Annual Report & Accounts 2013 - Pinewood Studios

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56 Pinewood Shepperton plcAnnual Report & Accounts 2013Notes to the consolidated financial statements continued2. Accounting policies continuedShare-based payment transactions continuedThe cost of equity-settled transactions with employees is measured by reference to the fair value at the date at whichthey are granted. The fair value is determined by an external valuer using the binomial method. In valuing equity-settledtransactions, no account is taken of any performance conditions, other than the conditions linked to the price of theshares of Pinewood Shepperton plc (‘‘market conditions”).The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period inwhich the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitledto the award (‘‘vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting dateuntil the vesting date reflects the extent to which the vesting period has expired and the number of awards that, inthe opinion of the Directors of the Group at that date based on the best available estimate of the number of equityinstruments, will ultimately vest.No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upona market condition and in circumstances where holders of awards with no performance conditions attached cancel theirawards whilst remaining in the employment of the Group. These are treated as vesting irrespective of whether or notthe market condition is satisfied, provided that all other performance conditions are satisfied.Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms hadnot been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result ofthe modification.Where an equity-settled award is cancelled by the award holder whilst remaining in the employment of the Group, it istreated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognisedimmediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award onthe date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award,as described in the previous paragraph.Where an equity-settled award is cancelled due to the holder of the award no longer remaining in the employment of theGroup, no expense is recognised.The dilutive effect of outstanding issuable awards is reflected as additional share dilution in the computation of earningsper share. Awards that are contingently issuable are not considered dilutive unless the performance conditions forultimate vesting are met.Cash and cash equivalentsCash and short-term deposits in the statement of financial position comprise cash at bank and in hand. For the purposeof the Group statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as described above,net of outstanding bank overdrafts.Interest-bearing loans and borrowingsObligations for loans and borrowings are recognised when the Group becomes party to the related contracts and aremeasured initially at the fair values of consideration received less directly attributable transaction costs. After initialrecognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effectiveinterest method, allocating the interest income or interest expense over the relevant period. The loan issue costs areamortised in the income statement over the remaining maturity of the loans at a constant carrying amount and arereviewed for changes in circumstances that may indicate that the loans will not be held to maturity.
Pinewood Shepperton plc 57Annual Report & Accounts 2013Notes to the consolidated financial statements continued2. Accounting policies continuedDerivative financial instrumentsThe Group has interest rate swaps to hedge against risks associated with interest rate fluctuations. These derivativefinancial instruments are stated at fair value.The fair values of the interest rate swap contracts are determined by reference to market values for similar instruments.The interest rate swaps are cash flow hedges which hedge exposure to variability in cash flows that are attributable tothe interest rate risk on the Group’s external borrowings.The portion of the gain or loss on the hedging instruments that is determined to be an effective hedge is recogniseddirectly in other comprehensive income and the statement of changes in equity in a cash flow hedge reserve and theineffective portion is recognised in the Group income statement in finance costs. Amounts taken to other comprehensiveincome and the statement of changes in equity are transferred to the income statement when the hedged transactionaffects Group income.Hedge accounting is discontinued when the hedging instruments expire, or are sold, terminated or exercised, or no longerqualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instruments recognisedin other comprehensive income and the statement of changes in equity is kept in other comprehensive income and thestatement of changes in equity until the forecasted transactions occur. If a hedged transaction is no longer expected tooccur, the net cumulative gain or loss recognised in other comprehensive income and the statement of changes in equityis transferred to the Group income statement for that year.ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can bemade of the amount of the obligation. If the effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value ofmoney and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provisiondue to the passage of time is recognised as a finance cost.LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangementsat the inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or thearrangement conveys a right to use the asset. Finance leases, which transfer to the Group substantially all the risks andbenefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair valueof the leased item, or if lower, at the present value of the minimum lease payments. Lease payments are apportionedbetween the finance charges and the reduction of the lease liability so as to achieve a constant rate of interest on theremaining balance of the liability, using the effective interest rate method. Finance charges are recognised in the incomestatement on a straight-line basis.Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.Leases, where the lessor retains substantially all the risks and benefits of ownership of the asset, are classified asoperating leases. Operating lease payments are recognised as an expense in the income statement on a straight linebasis over the lease term.Operating lease income is recognised as Media Hub revenue in the income statement on a straight-line basis over thelease term.
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Annual Report & Accounts 2013 - Pinewood Studios

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