G4S Annual Report and Accounts 2011

Overview Strategic review Performance
Notes to the consolidated financial statements
1 General information
G4S plc is a company incorporated in the United Kingdom under the Companies Act 1985. The consolidated financial statements incorporate the financial
statements of the company and entities (its subsidiaries) controlled by the company (collectively comprising the group) and the group’s interest in associates
and jointly controlled entities made up to 31 December each year. The nature of the group’s operations and its principal activities are set out in note 6 and
in the Operating and Financial Review on pages 28 to 37 and 38 to 41. The group operates throughout the world and in a wide range of functional
currencies, the most significant being the euro, the US dollar and sterling. The group’s financial statements are presented in sterling, as the group’s primary
listing is in the UK. Foreign operations are included in accordance with the policies set out in Note 3. The address of the registered office is given on
page 140.
2 Statement of compliance
The consolidated financial statements of the group have been prepared in accordance with International Financial Reporting Standards adopted for use in
the European Union (adopted IFRSs). The company has elected to prepare its parent company financial statements in accordance with UK Generally
Accepted Accounting Practice (UK GAAP). These are presented on pages 124 to 132.
3 Significant accounting policies
(a) Basis of preparation
The consolidated financial statements of the group have been prepared under the going concern basis and using the historical cost basis, except for the
revaluation of certain non-current assets and financial instruments. The principal accounting policies adopted are set out below. Judgements made by the
directors in the application of these accounting policies which have a significant effect on the financial statements, and estimates with a significant risk of
material adjustment, are discussed in note 4. The directors are confident that, after making enquiries and on the basis of current financial projections and
available facilities, they have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future.
Further information on the going concern assessment is given in note 33 on pages 107 to 109.
The comparative income statement for the year ended 31 December 2010 has been re-presented for operations qualifying as discontinued during the
current year. Revenue from continuing operations has been reduced by £139m and PBT has been increased by £5m compared to the figures published
previously. Further details of discontinued operations are presented within note 7. In addition, the comparative consolidated statement of financial position
as at 31 December 2010 has been restated to reflect the completion during 2011 of the initial accounting in respect of acquisitions made during 2010.
Adjustments made to the provisional calculation of the fair values of assets and liabilities acquired amount to £12m, with an equivalent increase in the
reported value of goodwill. The impact of these adjustments on the net assets acquired is presented in note 17. The prior year balance sheet has been
restated to reflect the reclassification of the entire retirement benefits obligation within non-current liabilities to bring the disclosure in line with the group’s
peers and to more appropriately reflect the nature of the obligation.
(b) Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the group. Control is achieved where the group has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities, determined either by the group’s ownership percentage, or by the terms of any shareholder
agreement.
On acquisition, the assets and liabilities and contingent liabilities of the acquired business are measured at their fair values at the date of acquisition. The cost
of acquisition is measured as the acquisition date fair values of the assets transferred to the vendor and does not include transaction costs. The cost of
acquisition in respect of acquisitions made prior to 1 January 2010 included transaction costs and has not been restated. Any excess of the cost of
acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency in the cost of acquisition below the fair values
of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the year of acquisition.
The cost of acquisition includes the present value of deferred and contingent consideration payable, including that in respect of put options held by
non-controlling shareholders, as estimated at the date of acquisition. For acquisitions prior to 1 January 2010 subsequent changes to the present value of
the estimate of contingent consideration and any difference upon final settlement of such a liability are recognised as adjustments to the cost of acquisition.
For acquisitions after 1 January 2010 such changes are recognised in the income statement with respect to contingent consideration and in other
comprehensive income with respect to put options. Non-controlling interests are stated at their proportion of the fair values of the assets and liabilities
recognised. Profits and losses are applied in the proportion of their respective ownership to the interest of the parent and to the non-controlling interest.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of control or
up to the effective date of disposal, as appropriate.
Joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, in that strategic,
financial and operating decisions require the unanimous consent of the parties.
The group’s interest in joint ventures is accounted for using the proportionate consolidation method, whereby the group’s share of the results and assets
and liabilities of a jointly-controlled entity is combined line by line with similar items in the group’s consolidated financial statements.
Associates
An associate is an entity over which the group is in a position to exercise significant influence, but not control or joint control, through participation in the
financial and operating policy decisions of the investee.
The results and assets and liabilities of associates are incorporated in the group’s consolidated financial statements using the equity method of accounting.
Investments in associates are carried in the consolidated statement of financial position at cost as adjusted by post-acquisition changes in the group’s share
of the net assets of the associates, less any impairment in the value of individual investments. Losses of the associates in excess of the group’s interest in
those associates are not recognised.
78
G4S plc
Annual Report and Accounts 2011