BAE-annual-report-2014

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Financial statements NOTES TO THE COMPANY ACCOUNTS 1. ACCOUNTING POLICIES Basis of preparation The financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, and in accordance with applicable accounting standards in the UK (UK GAAP). The going concern basis has been applied in these accounts. In accordance with Section 408(3) of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss account. The amount of profit for the financial year of the Company is disclosed in note 11 to these accounts. The Company has no other recognised gains or losses in the current or preceding year and, therefore, no statement of total recognised gains or losses is presented. Cash flow statement The Company is exempt under the terms of FRS 1, Cash Flow Statements, from the requirement to publish its own cash flow statement, as its cash flows are included within the Consolidated Cash Flow Statement of the Group. Foreign currencies Transactions in foreign currencies are translated at the exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date. These exchange differences are recognised in the profit and loss account unless they qualify for hedge accounting treatment, in which case the effective portion is recognised directly in a separate component of equity. Intangible assets Software development costs that are directly associated with the production of identifiable and unique software products controlled by the Company, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Tangible fixed assets Depreciation is provided, normally on a straight-line basis, to write off the cost or valuation of tangible fixed assets over their estimated useful economic lives to any estimated residual value using the following rates: Buildings up to 50 years, or the lease term if shorter Computing equipment 5 years No depreciation is provided on freehold land and assets in the course of construction. Impairment reviews are undertaken if there are indications that the carrying values may not be recoverable. Leases Rental payments under operating leases are charged to the profit and loss account on a straight-line basis in arriving at operating profit. Investments The Company’s investment in shares in Group companies is stated at cost less provision for impairment. Financial instruments The policies disclosed in note 14 to the Group accounts for recognition, measurement and presentation of financial instruments are applied in the Company accounts. Tax The charge for taxation is based on the profit for the year and takes account of taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised on an undiscounted basis in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date where there is an obligation to pay more tax, or a right to pay less tax, in the future. Pensions and other post-retirement benefits The Company contributes to Group pension schemes operated in the UK. Details of the principal schemes and the financial assumptions used are contained in note 21 to the Group accounts. As permitted by FRS 17, Retirement Benefits, the schemes are accounted for as defined contribution schemes, as the employer cannot identify its share of the underlying assets and liabilities of the schemes. The employer’s contributions are set in relation to the current service period and also to fund a series of agreed measures to address the pension scheme funding deficits. Share-based payment compensation The Company has granted equity-settled share options and Long-Term Incentive Plan (LTIP) arrangements to Group employees. Equity-settled share options and LTIP arrangements are measured at fair value at the date of grant. The fair value of awards granted to employees of the Company is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of the number of shares that will actually vest. The cost of awards to employees of subsidiary undertakings is accounted for as an additional investment in the employing subsidiary. In accordance with Urgent Issues Task Force (UITF) Abstract 25, National Insurance Contributions on Share Option Gains, the Company provides in full for the employer’s national insurance liability estimated to arise on the future exercise of share options and LTIP arrangements granted, except where the employee has agreed to settle the employer’s national insurance liability as a condition of grant. Own shares held As required under UITF Abstract 38, Accounting for ESOP Trusts, the cost to the Company of own shares held is shown as a deduction from shareholders’ funds within the profit and loss account. Consideration paid or received for the purchase or sale of the Company’s own shares in the ESOP Trust is shown separately in the reconciliation of movements in shareholders’ funds. Dividends Dividends received and receivable are credited to the Company’s profit and loss account. Equity dividends on ordinary share capital are recognised as a liability in the period in which they are declared. The interim dividend is recognised when it has been approved by the Board and the final dividend is recognised when it has been approved by the shareholders at the Annual General Meeting. Changes in accounting policies in 2015 A new financial reporting framework in the UK was effective on 1 January 2015. As a result, BAE Systems plc has adopted FRS 101 Reduced Disclosure Framework for the year ending 31 December 2015. 158 BAE Systems Annual Report 2014
