Notes to the Accounts (continued)

1.Accounting policies (continued) The Group funds research by employees (‘direct costs’) and grant-funded researchers (‘grant costs’). Direct costs Grant costs

These include an allocation of central support costs.

A research grant liability is recognised when the Group formally notifies the recipient of the award. The liability is measured as the total of expected payments for the period to the next scientific review. Provision is made for the expected total payments on life chairs/fellowships when the appointment is first made. Grant liabilities for awards where more than five years of expected payments are provided at the outset are discounted to current value using the weighted average cost of capital.

Support costs

Overhead costs which are integral to the Group’s charitable activities are allocated accordingly as shown in Note 8.

The total of potential payments that would be made after the next scientific review if future scientific reviews are successfully completed is disclosed as grant commitments.

Net investment gains and losses The SOFA includes realised gains and losses from investments that have been sold, and unrealised gains and losses arising from the revaluation of investments that are still held.

Goodwill Goodwill is calculated as the difference between the acquisition cost of a consolidated entity and the aggregate of the fair values of that entity’s assets and liabilities. Negative goodwill arises when the aggregate fair values of the consolidated entity’s assets and liabilities exceed any acquisition cost. Negative goodwill is recognised in the SOFA in the periods in which the assets are recovered. Negative goodwill arising from the acquisition of the Beatson Institute for Cancer Research is amortised on a straight-line basis over ten years.

Fixed assets and depreciation Fixed assets are included at cost where that is greater than £5,000 for the Charity and its charitable subsidiaries and £500 for its trading subsidiaries, except that batches of items individually below those thresholds are capitalised if they form part of one project and together cost more than £50,000. Software is only capitalised where its cost exceeds £50,000. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. The costs of laboratory refurbishments are written off as they are incurred. Depreciation is provided so as to write off the cost of fixed assets on a straight-line basis over their expected useful economic lives, as follows:

Freehold land Freehold buildings

Leasehold buildings and research facilities Plant and equipment

Retail fixtures and fittings Computer equipment and software

Not depreciated 25 years

25 years, or lease period if shorter 4–5 years 5 years 3 years

Investments Listed investments are stated at market value. Unlisted investments are included at cost as an approximation to market value, unless there is specific evidence to the contrary. Subsidiary companies are valued at cost. All cash balances are shown in cash and short-term deposits. The SOFA includes unrealised gains and losses arising from the revaluation of the investment portfolio in the year.

Programme-related investments Programme-related investments are held at cost less any provision for diminution in value.

Impairment of fixed assets and investments Fixed assets and investments are subject to review for impairment when there is an indication of a reduction in their carrying value. Any impairment is recognised in the year in which it occurs.

30 / Annual Report and Accounts / Notes to the Accounts