Annual report 2005 - Xeikon

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36 Significant accounting policies Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) as adopted by the EU and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRS. These are the first financial statements presented by the group. The transition date for IFRS 1 has been taken as January 1, 2004. The only exemption taken under IFRS 1 is the transition date for IAS39 and IAS32 which has been taken as January 1, 2005. The company was incorporated in the United Kingdom as Punch Graphix Limited on March 24, 2005 and re-registered as a public limited company with the name Punch Graphix plc on April 29, 2005. On April 20, 2005 the company acquired Xeikon International nv (‘Xeikon’), Strobbe Graphics nv (‘Strobbe’), basysPrint GmbH (‘basysPrint’), and certain other companies, in which Punch International nv (‘Punch International’) had an investment immediately prior to April 20, 2005. Following the company’s Admission onto AIM on May 26, 2005, its issued share capital was £10,282,922 divided into 102,829,220 fully paid ordinary shares. This is the first period that the company has presented consolidated financial statements. The company’s controlling interest in its directly held subsidiaries was acquired through a transaction under common control, as defined in IFRS 3 Business Combinations. The directors note that transactions under common control are outside the scope of IFRS 3 and that there is no guidance elsewhere in IFRS covering such transactions. IFRS contain specific guidance to be followed where a transaction falls outside the scope of IFRS. This guidance is included at paragraphs 10 to 12 pf IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. This requires, inter alia, that where IFRS does not include guidance for a particular issue, the directors should also consider the most recent pronouncements of other standard setting bodies that use a similar conceptual framework to develop accounting standards. In this regard, it is noted that the United States Financial Accounting Standards Board (FASB) has issued an accounting standard covering business combinations (FAS 141) that is similar in a number of respects to IFRS 3. Further, there is currently a major project being run jointly by the IASB and FASB to converge IFRS and US GAAP. In contrast to IFRS 3, FAS 141 does include, as an Appendix, limited accounting guidance for transactions under common control which, as with IFRS 3, are outside the scope of that accounting standard. The guidance contained in FAS 141 indicates that a form of accounting that is similar to pooling of interests accounting, which was previously set out in Accounting Principles Board (APB) Opinion 16, may be used when accounting for transactions under common control. Having considered the requirements of IAS 8, and the guidance included within FAS 141, it is considered appropriate to use a form of accounting which is similar to pooling of interests when dealing with the transaction in which the company acquired its controlling interest in its subsidiaries. In consequence, the Financial Information for Punch Graphix plc reports the result of operations for the period as though the acquisition of its controlling interest through a transaction under common control had occurred on January 1, 2004. The effects of intercompany transactions have been eliminated in determining the results of operations for the period prior to the acquisition of the controlling interest, meaning that those results are on substantially the same basis as the results of operations for the period after the acquisition of the controlling interest. Similarly, the consolidated balance sheets and other financial information have been presented as though the assets and liabilities of the combining entities had been transferred on January 1, 2004. A summary of the more important accounting policies is set out below. The accounting principles have been applied consistently for all years presented. Basis of consolidation Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries (“the group”) as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. Business combinations The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.
Goodwill Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the income statement. Where the fair value of identifiable assets, liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is credited in full to the income statement. Intangibles Research and development costs Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge, is recognised in the income statement as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets to the extent that such expenditure is expected to generate future economic benefits and meets the recognition criteria set out in IAS 38 ‘Intangible Assets’. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as assets in a subsequent period. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over the period of its expected benefit. The amortisation periods adopted do not exceed five years. The capitalised development costs are assessed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Computer software development costs Generally, costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. However, costs that are directly associated with identifiable and unique software products controlled by the group that have probable economic benefits exceeding the cost beyond one year, are recognised as assets. Direct costs include staff costs of the software development team. Computer software costs that have been capitalised are amortised on a straight-line basis over the period of their expected useful lives, not exceeding a period of five years. Other intangible assets Expenditure on acquired patents, trademarks and licences are capitalised and amortised on a straight-line basis over their useful economic lives, but not exceeding 20 years. Amortisation of intangible assets is included within depreciation and amortisation expenses in the income statement. Impairment of non-financial assets Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually on December 31. Other nonfinancial assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount (being the higher of its fair value less cost to sell and its value in use), an impairment loss is recognised within other operating charges. The fair value less cost to sell is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash generating unit to which the assets belong. Reversal of impairment losses recognised in prior years is recorded in income when there is an indication that the impairment losses recognised for the assets no longer exist or have decreased. As an exception, impairment losses recognised for goodwill are not reversed. Property, plant and equipment Items of property, plant and equipment are stated at purchase price or production cost including directly attributable costs less accumulated depreciation and impairment losses. Expenses for the repair of property, plant and equipment are usually charged as an expense when incurred. They are, however, capitalised when they increase the future economic benefits expected to arise from the item of Property, plant and equipment. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of the item. Land is not depreciated. Assets under construction represent plant and properties under construction and are stated at cost. This includes cost of construction, plant and equipment acquired and other direct costs. Assets under construction are not depreciated until such time as the relevant assets are available for their intended use. 37
Page 1 and 2: Annual report 2005
Page 3 and 4: CONTENTS 1 2 3 4 5 6 7 8 9 10 11 12
Page 5 and 6: Pre-press solutions: basysPrint and
Page 7 and 8: Outlook The group has produced a fi
Page 9 and 10: The Digital printing solutions busi
Page 11 and 12: Shareholders’ funds Shareholders
Page 13 and 14: Henry Nigel Pakenham McCorkell Non-
Page 15 and 16: statements on pages 30 to 63 the co
Page 17 and 18: Audit committee The Audit Committee
Page 19 and 20: Internal controls The Board of dire
Page 21 and 22: A participant receiving an award un
Page 24 and 25: 10 SOCIAL RESPONSIBILITY REPORT Saf
Page 26: Quality The entire Punch Graphix pr
Page 29 and 30: Our report has been prepared pursua
Page 31 and 32: Consolidated balance sheet 31/12/04
Page 33 and 34: Consolidated cash flow statement 31
Page 35: Consolidated statement of equity Or
Page 39 and 40: Taxation including deferred tax Def
Page 41 and 42: Foreign currency Transactions enter
Page 43 and 44: NOTES TO THE ACCOUNTS 1A. Business
Page 45 and 46: 4. Personnel costs Employees and di
Page 47 and 48: 7. Earnings per share 31/12/04 31/1
Page 49 and 50: 11. Property plant & equipment Acqu
Page 51 and 52: 14. Inventories Raw materials & com
Page 53 and 54: 18. Share capital Called-up share c
Page 55 and 56: 20. Minority Interest At January 1,
Page 57 and 58: At December 31, 2004 882 66 13,465
Page 59 and 60: 25. Financial instruments (i) Finan
Page 61 and 62: At December 31, 2005, the Group has
Page 63 and 64: 30. Acquisitions 1. BasysPrint GmbH
Page 65: 11. That: a. The directors be given

Annual report 2005 - Xeikon

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