386 / 488
Chapter
33 /
First-Time Adoption of Internal Financial Reporting Standards (IFRS I )
375
tion should be measured at fai r value at grant date. using an option pricing model. and charged
against profits over the period between grant date and vesting date. being the vesting period. This
treatment has been applied
10
all awards granted but not f ully vested at the date of transition.
c.
l AS 100Events after the Balance Sh eet Date
Under UK GAAP. dividends are recognised in the period
10
which they relate. lAS IO requires
that dividends declared after the balance sheet date should not be recognised as a liability at that
balance sheet date as the liability does not represent a present obligation as defined by lAS 37.
Provisions, Contingent Liabilities. and Contingent Assets. Accordingly the final dividends for
2003104 (£J60.7m) and 2004105 (£J24.3m) are derecognised in the balance sheets for Ap ril 2004
and April 2005 respectively.
d.
lAS 17-Leases-Treatment of Leasehold Land
The Group previously recognised finance leases under the recogn ition criteria set out in SSAP 21.
lAS 17 requires the land and building elements ofproperty leases
10
be considered separately. with
leasehold land normally being treated as an operating lease. As a consequence. payments made to
acquire leasehold land, previously treated as
fix ed
assets. have been recategorised as prepaid
leases and amortised over the life ofthe lease. In addition. the revaluation previously attributed to
the land element had been derecognised.
e.
lAS 17-Leases-Finance Leases
Also under the provisions of lAS 17, the building elements 'of certain property leases. classified as
operating leases under UK GAAP have been reclassified asfinance leases. The adjustments are to
include the fai r value of these leased building s within fixe d assets and to set up the related obliga–
tion, net offinance charges, in respect offuture periods, within creditors.
f.
lAS I7-Leases-Lease In centives
Under UK GAAP, leasehold incentives received on entering into property leases were recognised
as deferred income on the balance sheet and amortized to the profi t and loss account over the pe–
riod
10
the fir st rent review. Under lAS 17, these incentives have to be amortised over the term of
the lease. Consequently, as the term of the lease is longer than the period
10
the fir st rent review.
amounts previously amortised to the profit and loss accoulll are reinstated on the balance sheet as
def erred income and released over the term of the lease.
g. lAS 17-Leases-Fixed Rental Uplifts
The group has a number of leases that contain predetermined, fi xed rental uplifts. Under lAS 17.
it is necessary
10
account for these leases such that the predetermined, fi xed rental payments are
recognised on a straight-line basis over the life of the lease. Under UK GAAP. the Group ac–
counted f or these property lease rentals such that the increases were charged in the year that they
arose.
11.
lAS 19-Emp loyee Benefits
Previously no provision was made fo r holiday pay. Under lAS 19. Employee Benefits. the expected
cost of compensated short-term absences ie.g., holidays) should be recognised when employees
render the service that increases their entitlement. As a result. an accrua l has been made f or holi–
days earned but not taken.
i.
lAS 38-Software Assets
The cost of developing
software
used to be written off as incurred. Under lAS
38,
Intangible As–
sets, there is a requirement
10
capitalise internally generated intangible assets provided certain
recognition criteria are met. Results have been adjusted to refl ect the capitalisation and subse–
quent amortisation of costs that meet the criteria. As a result expenses previously charged
10
the
profit and loss accoulll have been brought
0 1110
the balance sheet as intangible softw are assets and
amortised over their estimated useful lives.
j.
lAS 38-Goodwill
Goodwill used
10
be capitalised and amortised over its usef ul economic life. Under lAS
38,
Intan–
gible Assets, there is a requirement to separately identify brands and other intangibles acquired
rather than include these as part of goodwill. Intangible assets. other than goodwill, are amor–
tised over their useful lives. Goodwill, which is considered to have an indefinite life. is subject to
an annual impairment review. As a result, the goodwill recognised under UK GAAP on the acqui–
sition of per una of £J25.5m has been split between brand (£80m) and goodwill (£45.5m). The
goodwill amortisation under UK GAAP has been reversed but the brand has been amortised as re–
quired under IFRS.
Cas h Flow Sta tement
The cash flows reported under IFRS relate to movements in cash and cash equi valents (defined as
short-term highly liquid investments that are readily convertib le into known amounts of cash and
subject to insignificant risk of changes in value). Under UK GAAP, only the movement in cash
(defined as cash in hand and deposits repayable on demand, less overdrafts) were reported in the cash
flow statement. As a result of adopting IFRS, a £55.7m movement in cash equivalents in the year to
April 2, 2005 is now reported as a cash flow movement rather than as movement in financial invest–
ment.