Annual Report 2012 - Development Securities PLC

Financial Statements continued
Notes to the Consolidated Financial Statements continued
For the 14-month period ended 29th February 2012
1 Basis of preparation and accounting policies continued
j) Property, plant and equipment
(i) Operating properties – serviced offices
Operating properties are held for business purposes rather than for
investment, generating revenue by way of licence fees and ancillary services.
These properties are recognised initially at cost, which includes the original
purchase price of the asset and the costs attributable to bringing the asset
to its working condition for its intended use. Thereafter the asset is carried
at valuation less depreciation and impairment charged subsequent to the
date of revaluation. A revaluation surplus is credited to Other comprehensive
income and accumulated in equity under the heading of Property revaluation
reserve, unless it reverses a revaluation decrease on the same asset
previously recognised as an expense, where it is first credited to the
Statement of Comprehensive Income to that extent.
Operating properties are valued at each reporting date by independent,
professional valuers on the basis of Existing Use Value. Surpluses and
deficits in the period are included in the Property revaluation reserve within
equity, except where carrying value is below depreciated cost, in which case
surpluses and deficits are included in the Statement of Comprehensive
Income. Depreciation is provided so as to write off the value of the
properties, excluding land, over their expected useful lives, usually 25 years.
(ii) Other plant and equipment
Other plant and equipment is stated at cost less accumulated depreciation
and any provision for impairment. Cost includes expenditure that is directly
attributable to the acquisition of the assets. Depreciation is provided so as
to write off the cost less estimated residual value of the assets over their
expected useful lives on a straight-line method. The principal annual rates
used for this purpose are as follows:
Fixtures and fittings and computer equipment – 10% to 33%
Motor vehicles – 20%
The assets’ residual values and useful lives are reviewed and adjusted if
appropriate at the end of each reporting period. An asset’s carrying amount
is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the net
proceeds with the carrying amount and are recognised within Other gains
and losses in the Statement of Comprehensive Income.
k) Operating leases
Leases in which a significant portion of the risks and rewards of ownership
are retained by the lessor are classified as operating leases. Rents payable
under operating leases are charged in the Statement of Comprehensive
Income on a straight-line basis over the term of the lease.
l) Inventory – development and trading properties
Property acquired or being constructed for sale in the ordinary course of
business, rather than to be held for rental or capital appreciation, is held
as inventory and is measured at the lower of cost and estimated net
realisable value.
74 Development Securities PLC / Annual Report 2012
Cost includes directly attributable expenditure and interest. No element of
overhead is included in cost, since it is not practical to identify overhead
amounts in respect of particular assets. Where the Directors consider that
the costs are not recoverable from the sale or development of the asset, the
project or site is written down to its net realisable value, with the write-down
taken to the Statement of Comprehensive Income.
Net realisable value is calculated as the estimated realisable value of the
project or site, based upon our current plans, less all further costs to be
incurred in making the sale.
m) Current and deferred income tax
Current tax is the expected tax payable on the taxable income for the period,
based on the tax laws enacted or substantively enacted at the balance sheet
date, together with any adjustment in respect of previous years.
Deferred income tax is provided using the liability method on all temporary
differences arising at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes,
with the following exceptions:
Where the temporary differences arise from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination that, at the time of the transaction, affects neither accounting
nor taxable profit or loss.
In respect of taxable temporary differences associated with investments in
subsidiaries, joint ventures and associates where the timing of the reversal
of the temporary difference can be controlled by the parent, venture or
investor respectively, and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date. Income tax relating to items
recognised directly in equity is recognised in equity and not in the Statement
of Comprehensive Income.
n) Financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group’s
Balance Sheet when the Group becomes a party to the contractual terms
of the instrument.
(i) Financial assets
The Group determines the classification of its financial assets at initial
recognition. The classification depends on the purpose for which the
financial assets were acquired as follows:
Loans and other receivables with fixed or determinable payments that are
not quoted on an active market. The Group’s loans and receivables are
included within Trade and other receivables and Other financial assets in
the Consolidated Balance Sheet.
Financial assets at fair value through profit or loss. This represents interest
and currency swaps which are categorised as held for trading unless they
are designated as hedges.