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Notes to the accounts

continued


1 Accounting policies (continued)

The preparation of the financial statements requires management to make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, be likely to differ from the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Retirement benefits

Pension accounting requires certain assumptions to be made in order to value our obligations and to determine the charges to be made to the income statement. These figures are particularly sensitive to assumptions for discount rates, mortality, inflation rates and expected long-term rates of return on assets. Details of assumptions are given in note 25.

Provisions

Provisions recognised at the balance sheet date are detailed in note 21 and include amounts for long leave, insurance claims, service guarantee costs, reorganisation costs, accrued holiday pay and property related costs.

Although provisions are reviewed on a regular basis and adjusted to reflect management’s best current estimates the judgemental nature of these items means that future amounts settled may be different from those provided.

Impairment

The group is required to test whether assets in use in operations have suffered any impairment. The recoverable amounts of cash generating units have been determined based on the higher of fair value less costs to sell and value in use. The calculation of value in use requires the estimation of future cash flows expected to arise from the continuing operation of the cash generating unit and the selection of a suitable discount rate in order to calculate the present value. Given the degree of subjectivity involved, actual outcomes could vary significantly from these estimates.


2 Segmental reporting (continued)

From 1 February 2009, the group has adopted IFRS 8 ‘Operating Segments’. This standard replaces IAS 14 ‘Segment Reporting’. Comparative segmental information has been restated accordingly.

IFRS 8 introduces a ‘management approach’ to identifying reportable operating segments. An operating segment is defined as a business activity whose operating results are reviewed by the chief operating decision maker (‘CODM’) and for which discrete information is available. The group’s CODM is the Partnership Board.

The group’s operating segments have been identified as John Lewis, Waitrose and Corporate and other. Corporate and other includes corporate and shared services overheads, finance transformation costs and Greenbee operations. The operating profit of each segment is after charging relevant corporate and shared service costs based on the business segments’ usage of corporate and shared service facilities and services.