john-lewis-partnership-plc-annual-report-2015

142
John Lewis Partnership plc Annual Report and Accounts 2015
Notes to the consolidated financial statements (continued)
11 Property, plant and equipment (continued)
In accordance with IAS 36 ‘Impairment of Assets’, the Partnership tests its property, plant and equipment for impairment, whenever events
or circumstances indicate that the value on the balance sheet may not be recoverable. For the purpose of impairment testing, each branch is a
Cash Generating Unit (‘CGU’).
The impairment test compares the recoverable amount for each CGU to the carrying value on the balance sheet. The key assumptions used in the
calculations are the discount rate, long term growth rate and expected sales performance and branch costs.
The value in use calculation is based on five year cash flow projections using the latest budget and forecast data. Any changes in sales performance
and branch costs are based on past experience and expectations of future changes in the market. The forecasts are then extrapolated beyond the
five year period using a long term growth rate of 2.0% (2014: 3.2%). The discount rate is based on the Partnership’s pre-tax weighted average cost of
capital of between 9 to 10% (2014: 9 to 10%).
Having applied the above methodology and assumptions, the Partnership recognised an impairment charge of £10.3m to land and buildings in the
Waitrose division. The impairment charge reflects the revision of the long term forecast cashflows as a result of trading in a highly competitive and
deflationary market.
A reduction of 0.5% in the long term growth rate would result in an additional impairment charge of £9.9m. An increase in the discount rate of 0.5%
would result in an additional impairment charge of £22.4m.
12 Inventories
This note sets out the make-up of our inventories and the value of inventories charged through the consolidated income statement
in the year. Slow moving and obsolete inventory is assessed each reporting period and appropriate provision made against the inventory
balance, and so the finished goods and goods for resale is shown net of provisions. Our raw materials and work in progress are primarily
related to Herbert Parkinson and Leckford Farm. Our inventories primarily consist of finished goods and goods for resale.
Once the inventory is sold, it is charged to cost of sales in the consolidated income statement.
Raw materials 4.4 4.0
Work in progress 1.0 0.9
Finished goods and goods for resale 575.3 549.1
580.7 554.0
2015
£m
2014
£m
The cost of inventory recognised as an expense by the Partnership in the year was £6,426.9m (2014: £6,008.9m). Provisions against inventories
of £5.1m were charged (2014: £7.9m charged) in branch operating expenses.