a better understanding of the Group’s
financial performance.
■■Critical accounting estimates,
judgements and assumptions
The preparation of the financial information
requires management to make estimates and
assumptions that affect the reported amount
of revenues, expenses, assets and liabilities
and the disclosure of contingent liabilities. If
in the future such estimates and assumptions,
which are based on management’s best
judgement at the date of preparation of the
financial information, deviate from actual
circumstances, the original estimates and
assumptions will be modified as appropriate
in the period in which the circumstances
change. The areas where assumptions
and estimates are significant to the Group
financial statements are discussed in the
goodwill note.
Impairment of goodwill
Goodwill is reviewed for impairment annually,
or more frequently if changes in circumstances
indicate that the carrying value may be
impaired. For this purpose, management
prepares a value in use calculation which
is based on the approved budget for the
following year and then extrapolated for
expected future growth rates and discounted
at the Group’s pre tax equity cost of capital.
The judgement exercised by management in
arriving at this valuation includes the selection
of market growth rates, fund flow assumptions,
expected margins and costs. The carrying
amount of goodwill is detailed in the
goodwill note.
Impairment of available for sale
financial investments
Available for sale financial assets are
reviewed for impairment in accordance with
the guidance on impairment set out in IAS 39.
In specific cases, where a quoted market
price or fair value is not available, significant
judgement is exercised by management in
determining the extent of impairment of
available for sale financial assets. In making
this judgement, the Group evaluates, among
other factors, the duration and extent to which
the fair value of an investment is less than
its cost, as well as the financial health of and
business outlook for the investee, including
factors such as industry and sector
performance and operational and financing
cash flow.
Accrued income and expenses
Accrued income and expenses are based
on latest available information and therefore
involve a degree of estimation. The most
significant expense accruals at year end
relate to bonus and other variable
remuneration scheme costs.
Deferred income tax assets
Deferred tax assets are recognised for
all unused tax losses to the extent that it is
probable that taxable profit will be available
against which the losses can be utilised.
Significant management judgement is
required to determine the amount of deferred
income tax assets that can be recognised,
based upon the likely timing and the level
of future taxable profits with future tax
planning strategies.
Impairment of acquired intangibles
An assessment is made at each reporting
date as to whether there is any indication that
an asset in use may be impaired. If any
Annual Report & Accounts 2010 69 Jupiter Fund Management plc