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IMI plc
P. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Bank overdrafts that are repayable on demand and form an integral part of
the Group’s cash management are included as a component of cash and
cash equivalents for the purpose of the statement of cash flows.
Q. Impairment
The carrying values of the Group’s non-financial assets other than inventories
(see accounting policy ‘Inventories’) and deferred tax assets (see accounting
policy ‘Income tax’), are reviewed at each balance sheet date to determine
whether there is any indication of impairment.
If any such indication exists, the recoverable amount of the asset or all assets
within its cash-generating unit is estimated. An impairment loss is recognised
whenever the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in the income statement.
For goodwill and assets that are not yet available for use, the recoverable
amount is evaluated at each balance sheet date.
i. Calculation of recoverable amount
The recoverable amount of the Group’s receivables other than financial assets
held at fair value is calculated as the present value of expected future cash
flows, discounted at the original effective interest rate inherent in the asset.
Receivables with a short duration of less than one year are not discounted.
The recoverable amount of other assets is the greater of their fair value
less costs to sell and value in use. In assessing value in use an individual
assessment is made of the estimated future cash flows generated for each cash
generating unit (based upon the latest Group forecast and extrapolated using
an appropriate long-term growth rate for each cash generating unit in perpetuity
consistent with an estimate of the relevant geographic long-term GDP growth).
These are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. Management believe that this approach, including the use
of the indefinite cash flow projection, is appropriate based upon both historical
experience and because it is one of the bases management utilise to evaluate
the fair value of investment opportunities. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the
smallest cash generating unit to which the asset belongs.
ii. Reversals of impairment
As required by IAS36:
‘Impairment of Assets’,
any impairment of goodwill or
available for sale financial assets is non-reversible. In respect of other assets,
an impairment loss is reversed if at the balance sheet date there are indications
that the loss has decreased or no longer exists following a change in the
estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
R. Dividends
Final dividends payable are recognised as a liability at the date at which they are
approved by the Company’s shareholders or by the subsidiary’s shareholders in
respect of dividends to non-controlling interests. Interim dividends payable are
recognised on the date they are declared.
S. Employee benefits
i. Defined contribution pension plans
Contributions to defined contribution pension plans are recognised as an
expense in the income statement as incurred.
ii. Defined benefit pension plans
The Group’s net obligation in respect of defined benefit pension plans is
calculated separately for each plan by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior periods;
that benefit is discounted to determine its present value, and the fair value of any
plan assets are deducted. Past service costs are recognised in profit or loss on
the earlier of the date of the plan amendment or curtailment, and the date that
the Group recognises restructuring-related costs. The discount rate is the yield
at the balance sheet date on high quality corporate bonds of the appropriate
currency that have durations approximating those of the Group’s obligations.
The calculation is performed by a qualified actuary using the projected unit
credit method. When the calculation results in a net asset to the Group, the
recognised asset is limited to the net total of any unrecognised past service
costs and the present value of any future refunds from the plan or reductions
in future contributions to the plan and restricted by any relevant asset ceiling.
Any deduction made by the tax authorities in the event of a refund of a surplus
would be regarded by the Group as an income tax.
When the benefits of a plan are improved, the expense is recognised
immediately in the income statement. Re-measurement gains and losses
are recognised immediately in equity and disclosed in the statement of
comprehensive income.
iii. Long-term service and other post-employment benefits
The Group’s net obligation in respect of long-term service and other post-
employment benefits, other than pension plans, is the amount of future benefit
that employees have earned in return for their service in the current and prior
periods. The obligation is calculated using the projected unit credit method
and is discounted to its present value and the fair value of any related assets
is deducted. The discount rate is the yield at the balance sheet date on high
quality bonds of the appropriate currency that have durations approximating
those of the Group’s obligations.
iv. Equity and equity-related compensation benefits
The Group operates a number of equity and equity-related compensation benefits
as set out in Section 4.7. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense each year.
The total amount to be expensed over the vesting period is determined by
reference to the fair value of the options granted, excluding the impact of any
non-market vesting conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. The fair value of the options is
determined based on the Black-Scholes option-pricing model.
At each balance sheet date, the Group revises its estimates of the number of
options that are expected to vest. It recognises the impact of the revision of
original estimates, if any, in the income statement.
For newly issued shares, the proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised.
T. Provisions
Provisions are 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. Provisions are valued at management’s best estimate of the
amount required to settle the present obligation at the balance sheet date.
A provision for restructuring is recognised when the Group has approved
a detailed and formal restructuring plan, and the restructuring has either
commenced or has been announced publicly.
SECTION 5 – OTHER NOTES
Continued
