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BAKKAVOR ANNUAL REPORT AND ACCOUNTS 2012 notes to the consolidated financial statements continued 2 SIGNIFICANT ACCOUNTING POLICIES CONTINUED Business combinations Business acquisitions from third parties are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date. Goodwill arising on business combinations is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after the reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement. The share of non-controlling interests in the acquiree is initially measured at the non-controlling interests proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Where a business combination is achieved in stages, the Group’s previously-held interests in the acquired entity are re-measured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in the income statement. Assets held for sale and discontinued operations Disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, the disposal group is available for immediate sale in its present condition and management are committed to and expect to complete the sale within 12 months from the date of classification. Disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. When the Group is committed to the loss of control of a subsidiary, through a sale transaction, all the assets and liabilities of that subsidiary are grouped together, but not offset, to present amounts classified as assets and liabilities held for sale separately in the statement of financial position. Comparative amounts for prior periods are not restated in the statement of financial position. Further disclosures on the components of the disposal group’s assets and liabilities are provided within the notes to the financial statements (see note 14). No depreciation is charged in respect of property, plant and equipment from the date the assets are classified as held for sale. A discontinued operation is a component of an entity that has either been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operation. A disposal group which qualifies as a discontinued operation is presented as a single amount and shown separately from continuing operations in the income statement and statement of comprehensive income. The components of the disposal group’s income or expense presented in the income statement are disclosed further in the notes to the financial statements (see note 14). When amounts relating to discontinued operations are separately presented in the income statement and statement of comprehensive income, comparative figures for prior periods are also restated in the income statement. Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually or more frequently when there is an indication that the unit may be impaired. Any impairment is recognised immediately in the income statement and is not subsequently reversed. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Other intangible assets Intangible assets have finite useful lives over which the assets are amortised on a straight line basis. The amortisation charge for customer relationships and customer contracts is recognised as an expense over 10 years. PAGE 61 VIEW THE FULL REPORT AT ANNUALREPORT12.BAKKAVOR.COM
BAKKAVOR ANNUAL REPORT AND ACCOUNTS 2012 notes to the consolidated financial statements continued 2 SIGNIFICANT ACCOUNTING POLICIES CONTINUED Property, plant and equipment All property, plant and equipment is stated in the statement of financial position at cost less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over their estimated useful lives, using the straight-line method, on the following bases: Buildings – maximum period of 50 years Plant and machinery – 1 to 20 years Fixtures and equipment – 3 to 5 years Freehold land is not depreciated. Most plant and machinery is depreciated over 12 years. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. Reviews of the estimated remaining useful lives of and residual values of individual productive assets are performed annually, taking account of commercial and technological obsolescence as well as normal wear and tear. All items of property, plant and equipment are reviewed for impairment when there are indications that the carrying value may not be recoverable. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement. Impairment The useful economic lives of intangible assets are determined based on a review of a combination of factors including the asset ownership rights and the nature of the overall product life cycle. Intangible assets and property, plant and equipment are tested for impairment when an event that might affect asset values has occurred. Examples of such triggering events include significant planned restructuring, a major change in market conditions or technology, expectations of future operating losses, or a significant reduction in cash flows. An impairment loss is recognised, in the income statement, to the extent that the carrying amount cannot be recovered either by selling the asset or by the discounted future earnings from operating the assets in accordance with IAS 36 “Impairment of Assets”. Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct lab<strong>our</strong> costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Assets held under leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Finance leases Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. The interest element of the finance cost is charged to the income statement over the lease period. Operating leases Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. Income earned from operating leases is credited to the income statement when earned. PAGE 62 VIEW THE FULL REPORT AT ANNUALREPORT12.BAKKAVOR.COM
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Annual report AND accounts 2012
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BAKKAVOR ANNUAL REPORT AND ACCOUNTS
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welcome to our Bakkavor 'Fast Read'
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usiness segments united kingdom mar
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key performance indicators WE USE A
Page 11 and 12: 3 4 5 assets Our commitment to cont
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Page 15 and 16: leading customer service leading ma
Page 17 and 18: growing our product pipeline Within
Page 19 and 20: 2 6centres of excellence investing
Page 21 and 22: corporate governance how we manage
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