48 | FINANCIAL STATEMENTS | Accounting Policies
(d) Provisions Onerous contract provisions for premises are subject to uncertainties over time, including market rent reviews and break options within the lease arrangements. The final settlement in respect of the F&C Partners litigation is subject to determination by an appeal process. While there are a number of possible financial outcomes, the Directors have recognised a provision in respect of the amount which could be payable. Details of provisions are disclosed within note 24.
(e) Share-based payments The share-based payment expense in respect of the TRC Commutation arrangements, as detailed in notes 15(a) and 26(g), is dependent upon whether the underlying put and call options are exercised and, if exercised, the expense will vary according to a number of factors, including the level of earnings of the respective Investment Teams and the latest audited financial results of the F&C Group.
The final F&C REIT variable NCI share-based payment expense will depend on the extent of the F&C REIT financial results over the remainder of the performance periods and, if the performance criteria are achieved, the value of F&C REIT business at the vesting date. Details are given in note 26(c).
(f) Deferred tax assets The quantum of deferred tax assets recognised, as detailed in note 17, is based upon assumptions as to the future profitability of the underlying companies to which they relate.
(g) TRC contingent consideration The conditional consideration payable in respect of the acquisition of TRC has been estimated as nil, but is dependent upon the level of future earnings of the TRC Group at 30 June 2012, as detailed in note 15(a).
Summary of significant accounting policies The accounting policies set out below have been applied consistently throughout the Group for the purposes of the Consolidated Financial Statements for the years ended 31 December 2011 and 31 December 2010, aside from any new or revised standards applicable for the first time in the current year.
(a) Consolidation
(i) Subsidiaries Subsidiaries are entities over which the Company has the power, directly or indirectly, to govern the financial and operating policies so as to obtain benefits from their activities. Subsidiaries follow accounting policies consistent with those of the Group, unless there is a requirement for the subsidiary to follow a different accounting treatment, in which case, consolidation adjustments are made to align the treatment of such subsidiaries within the Consolidated Financial Statements. The subsidiaries all have coterminous reporting periods, with three exceptions.
The Consolidated Financial Statements incorporate the assets, liabilities, results and cash flows of the Company and its subsidiaries. The results of subsidiaries acquired or sold during the period are included in the consolidated results from the date
of acquisition or up to the date of disposal. Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the Consolidated Financial Statements.
NCI represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the Consolidated Income Statement (Income Statement) and within equity in the Consolidated Statement of Financial Position (Statement of Financial Position), separately from parent shareholders’ equity.
(ii) Business combinations
IFRS 3 (Revised) (relating to Business Combinations from 1 January 2010) A business combination is the bringing together of separate entities or businesses into one reporting entity. The result is that one entity, the acquirer, obtains control of one or more entities or businesses. The acquisition date is the date on which the acquirer obtains control of the acquiree.
The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets and liabilities acquired and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the consideration transferred for the acquisition, plus any NCI, over the fair value of the Group’s share of identifiable net assets acquired is recorded as goodwill. Acquisition-related expenses are expensed in the Income Statement.
(b) Foreign currencies The Group’s presentational currency is Sterling. Each entity in the Group determines its own functional currency and amounts included in the financial statements of each entity are measured in that functional currency.
(i) Foreign currency transactions Transactions in foreign currencies are translated into the functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the exchange rate ruling at the reporting date, and any exchange differences arising are taken to the Income Statement.
Non-monetary assets and liabilities, other than intangible assets arising on the acquisition of foreign operations (measured at historical cost in a foreign currency), are translated using the exchange rate at the date of transaction and are not subsequently restated. Non-monetary assets and liabilities stated at fair value in a foreign currency are translated at the exchange rate at the date the fair value was determined.When fair valuemovements in assets and liabilities are reflected in the Income Statement, the corresponding exchangemovements are also recognised in the Income Statement. Similarly, when fair valuemovements in assets and liabilities are reflected directly in equity, the corresponding exchangemovements (except any relating to available for sale monetary assets) are also recognised directly in equity.
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