48 | FINANCIAL STATEMENTS | Accounting Policies
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 2012 and 31 December 2011.
(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 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. 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.
(ii) Foreign operations The functional currency of foreign operations is predominantly the Euro.
The assets and liabilities of, or relating to, foreign operations are translated into Sterling at foreign exchange rates ruling at the reporting date. The revenues and expenses of foreign operations are translated to Sterling at foreign exchange rates approximating to the rates ruling at the dates of the transactions. Foreign exchange differences arising on translation of foreign operations into Sterling, including related intangible assets, are recognised directly in the Group’s Foreign Currency Translation Reserve (FCTR), which is a separate component of equity, and reported in the Statement of Comprehensive Income. These exchange differences are recognised as income or expenses in the period in which the foreign operations are disposed of.
(c) Revenue recognition Management fees, investment advisory fees and other revenue generated from the Group’s asset management activities are recognised in the Income Statement over the period which these investment management services are provided.
Initial fees received in advance, arising on open-ended funds, are taken to the Statement of Financial Position and released to the Income Statement over the period of the asset management service. The Group enters into standard contractual terms for all investors. Therefore, the period of provision of asset management services is estimated based upon the Group’s experience of the average holding periods of investors. The average holding period is reassessed on an annual basis.
The Group is entitled to earn performance fees from a number of clients if the actual investment performance of clients’ assets exceeds defined benchmarks by an agreed level of outperformance, generally in a set time period. Performance fees are recognised when the quantum of the fee can be estimated reliably, which is when the performance period ends when this occurs on or before the reporting date, or where there is a period of less than six months remaining to the end of the performance period and there is evidence at the reporting date which suggests that the current performance will be sustainable.
(d) Leases All leases entered into by the Group are operating leases, being leases where the lessor retains substantially all the risks and rewards of ownership of the leased asset. Rentals paid under
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