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Annual Report and Accounts 2014
SECTION 5 – OTHER NOTES
5.1
Contingent liabilities
A contingent liability is a liability that is not sufficiently certain to qualify for
recognition as a provision because significant subjectivity exists regarding
its outcome.
In our 2012 and 2013 accounts, we made reference to companies belonging
to the British builders’ merchant serving damages claims against IMI plc and
others relating to alleged financial losses incurred in the UK as a result of
anti-competitive behaviour undertaken by a number of manufacturers of
copper plumbing tubes and copper plumbing fittings. This matter was
settled during the year.
Group contingent liabilities relating to guarantees in the normal course of
business and other items amounted to £144m (2013: £114m).
5.2
Related party transactions
Related parties are solely the key management personnel. The Board is
considered to be the key management personnel of the Group.
2014
2013
£m
£m
Short-term employee benefits*
5.1
6.5
Termination Benefits
-
0.5
Share-based payments
1.6
5.7
Total
6.7
12.7
* Short-term employee benefits comprise salary, including employers’ social
contributions, benefits earned during the year and bonuses awarded for the year.
There are no other related party transactions.
5.3
Subsequent events
Events that occur in the period between 31 December and the date of
approval of the Annual Report can be categorised as adjusting or non-
adjusting depending on whether the condition existed at 31 December. If
the event is an adjusting event, then an adjustment to the results is made.
If a non-adjusting event after the year end is material, non-disclosure could
influence decisions that readers of the financial statements make. Accordingly,
for each material non-adjusting event after the reporting period we disclose
the nature of the event and an estimate of its financial effect, or a statement
that such an estimate cannot be made.
The acquisition of Bopp & Reuther completed on 2 January 2015. This is
categorised as a non-adjusting event and is discussed further in section 3.4.1.
5.4
Significant accounting policies
A. Subsidiaries and Non-controlling interests
The Group financial statements consolidate the financial statements of IMI plc
and the entities it controls (its subsidiaries) for the year to 31 December.
The Group has no significant interests which are accounted for as Associates
or Joint Ventures as at 31 December 2014.
Subsidiaries are consolidated from the date of their acquisition, being the date
on which the Group obtains control, and continue to be consolidated until the
date that such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain benefit from
its activities and is achieved through direct or indirect ownership of voting
rights; currently exercisable or convertible potential voting rights; or by way of
contractual agreement. The financial statements of subsidiaries used in the
preparation of the consolidated financial statements are prepared for the same
reporting year as the parent company and are based on consistent accounting
policies. All intragroup balances and transactions, including unrealised profits
arising from them, are eliminated in full.
A change in the ownership interest of a subsidiary, without loss of control,
is accounted for as an equity transaction. If the Group loses control over a
subsidiary, it:
• derecognises the assets (including any goodwill relating to the subsidiary) and
liabilities of the subsidiary;
• derecognises the carrying amount of any non-controlling interest;
• derecognises the cumulative translation differences recorded in equity;
• recognises the fair value of the consideration received;
• recognises the fair value of any investment retained;
• recognises any surplus or deficit in profit or loss; and
• reclassifies the Parent’s share of components previously recognised in other
comprehensive income to profit or loss or retained earnings, as appropriate.
Taxation on the above accounting entries would also be recognised
where applicable.
Non-controlling interests include the equity in a subsidiary not attributable, directly
or indirectly, to the parent company and the IMI Pension Fund’s interest in the
IMI Scottish Limited Partnership (‘the Partnership’). Non-controlling interests are
presented within equity in the consolidated balance sheet, separately from equity
attributable to owners of the parent. Losses within a subsidiary are proportionally
attributed to the non-controlling interest even if that results in a deficit balance.
B. Use of judgements and estimates
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
i. Judgement
Consolidation of the Scottish Limited Partnership (‘SLP’) and inclusion
of the UK Pension Funds’ interests in this special purpose entity as a
non-controlling interest.
In June 2010, the Group made a special contribution to the IMI Pension Fund
of £48.6m which the Trustee agreed to invest in the IMI Scottish Limited
Partnership (‘SLP’) , an entity controlled by the Group, which conferred upon
the Fund conditional rights to receive income of £4.4m a year for twenty years,
or until the Fund becomes fully funded. One of the judgements involved in this
issue was whether this entity qualified as a Special Purpose Entity as defined by
SIC 12: Consolidation – Special Purpose Entities, and whether, in applying this
interpretation, the entity should be consolidated. It was determined that the entity
meets the definition of a Special Purpose Entity under IFRS10 and furthermore,
upon consideration of the criteria in this interpretation, it was determined that
