Savills plc - Investor relations

NOTES TO THE ACCOUNTSyear ended 31 December 20031. Principal accounting policies (continued)DepreciationProvision for depreciation is made at rates calculated to write off the cost, less estimated residual value, of tangible fixed assets from their commencement of service over their estimated useful lives as follows:YearsFreehold property 50Leasehold property (less than 50 years) over unexpired term of leaseFurniture & office equipment 6Motor vehicles 5Computer equipment & software between 3 & 5Property held for saleProperties held by the Group for its own account as trading properties are stated at the lower of cost and net realisable value.Work in progressWork in progress is stated at the lower of cost and net realisable value. Cost includes an appropriate proportion of overheads. Long-term work in progress is assessed on a contract by contract basis; turnover andrelated costs are included in the profit and loss account as contract activity progresses. Where the outcome of a long-term contract can be assessed with reasonable certainty, attributable profit is recognised.Long-term contracts are stated at cost net of amounts transferred to cost of sales, foreseeable losses and applicable payments on account.Deferred taxationDeferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallisebased on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in years different from those in which they are included in financialstatements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.Deferred tax is not provided on timing differences arising from the revaluation of investment properties where there is no commitment to sell the asset. Deferred tax assets and liabilities are not discounted.Accounting for leasesAssets financed by leasing agreements which give rights approximating to ownership (finance leases) are capitalised at amounts equal to the original cost and depreciation is provided on the basis of the Groupdepreciation policy. The capital elements of future obligations under finance leases are included as liabilities in the balance sheet and the current year’s interest elements are charged to the profit and loss account.The annual payments under all other lease agreements, known as operating leases, are charged to the profit and loss account as incurred.Pension costsRetirement benefits for employees are provided by a defined benefit scheme which is funded by contributions from the Group and its employees. The Group contributions are determined by an independent qualifiedactuary, and are charged to the profit and loss account in order to spread the cost of pensions over the service lives of employees in the scheme. The Group also operates a defined contribution group personalpension plan for new entrants and a number of defined contribution individual pension plans. Contributions in respect of defined contribution pension schemes are charged to the profit and loss account when theyare payable.The notes to the financial statements contain additional information on retirement benefits as required by FRS 17. Further disclosures will be made in future years in accordance with the provisions set out in thestandard.Foreign currency translationAssets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date. Gains and losses from foreign currency transactions are included in theprofit and loss account.The assets and liabilities of overseas subsidiary undertakings are translated at the closing exchange rates. Profit and loss accounts of such undertakings are consolidated at the average rates of exchange during theyear. Gains and losses arising on these translations are taken to reserves net of exchange differences arising on related foreign currency borrowings.Financial instrumentsPage 22 of the Financial Review provides an explanation of the role that financial instruments have had during the year in affecting the risks the Group faces in its activities. The explanation summarises theobjectives and policies for holding or issuing financial instruments and similar contracts and the strategies for achieving those objectives that have been followed during the year.The numerical disclosures in Note 18 deal with the financial assets and financial liabilities as defined in FRS 13. Certain assets such as investments in subsidiary and associated companies are excluded from thescope of these disclosures.As permitted by FRS 13, short-term debtors and creditors have been excluded from the disclosures, other than currency disclosures.Savills Sharesave SchemeNo costs are recognised in respect of the Sharesave Scheme under the exemption permitted by UITF abstract 17.48