20645_Scapa_AR_160504

GROUP ACCOUNTING POLICIES CONTINUED
FINANCIAL STATEMENTS
LEASES
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments
made under operating leases (net of any incentives received from the lessor) are charged to the Income Statement on a straight-line basis over
the period of the lease.
Leases in which substantially all of the risks and rewards of ownership are transferred to the Group are classified as finance leases. Finance
leases are recognised as assets and liabilities in the Balance Sheet at the present value of the minimum lease payments. The interest rate implicit
in the lease is used as the discount rate in calculating the present value of the cash outflows. Where the Group does not obtain ownership of the
asset at the end of the lease period, the asset is depreciated over the shorter of its useful life and the lease term. Where ownership does pass to
the Group at the end of the lease period, the policy for depreciating the asset is consistent with that for depreciable assets that are owned.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is
calculated based on the amount of borrowing outstanding, and is charged against profits over the primary lease period.
GOVERNMENT GRANTS
Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the
Group will comply with all attached conditions.
Government grants relate to tangible fixed assets and are treated as deferred income, and are credited to the Income Statement over the
expected useful lives of the assets concerned.
RESEARCH AND DEVELOPMENT EXPENDITURE
Research expenditure is expensed as incurred. Costs associated with developing or enhancing existing product lines are recognised as an
expense as incurred.
Development costs are assessed as to whether they meet the IAS 38 criteria for capitalisation. An internally generated intangible asset is
recognised only if all of the following conditions are met:
Technical feasibility and intention to complete the intangible asset so that it is available for use
An asset has been created that can be identified
Ability to use or sell the asset
It is probable that the asset created will generate future economic benefits
The development cost of the asset can be measured reliably
FOREIGN CURRENCY TRANSLATION
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Sterling.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement, except when deferred in equity as
qualifying net investment hedges.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
(i)
assets and liabilities for each Balance Sheet presented are translated at the closing rate at the date of that Balance Sheet;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions).
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of long-term borrowings that are
considered to form part of that net investment, are taken to the translation reserve within shareholders’ equity. When a foreign operation is sold,
such exchange differences are recognised in the Income Statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
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Scapa Group plc Annual Report and Accounts 2016
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ANNUAL REPORT AND ACCOUNTS 2016 SCAPA GROUP PLC