NIG Prospectus - London Stock Exchange

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Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cof an enterprise so as to obtain benefits from its activities. The financial statements ofsubsidiaries, other than those that are considered not material to the financial statements of theparent company, are included in the consolidated financial statements from the date that controleffectively commences until the date that control effectively ceases.All significant inter-company balances and transactions are eliminated on consolidation.RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to thegroup and the revenue can be reliably measured. The following specific recognition criteria mustalso be met before revenue is recognised.SalesSales represent the value of goods and services supplied during the year excluding value addedtax or other sales taxes. Sales and profits between subsidiary undertakings are eliminated.Dividend incomeDividend income is recognised when the shareholders’ right to receive payment is established.Interest incomeInterest income is recognised on a time proportionate basis, taking into consideration the principaloutstanding and the interest rate applicable.Finance costsFinance costs are calculated and recognised on a time proportionate basis taking into account theprincipal loan balance outstanding and the interest rate applicable.Development costsExpenditure on development activities which are not expected to generate future economicbenefits are written off as incurred. Development costs are carried forward only if specific criteriaare met. Such development costs carried forward are amortised over their estimated useful liveson a straight line basis and are subject to regular impairment review.Share-based PaymentCertain employees (including managing director) of the company receive remuneration in the formof share-based payment transactions, whereby the employees render services in exchange forshares (“equity settled transactions”).Equity-settled transactionsThe cost of equity-settled transactions with employees is measured under the intrinsic valuemethod. Under this method, the cost is determined by comparing the period end market value ofthe company’s shares with the issue price. The cost of equity settled transactions is recognised,together with a corresponding increase in equity, over the period in which the performanceconditions are fulfilled, ending on the date on which the shares vest.GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the netidentifiable assets acquired at the date of acquisition. Goodwill is measured at cost lessF-57
Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cimpairment losses. Goodwill is tested for impairment, annually or more frequently if events orchanges in circumstances indicate that the carrying value may be impaired. For the purpose ofimpairment testing, goodwill is allocated to cash generating units.Property, plant and equipment and depreciationProperty, plant and equipment are stated at cost/valuation less accumulated depreciation andimpairment losses. Depreciation is calculated to write off the cost or valuation, less the estimatedresidual value of property, plant and equipment, on a straight-line basis over their estimated usefullives as follows:Freehold propertyLong leasehold propertyShort leasehold propertyProperty on leasehold landPlant and machineryMotor vehiclesFurniture and equipmentLower of 50 years or remaining useful lifeLower of 50 years or remaining lease termLease term4 to 20 years1 to 15 years2 to 10 years4 to 10 yearsAny increase arising on revaluation is credited directly to shareholders’ equity as “revaluationreserve” except to the extent where the increase reverses a revaluation decrease related to thesame asset for which a decrease in valuation has previously been recognised as an expense, it iscredited to the consolidated statement of income. Any decrease in the net carrying amount arisingon revaluation is charged directly to the consolidated statement of income, or charged to therevaluation reserve to the extent that the decrease is related to an increase for the same assetwhich was previously recorded as a credit to the revaluation surplus.Depreciation on the re-valued properties is charged to the consolidated statement of income overtheir remaining estimated useful lives and an amount equivalent to the excess depreciation chargerelating to the increase in carrying amount is transferred each year from the revaluation reserve toretained earnings.No depreciation is provided on freehold land. Properties in the course of construction forproduction or administrative purposes, are carried at cost, less any recognised impairment loss.Depreciation of these assets, on the same basis as other property assets, commences when theassets are ready for their intended use.Investment in associatesThe group’s investment in associates is accounted for under the equity method of accounting. Anassociate is an entity in which the group has between 20% to 50% of the voting power or overwhich it exercises significant influence. Under the equity method of accounting, the initialinvestment is recorded at cost and the carrying amount is increased or decreased to recognise thegroup’s share of profit or loss and other changes in the equity of the associated companies.Distributions received from the associated companies reduce the carrying amount of theinvestment.Investment in joint venturesInvestment in joint ventures are accounted for under the equity method of accounting. A jointventure is an undertaking in which the group has a long-term interest and over which it exercisesjoint control. Under the equity method of accounting, the initial investment is recorded at cost andthe carrying amount is increased or decreased to recognise the group’s share of profits or lossesand other changes in equity of the joint venture. Distributions received from joint ventures reducethe carrying amount of the investment.F-58
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NIG Prospectus - London Stock Exchange

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