Strategic Report
Corporate Governance
Financial Statements Notes to the Consolidated Financial Statements/Continued
Finsbury Food Group Annual Report and Accounts 2020
69 1. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated Financial Statements, except as explained in the basis of preparation, which addresses any changes in accounting policies resulting from new or revised standards.
Basis of Consolidation Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration the potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date that control commences until the date that control ceases. The accounting policies of new subsidiaries are changed when necessary to align them with the policies adopted by the Group. Intra-group balances and transactions are eliminated in preparing the consolidated Financial Statements.
Lightbody Stretz Limited which is 50% owned by the Group has been consolidated into the Group accounts as a subsidiary with a corresponding non- controlling interest on the basis that the Group has the controlling interest. Control arises by virtue of the fact that Lightbody Group Limited, a wholly owned subsidiary of Finsbury Food Group, has a majority of voting rights arising from an agreement between Lightbody Group Limited and Philippe Stretz, the owner of the remaining 50%.
New and Upcoming Standards The following new standards, new interpretations and amendments to standards and interpretations are applicable for the first time for the financial year ended 27 June 2020.
• IFRS 16 “Leases” (effective 1 January 2019); • Amendments to IFRS 9 – Financial Instruments on Prepayment Features with Negative Compensation (effective 1 January 2019); • Amendment IAS 28 “Investments in associates” (effective 1 January 2019); • Amendments to IAS 19, “Employee benefits’ (effective 1 January 2019); and • Annual improvements to IFRS Standards 2015-2017 Cycle (effective 1 January 2019).
With the exception of IFRS 16 “Leases”, none of the amendments to the above standards had a material impact on the Financial Statements.
This is the first full year set of the Group’s Financial Statements in which IFRS 16 has been applied. The Group has adopted IFRS 16 from 30 June 2019 using the modified retrospective approach, comparatives have not been restated. The reclassifications and adjustments from the new leasing rules are therefore recognised in the opening Consolidated Statement of Financial Position on 30 June 2019.
On transition the Group recognised a right of use lease asset of £16.3 million, being £15.0 million created from assets previously treated as operating leases under IAS 17 and £1.3 million relating to amounts transferred into right of use asset category which were previously treated as a finance lease under IAS 17. A lease liability of £15.8 million has been recognised on transition, being £15.0 million created from leases previously treated as operating leases Under IAS 17 and £0.8 million relating to amounts transferred into right of use asset category which were previously treated as a finance lease under IAS 17.
The impact on the Group’s full year results are detailed in note 11. The impact of first time adoption of IFRS 16 are summarised as follows: Performance measures impacted by IFRS 16
EBITDA Group operating profit
Group profit before taxation Basic EPS
Net debt as at 27 June 2020 Assets
£m
+£1.8 +£0.1 (£0.1) (£0.1)
+£11.8m +£9.4m
There are a number of new standards, interpretations and amendments to existing standards that are not yet effective and have not been adopted early by the Group. The future introduction of these standards is not expected to have a material impact on the Financial Statements of the Group.
• Amendments to IFRS 3 – Business Combinations (effective 1 January 2020); • Amendments to IAS 1 – Presentation of Financial Statements on classification of liabilities (effective 1 January 2022); • Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform (effective 1 January 2020); and • IFRIC Interpretation 23 Uncertainty over Income Tax Treatments (effective 1 January 2019).
Work will continue in the new financial year to assess the impact of the new standards and interpretations on the Group’s Financial Statements.
Business Combinations The acquisition method of accounting is used in accounting for the acquisition of businesses. In accordance with IFRS 3 Business Combinations, the assets and liabilities of the acquired entity are measured at fair value. When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated are made within twelve months of the acquisition date and are affected from the date of acquisition.
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