1 Significant Accounting Policies (continued)
Licence Fees Payments made for licence fee charges are recognised under cost of sales in the Consolidated Statement of Profit and Loss in the period to which they relate. Any charges relating to future years are deferred and recognised in the Consolidated Statement of Profit and Loss under cost of sales over the life of the contract.
Finance Income and Cost Finance costs comprise loan interest payable, interest payable and finance charges on finance leases recognised using the effective interest method, unwinding of the discount on provisions and deferred consideration, interest on defined benefit pension plan obligations and changes in the fair value of interest rate swaps.
Finance income comprise expected return on defined benefit pension plan funds invested, interest receivable on funds invested and changes in the fair value of interest rate swaps. Interest income is recognised in Consolidated Statement of Profit and Loss as it accrues, using the effective interest method.
Taxation Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Consolidated Statement of Profit and Loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the period end date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Te following temporary differences are not provided for:
• Te initial recognition of goodwill; • Te initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and • Te differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.
Te amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the period end date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.
Research and Development Expenditure Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in Consolidated Statement of Profit and Loss as incurred.
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