formerly Motion Media PLC - Scotty Tele-Transport Corporation

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SCOTTY GROUP PLC (formerly Motion Media PLC) NOTES TO THE FINANCIAL STATEMENTS For the period from 1 January 2004 to 6 August 2004 1. ACCOUNTING POLICIES The financial statements are prepared in accordance with applicable United Kingdom accounting standards, which have been applied consistently throughout the year. The particular accounting policies adopted are described below. Basis of preparation The financial statements are prepared under the historical cost convention. Consolidation The consolidated financial statements incorporate the financial statements of the company and its subsidiaries for the period ended 6 August 2004 and exclude all intra-group transactions. The acquisition method of accounting has been used and the results of the subsidiaries are included from the date of acquisition. The company has taken advantage of the exemption provided by Section 230 of the Companies Act 1985 from presenting its own profit and loss account. The company’s loss after tax for the period was £15,120,000 (2003: loss of £141,000). Intangible assets - goodwill Goodwill arising on acquisitions prior to 1 January 1998 has been written off to reserves on acquisition as a matter of accounting policy. Under the transitional arrangements of FRS10 the balance of the goodwill write off reserve has been transferred to the profit and loss account reserve. Such goodwill will be included in the calculation of profit or loss on disposal of the business to which it relates. Goodwill arising on the acquisition of SCOTTY Group as of 28 July 2004, representing the excess of the fair value of the consideration given over the fair value of identifiable assets and liabilities acquired is capitalised and written off on a straight-line basis over its useful economic life. Intangible assets - licences Licences relating to Intellectual Property Rights acquired from C-Phone Corporation, which is core to current Telehealth and Security products being sold in the US, are amortised on a straight line basis over the expected future product sales to which the Intellectual Property Rights relates. Investments Investments held as fixed assets are stated at cost less provision for impairment. Tangible fixed assets Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset, as follows: Fixtures, fittings, tools and equipment 25% on cost 24
SCOTTY GROUP PLC (formerly Motion Media PLC) NOTES TO THE FINANCIAL STATEMENTS For the period from 1 January 2004 to 6 August 2004 1. ACCOUNTING POLICIES (continued) Stocks Stocks are stated at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Turnover The turnover shown in the profit and loss account represents amounts invoiced during the year, net of value added tax. Revenue on sales of technology products is recognised on despatch of the goods in question. Where applicable, revenue in relation to maintenance contracts is amortised over the period of the maintenance contract. Deferred taxation Deferred taxation is provided in full on timing differences that 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 periods different from those in which they are included in the financial statements. Deferred tax assets are recognised only to the extent that they are expected to be recoverable without replacement by equivalent debit balances. Tax losses carried forward are not recognised as it is not assured beyond reasonable doubt that future taxable profits will be sufficient to offset the current loss during the carry forward period prescribed by tax legislation. Deferred tax assets and liabilities are not discounted. Foreign exchange Transactions denominated in foreign currencies are translated into sterling at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates ruling at that date. These translation differences are dealt with in the profit and loss account. The financial statements of foreign subsidiaries are translated into sterling at the closing rates of exchange and the differences arising from the translation of the opening net investment in subsidiaries at the closing rate are taken direct to reserves. Leases Assets held under hire purchase contracts are capitalised at their fair value on the inception of the leases and depreciated over the shorter of the period of the lease and the estimated useful economic lives of the assets. The finance charges are allocated over the period of the lease in proportion to the capital amount outstanding and are charged to the profit and loss account. Operating lease rentals are charged to profit and loss in equal annual amounts over the lease term. Amounts due to the group under sub-leases are credited to the profit and loss account in equal annual amounts over the lease term. Pension costs The group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the group. Contributions are charged to the profit and loss account as they fall due. 25
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formerly Motion Media PLC - Scotty Tele-Transport Corporation

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