32 AVESCOGROUPPLC ANNUAL REPORT 2009
www.avesco.com
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
2.3 Alternative performance measures
The Group uses alternative non-Generally Accepted Accounting Practice (“non-GAAP”) financial measures which are not defined within IFRS. The Directors use
these measures in order to assess the underlying operational performance of the Group and as such, these measures are important and should be considered
alongside the IFRS measures. The following non-GAAP measures are referred to in these annual report and accounts.
a) Trading profit/loss
‘Trading profit/loss’ is separately disclosed, being defined as operating profit adjusted to exclude impairment of property, plant and equipment, impairment
of goodwill, amortisation of acquired intangible assets, the loss on disposal of investments, restructuring costs, the release of property lease and dilapidation
provisions, excess of the acquirer’s interest in the fair value of acquiree’s identifiable net assets and the fair value gain on investments under IAS 39. The
Directors believe that adjusted operating profit/loss is an important measure of the underlying performance of the Group.
b) Adjusted earnings per share
‘Adjusted earnings per share’ is calculated by dividing the profit for the period excluding impairment of property, plant and equipment, impairment of
goodwill, the amortisation of acquired intangible assets, the loss on disposal of investments, restructuring costs, the release of property lease and
dilapidation provisions, the excess of acquirer’s interest in the fair value of acquiree’s identifiable net assets, the fair value gain on investments under IAS 39,
the share of loss of associates, the impairment of associates, the profit/loss from discontinued operations and all related taxation effects by the weighted
average number of ordinary shares in issue during the period. The Directors believe that adjusted earnings per share provides an important measure of the
underlying performance of the Group.
2.4 Segmental reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from
those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are
subject to risks and returns that are different from those in segments operating in other economic environments.
2.5 Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the
entity operates (‘the functional currency’). The consolidated financial statements are presented in Sterling (‘£’), which is the Company’s functional and
presentational currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income statement for the period, except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges.
c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation currency as follows:
(i). assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(ii). income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions);
and
(iii). all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency
instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold the cumulative amount of the
exchange differences deferred in the separate component of equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as the foreign entity’s assets and liabilities and are translated at
the closing rate.
2.6 Property, plant and equipment
Property, plant and equipment is held at cost. The cost of property, plant and equipment includes those costs which are directly attributable to purchasing the
assets and bringing them into working condition. The Group does not capitalise interest or internal costs as part of the cost of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the
income statement during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Operating expenses’ in the
income statement.
Depreciation of property, plant and equipment is calculated at rates estimated to write off the cost to residual value using the straight line method over the
following estimated useful economic lives:
Freehold land Not depreciated
Freehold and long leasehold buildings 30 – 50 years
Short leasehold buildings Remaining period of lease
Hire stock 2 – 10 years
Other plant and equipment 3 – 10 years
The Group reviews its depreciation rates regularly to take account of any changes in circumstances. When setting useful economic lives, the principal factors the
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