Financial statements 2. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS £m Cost At 1 January 2014 8,118 Additions 1 153 Disposals (88) At 31 December 2014 8,183 Impairment provisions At 1 January 2014 61 Disposals (47) At 31 December 2014 14 Net carrying value At 31 December 2014 8,169 At 31 December 2013 8,057 1. Principally additional capital contributions into BAE Systems (Holdings) Limited in respect of the SilverSky acquisition. 3. DEBTORS Due within one year Corporation tax recoverable 32 32 Amounts owed by subsidiary undertakings 3,182 3,585 Amounts owed by Group joint ventures 5 5 Prepayments and accrued income 23 24 Other debtors 15 16 3,257 3,662 4. OTHER FINANCIAL ASSETS AND LIABILITIES 2014 Assets £m 2014 Liabilities £m 2014 £m 2013 Assets £m 2013 £m 2013 Liabilities £m Due within one year Cash flow hedges – foreign exchange contracts 2 – – (2) Other foreign exchange/interest rate contracts 126 (134) 126 (139) 128 (134) 126 (141) Due after one year Cash flow hedges – foreign exchange contracts 4 – – (2) Other foreign exchange/interest rate contracts 95 (98) 80 (84) Debt-related derivative financial instruments – assets 1 6 – – – 105 (98) 80 (86) 1. The debt-related derivative financial instrument assets are presented as other financial assets. Debt-related derivative financial instrument liabilities are presented as a component of loans and overdrafts (see note 5). Full disclosures relating to the Group’s other financial assets and liabilities, and financial risk management strategies are given in notes 14, 27 and 28 to the Group accounts. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS BAE Systems Annual Report 2014 159
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ANNUAL REPORT 2014
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Strategic Report 2014 AT A GLANCE I
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Strategic Report OUTLOOK FOR 2015 G
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Strategic Report The review confirm
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Strategic Report We have strong, es
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Strategic Report LAND 15% SALES 1 A
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Strategic Report Our strategy has g
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Strategic Report OUR BUSINESS IS EN
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Strategic Report The Group’s Elec
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Strategic Report M&A In August, the
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Strategic Report The Executive Comm
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Strategic Report OBJECTIVE 2014 PER
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Strategic Report SEGMENTAL PERFORMA
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Strategic Report OPERATIONAL AND ST
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Strategic Report CYBER & INTELLIGEN
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Strategic Report Cyber Security The
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Strategic Report PLATFORMS & SERVIC
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Strategic Report RESPONSIBLE BUSINE
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Strategic Report Our employees Our
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Strategic Report BOARD Overall resp
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Strategic Report 4. COMPETITION IN
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Strategic Report 9. INFORMATION TEC
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Governance The Company was complian
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Governance Chris Grigg Non-executiv
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Governance Board effectiveness This
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Governance AUDIT COMMITTEE REPORT N
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Governance We have since assessed t
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Governance REMUNERATION COMMITTEE R
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Governance ANNUAL REMUNERATION REPO
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Governance 2. Further detail on bon
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Governance Long-Term Incentive Plan
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Governance Pension entitlements TOT
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Governance Description of share pla
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Governance Share interests as at 31
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Governance Breakdown of scheme inte
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Governance PREFACE TO THE DIRECTORS
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Governance EXECUTIVE DIRECTORS’ P
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Governance EXECUTIVE DIRECTORS’ P
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Governance NON-EXECUTIVE DIRECTORS
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Governance Service contracts Execut
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Governance The Company must have si
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Governance Statement of directors
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Governance The contracts requiring
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Financial statements FINANCIAL STAT
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Financial statements PREPARATION co
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Financial statements CONSOLIDATED S
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Page 127 and 128: Financial statements 12. EQUITY ACC
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Page 155 and 156: Financial statements 29. SHARE-BASE
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Page 159: Financial statements COMPANY BALANC
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Page 167 and 168: CONNECT WITH BAE SYSTEMS WWW.BAESYS
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BAE-annual-report-2014

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