59 Finsbury Food Group Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
1. Significant Accounting Policies (continued)
Impairment The carrying amounts of the Group’s intangible assets and goodwill are reviewed at each period end date to determine whether there is an indication of impairment. Intangible assets and goodwill are considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. If any such indication exists, the asset’s recoverable amount is estimated.
For goodwill and intangible assets that have an indefinite useful life, the recoverable amount is estimated at each period end date.
An impairment loss would be recognised whenever the carrying amount of an intangible asset, goodwill or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Consolidated Statement of Comprehensive Income.
Calculation of Recoverable Amount The recoverable amount is the greater of the asset’s fair value less costs to sell and its value in use. In assessing an assets’ value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined on the first-in first-out basis, and includes all direct costs incurred and attributable production overheads. Net realisable value is based upon estimated selling price allowing for all further costs of completion and disposal. Specific provisions are made against old and obsolete stock taking the value to zero or an estimated reduced value based on the most likely route for disposal of each particular item of stock.
Employee Benefits
Defined Benefit Plans Memory Lane Cakes Ltd operates a Defined Benefit Pension Scheme and the pension costs are charged to the Consolidated Statement of Comprehensive Income in accordance with IAS 19 (revised), with current and past service cost being recognised as an administrative expense, interest on assets and liabilities is shown as finance income or a finance cost in the Consolidated Statement of Comprehensive Income. The remeasurements are recognised in full in Other Comprehensive Income.
Defined Contribution Plans The costs of contributing to defined contribution and personal pension Schemes are charged to the Consolidated Statement of Comprehensive Income as an administrative expense in the period to which they relate.
Share Based Payment Transactions The value, as at the grant date, of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted.
Revenue Revenue represents the amounts derived from the sale of bakery products. Revenue is the invoiced value of consideration received or receivable excluding value added tax, trade discounts, transactions with or between subsidiaries and less the cost of price promotions and sales related rebates known as overriders. Revenue is recognised upon despatch of goods. The nature and timing of promotions and overriders is typically known, accruals are established at the time of sale based on information available and management’s expectations of the amounts necessary to meet the claims of customers. As the business evolves, the Group will continue to review transactions with customers to ensure compliance with IFRS 15: Revenue from Contracts with Customers.
Segmental Reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All segments’ operating results are reviewed regularly by the Group’s Board of Directors. The Group’s Chief Operating Decision Maker is considered to be the Board.
Licence Fees Payments made for licence fee charges are recognised under cost of sales in the Consolidated Statement of Comprehensive Income in the period to which they relate. Any charges relating to future years are deferred and recognised in the Consolidated Statement of Comprehensive Income 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 the net defined benefit pension plan position and adverse changes in the fair value of interest rate swaps.
Finance income comprises interest receivable on funds invested and favourable changes in the fair value of interest rate swaps. Interest income is recognised in the Consolidated Statement of Comprehensive Income as it accrues, using the effective interest method.
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