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
p) Provisions
A provision is recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation and the amount can be
reliably estimated.
Onerous lease provisions are created for properties that are unoccupied,
sublet at below the rent payable on the head lease or for operating sites
where the projected future trading revenue is insufficient to cover the
value in use.
Provisions are measured at the present value of the expenditures expected
to be required to settle the obligation. The accretion in the discount is
recognised as an interest expense.
q) Pension schemes
The Group operates a defined contribution scheme. The charge to the
Statement of Comprehensive Income in the period represents the actual
amount payable to the scheme in the period. Differences between
contributions payable in the period and contributions paid are shown as
either accruals or prepayments in the Balance Sheet.
r) Foreign currencies
The Consolidated financial statements of the Group are presented in UK
Sterling, the Company’s functional and presentation currency. Transactions
denominated in foreign currencies are translated into Sterling at the rates
of exchange ruling at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the rates ruling at that date. Exchange
movements are dealt with in the Statement of Comprehensive Income, with
exchange differences on borrowings taken to finance income/costs, except
when deferred in equity as qualifying cash flow hedges and qualifying net
investment hedges.
s) Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief Operating Decision-Maker (CODM).
The CODM, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board.
t) Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new Ordinary shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
u) Share-based payments
The Group operates a number of share-based compensation plans, the
majority of which are cash-settled, under which the entity receives services
from employees as consideration for cash-settled instruments of the Group.
The fair value of the employee services received in exchange for the grant
of the option is recognised as an expense. The total amount to be expensed
is determined by reference to the fair value of the options granted.
76 Development Securities PLC / Annual Report 2012
The Group has used a Black-Scholes option valuation model to determine
the fair value of share options granted. An equal probability model has been
used to determine the fair value of share awards under the Performance
Share Plan. The cost of cash-settled transactions with employees and
Directors is measured by reference to the fair value at the date at which they
are granted and is recognised as an expense over the vesting period, which
ends on the date on which the relevant employees become fully entitled to
the award.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are
treated as vesting irrespective of whether or not the market condition is
satisfied, provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is
calculated, representing the extent to which the vesting period has expired
and management’s best estimate of the achievement or otherwise of
non-market conditions and of the number of cash-settled share-based
instruments that will ultimately vest or, in the case of an instrument subject
to a market condition, be treated as vesting as described above. The
movement in cumulative expense since the previous balance sheet date
is recognised in the Statement of Comprehensive Income, with a
corresponding entry in accruals.
v) Dividend distribution
Dividend distributions to the Company’s shareholders are recognised
as a liability in the Group’s financial statements in the period in which
the dividends are approved by the Company’s shareholders.
w) Definitions
Operating profit: stated after gain on disposal of investment properties and
the revaluation of the Investment property portfolio and before the results
of associates, jointly controlled entities and finance income and costs.
IPD Index and Total Portfolio Return: total return from the completed
investment property portfolio, comprising net rental income or expenditure,
capital gains or losses from disposals and revaluation surpluses or deficits,
divided by the average capital employed during the financial period, as
defined and measured by Investment Property Databank Limited, a
company that produces independent benchmarks of property returns.
Total Shareholder Return: movement in share price over the period plus
dividends paid as a percentage of the opening share price.
Gearing: expressed as a percentage, is measured as net debt divided
by total shareholders’ funds.
Adjusted gearing: expressed as a percentage, is calculated by deducting
from net debt the current fair value of the subordinated loan notes and
adding back relevant restricted cash balances and transaction costs.
Loan to value gearing: expressed as a percentage of net debt as a
proportion of total property assets, including shares of properties and
net debt in all projects in partnership.
Net debt: total debt less cash and short-term deposits, including
pledged cash.