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Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2015 www.henryboot.co.uk Stock Code: BHY Financial Statements Principal Accounting Policies for the year ended 31 December 2015 The Group regularly reviews its contract obligations and whether they are considered to be onerous. In the event that the costs of meeting the obligations exceed the economic benefits expected to be received through the life of the development, a provision would be recognised based on discounted cash flows to the end of the contract, to the extent of the costs exceeding the economic benefits. The road maintenance provision represents management’s best estimate of the Group’s liability under a five-year rolling programme for the maintenance of the Group’s PFI asset. Other provisions include any liabilities where the Directors anticipate that a present obligation would result in a future outflow of resources, including legal and regulatory penalties or claims, being taken into account in the Financial Statements. Specific details of the Group’s provisions relating to land development and road maintenance can be found in note 26 on page 122. Interest income and expense Interest income and expense are recognised within ‘Finance income’ and ‘Finance costs’ in the Statement of Comprehensive Income using the effective interest rate method, except for borrowing costs relating to qualifying assets, which are capitalised as part of the cost of that asset. The Group has chosen not to capitalise borrowing costs on all qualifying assets which are measured at fair value. The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability. Dividends Dividends are only recognised as a liability in the actual period in which they are declared. Government grants Government grants are recognised at their fair value in the Statement of Financial Position, within deferred income, where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Government grants relating to revenue items are released to the Statement of Comprehensive Income and recognised within cost of sales over the period necessary to match the grant on a systematic basis to the costs that they are intended to compensate. Government grants relating to capital items are released against the carrying value of the grant supported assets when the completion conditions of those assets are met. Judgements and key assumptions The critical judgements in applying the Group’s Accounting Policies and that have the most significant effect on the amounts recognised in the Financial Statements, apart from those involving estimations (see below), relate to revenue recognition, construction contracts and inventories. All of these are referred to on pages 93 and 95 and each is interpreted by management in the light of IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and IAS 2 ‘Inventories’. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, and that could have a material adjustment to the carrying amounts of assets and liabilities over the ensuing year, are: • retirement benefit costs – the estimates used in retirement benefit costs are arrived at in conjunction with the scheme’s actuary and advisers, those having the most significant impact being the liabilities discount rate, RPI and mortality rates. Note 27 to the Financial Statements gives details of the sensitivity surrounding these estimates; • fair value of investment properties and of Group occupied properties – the fair value of completed investment property and of Group occupied property is determined by independent valuation experts using the yield method valuation technique. The fair value of investment property under construction has been determined using the residual method by the Directors of the Company. The most significant estimates used in these valuations are rental values, yields and costs to complete. Notes 12 and 13 to the Financial Statements give details of the valuation methods used and the sensitivity surrounding these estimates; and • provisions – amounts recognised in relation to provisions are based on assumptions in respect of cost estimates, the timing of cash flows and discount rates used. Note 26 to the Financial Statements gives details of the sensitivity surrounding these estimates. 98
Henry Boot PLC Annual Report and Financial Statements for the year ended 31 December 2015 www.henryboot.co.uk Stock Code: BHY Impact of accounting standards and interpretations At the date of authorisation of these Financial Statements, the following standards, amendments and interpretations to existing standards are effective or mandatory for the first time for the accounting year ended 31 December 2015: Effective from Annual improvements (issued 2013) ‘Annual Improvements to IFRSs 2010–2012 Cycle’ 1 July 2014 # Annual improvements (issued 2013) ‘Annual Improvements to IFRSs 2011–2013 Cycle’ 1 July 2014 IAS 19 (amended 2013) ‘Defined Benefit Plans: Employee Contributions’ 1 July 2014 # # Mandatory for annual periods beginning on or after 1 February 2015. The adoption of these standards and interpretations has not had a significant impact on the Group. The Group did not early adopt any standard or interpretation not yet mandatory. At the date of the authorisation of these Financial Statements, the following standards, amendments and interpretations were in issue but not yet effective: Effective from Annual improvements (issued 2014) ‘Annual Improvements to IFRSs 2012–2014 Cycle’ 1 January 2016 IAS 1 (amended 2014) ‘Disclosure Initiative’ 1 January 2016 IAS 16 and IAS 38 (amended 2014) ‘Clarification of Acceptable Methods of Depreciation and Amortisation’ 1 January 2016 IAS 16 and IAS 41 (amended 2014) ‘Bearer Plants’ 1 January 2016 IAS 27 (amended 2014) ‘Equity Method in Separate Financial Statements’ 1 January 2016 IFRS 9 (issued 2014) ‘Financial Instruments’ 1 January 2018* IFRS 10, IFRS 12 and IAS 28 (amended ‘Investment Entities: Applying the Consolidation Exception’ 1 January 2016* 2014) IFRS 10 and IAS 28 (amended 2014) ‘Sale or Contribution of Assets between an Investor and its Associate or Joint Postponed Venture’ IFRS 11 (amended 2014) ‘Accounting for Acquisitions of Interests in Joint Operations’ 1 January 2016 IFRS 14 (issued 2014) ‘Regulatory Deferral Accounts’ 1 January 2016* IFRS 15 (issued 2014) ‘Revenue from Contracts with Customers’ 1 January 2018* IFRS 16 (issued 2016) ‘Leases’ 1 January 2019* * Not yet endorsed by the EU. A review of the impact of these standards, amendments and interpretations been conducted and the Directors do not believe that they will give rise to any significant financial impact. In 2015, the Group did not early adopt any new or amended standards and does not plan to early adopt any of the standards issued but not yet effective. Shareholder Information Financial Statements Governance Strategic Report Overview 99
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