Guinness Peat Group plc

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Notes to Financial Statements - Guinness Peat Group plc

22 GUINNESS PEAT GROUP PLC • ANNUAL REPORTNotes to Financial Statements – continuedf) INVESTMENTSInvestments acquired with the intention of being held forthe long term (excluding investments in subsidiaries,associates, joint ventures and joint arrangements) arerecorded as fixed asset investments and are stated at cost or,where there has been a permanent diminution in value, atdirectors’ valuation. Investments in art portfolios are valuedat cost or, where there has been an impairment in value, atdirectors’ valuation.Listed investments held as current assets, includingderivatives held as part of the Group’s investment portfolio,are stated at market value. This represents a change from theprevious policy of stating such investments at the lower ofcost and market value, but the impact on prior periods is notmaterial and hence no prior year adjustment has beenrecorded in these financial statements. In addition, provisionis made for any losses arising from derivatives in excess ofthe amounts paid.Unlisted investments held as current assets are stated at thelower of cost and directors’ valuation, including subsidiariesacquired with the intention of resale.In the Company’s financial statements, investments insubsidiaries, associates and joint ventures are valued at costor, where there has been an impairment in value, at theirexpected recoverable amount.g) LEASESAssets held under finance leases are capitalised as fixedassets. The amount initially brought to account is the presentvalue of minimum lease payments. Finance lease paymentsare allocated between interest expense and reduction oflease liability over the term of the lease. Operating leasepayments are charged as an expense in the year in whichthey are incurred.h) GOODWILLGoodwill represents the difference between the cost ofacquiring subsidiaries, associates and joint ventures and thefair value of the attributable net assets. Positive goodwill hasbeen capitalised in the balance sheet and amortised throughthe profit and loss account on a straight line basis over itsestimated useful economic life. If, in future years, anygoodwill arises which is considered to have an indefiniteeconomic useful life, amortisation will not be charged butthe goodwill will instead be subject to an annual impairmentreview and, where appropriate, provided against.Negative goodwill is also capitalised in the balance sheet,and is then released through the profit and loss account inthe periods in which the acquired company’s non-monetaryassets are recovered, whether through depreciation or sale.Negative goodwill is matched with the acquired company’stangible fixed assets, and any excess is then attributed to thecompany’s other non-monetary assets.Prior to 1998, negative goodwill was written off directly toreserves. Any such goodwill has not been reinstated. This willbe released through the profit and loss account on disposalof the business, or underlying asset, to which it relates.i) TURNOVERTurnover, which excludes VAT and other sales taxes, consistsof amounts receivable in respect of goods supplied andservices rendered to third parties and the proceeds from thedisposal of current asset investments.Sales of goods are recognised in revenue when controlpasses to the customer, except that sales of aluminiumproducts are recorded when goods have been despatchedand the associated risks and rewards have been transferred.Income from sales of property is recognised on a percentageof completion basis.Contracting turnover comprises the value of work executedduring the year, including the settlement of monetary claimsarising from previous years.j) STOCKS, WORK IN PROGRESS AND LONG TERMCONTRACTSStocks and work in progress are stated at the lower of costand net realisable value. In general, cost is determined on afirst in first out basis and includes transport and handlingcosts. In the case of manufactured products, cost includes alldirect expenditure and production overheads based on thenormal level of activity. Net realisable value is the price atwhich stocks can be realised in the normal course ofbusiness after allowing for the costs of realisation and, whereappropriate, the cost of conversion from their existing stateto a finished condition. Provision is made for obsolete, slowmoving and defective stocks.Raw materials and consumable stores are valued at actual orweighted average cost as appropriate.Long term contracts are generally those exceeding a year induration and are valued at cost,comprising direct expenditureand the relevant production overheads,plus the profit

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