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Notes to the Financial Statements
1 Accounting policies A summary of the principal accounting policies is set out below. The policies have been applied consistently, in all material respects throughout the current and the previous year. Accounting basis The accounts are prepared in accordance with applicable United Kingdom Accounting Standards and under the historical cost convention as modified by the revaluation of investment properties and fixed asset investments. Consolidation The consolidated accounts include the accounts of the parent and all subsidiaries. Subsidiaries or joint ventures acquired or disposed of during the year are included from the date of acquisition or to the date of disposal and accounted for under the acquisition or gross equity method. Accounting practices of subsidiaries and joint ventures which differ from Group accounting policies are adjusted on consolidation. In accordance with Section 230(3) of the Companies Act 1985 a separate profit and loss account for the Parent is not presented. Joint ventures and other investments In accordance with FRS 9 joint ventures are included under the gross equity method. As a result the Group’s balance sheet discloses the Group’s share of the gross assets and gross liabilities of the joint ventures. The Group’s share of joint venture operating profit, net interest payable and taxation are included at the relevant point in the Group profit and loss account. Where the Group participates in a joint arrangement that is not an entity, it accounts for its own assets, liabilities and cash flows, measured according to the terms of the agreement governing the arrangement. Other fixed asset investments are stated at market value when listed and at directors’ valuation when unlisted. Any surplus or deficit arising on revaluation is taken to the revaluation reserve, unless a deficit is expected to be permanent, in which case it is charged to the profit and loss account. Current asset investments are stated at the lower of cost and net realisable value. Investments in subsidiaries are stated at cost or directors’ valuation. Properties
Debt instruments are stated at their net proceeds on issue. Issue costs are amortised to the profit and loss account over the life of the instrument and are included in interest payable. Amounts payable or receivable under interest rate derivatives are matched with the interest payable on the debt which the derivatives hedge. In the course of the Group’s investment and financing activity underlying debt may be retired or redeemed such that an interest rate derivative becomes surplus. In these circumstances the derivative is marked to market or closed out. Any deficit/surplus arising is charged/credited to the profit and loss account and included in net interest payable. Negative goodwill Negative goodwill arising on the acquisition of subsidiary undertakings and joint ventures, representing any excess of the fair value of the identifiable assets and liabilities acquired over the fair value of the consideration given, is included in the balance sheet and is credited to the profit and loss account as the acquired non-monetary assets are sold. Taxation Corporation tax payable is provided on taxable profits at the current rate. On disposal of an investment property the element of tax relating to the profit in the year is charged to the profit and loss account and the element relating to earlier revaluation surpluses is included in the Statement of Total Recognised Gains and Losses. Deferred tax assets and liabilities arise from timing differences between the recognition of gains and losses in the financial statements and their recognition in a tax computation. Deferred tax is provided in respect of all timing differences that have originated, but not reversed, at the balance sheet date that may give rise to an obligation to pay more or less tax in the future. Deferred tax is not recognised when fixed assets are revalued unless by the balance sheet date there is a binding agreement to sell the revalued assets and the gain or loss expected to arise on sale has been recognised in the financial statements. Deferred tax is measured on a non-discounted basis. Net rental income Rental income is recognised on an accruals basis. Rent increases arising from rent reviews are taken into account when such reviews have been settled with tenants. Where a lease incentive does not enhance the property, it is amortised on a straight–line basis over the period from the date of lease commencement to the earlier of the first rent review to the prevailing market rent, the first break option, or the end of the lease term. On new leases with rent free periods, rental income is allocated evenly over the period from the date of lease commencement to the earlier of the first rent review to the prevailing market rate and the lease end date. Foreign currency Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction or, if hedged, at the forward contract rate. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date or, if appropriate, at the forward contract rate. The results and balance sheets of overseas operations are translated at the closing rates ruling at the balance sheet dates. Exchange differences arising on translation of the opening net assets and on foreign currency borrowings, to the extent that they hedge the Group’s investment in such operations, are dealt with through reserves. All other exchange differences are included in the profit and loss account. Pensions The pension cost charged to the profit and loss account is such as to spread the cost of pensions over the average remaining working lives of employees who are scheme members. Sharesave schemes The Group operates an Inland Revenue approved employee share option scheme and has taken advantage of the exemption given in UITF Abstract 17 ‘Employee share scheme’ from recognising a charge in the profit and loss account for the discount on the option.
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