BAE-annual-report-2014

Financial statements
PREPARATION continued
Changes in accounting policies
With effect from 1 January 2014, the Group has adopted the following new standards and amendments to existing standards:
− IFRS 10, Consolidated Financial Statements
− IFRS 11, Joint Arrangements
− IFRS 12, Disclosure of Interests in Other Entities
− IAS 27, Separate Financial Statements (revised 2011)
− IAS 28, Investments in Associates and Joint Ventures (revised 2011)
With the exception of new disclosure requirements, none of these have impacted the consolidated financial statements of the Group.
There are no other EU-endorsed IFRSs or IFRIC interpretations that are not yet effective that are expected to have a material impact
on the Group.
IFRS 15, Revenue from Contracts with Customers, issued in May 2014, is not yet EU endorsed. Management is in the process of
reviewing the impact that this will have on the Group.
IFRS 9, Financial Instruments, issued in July 2014, is not yet EU endorsed. It is not expected to have a material impact on the Group.
Consolidation
The financial statements of the Group consolidate the results of the Company and its subsidiary entities, and include its share of its
joint ventures’ results accounted for under the equity method, all of which are prepared to 31 December.
A subsidiary is an entity controlled by the Group. The Group controls a subsidiary when it is exposed, or has the rights, to variable
returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.
The results of subsidiaries are included in the income statement from the date of acquisition.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements.
Joint ventures are accounted for under the equity method where the Consolidated Income Statement includes the Group’s share of their
profits and losses, and the Consolidated Balance Sheet includes its share of their net assets within equity accounted investments.
The assets and liabilities of overseas subsidiaries and equity accounted investments are translated at the exchange rates ruling at the
balance sheet date. The income statements of such entities are translated at average rates of exchange during the year. All resulting
exchange differences are recognised directly in a separate component of equity.
Translation differences that arose before the transition date to IFRS (1 January 2004) are presented in equity, but not as a separate
component. When a foreign operation is sold, the cumulative exchange differences recognised in equity since 1 January 2004 are
recognised in the income statement as part of the profit or loss on sale.
STRATEGIC REPORT GOVERNANCE
FINANCIAL STATEMENTS
BAE Systems
Annual Report 2014
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