PA Group Annual Report 2007
ACCOUNTING POLICIES
(continued)
GOODWILL to closing rates is taken directly to contribution schemes, the amounts
Goodwill arising on consolidation reserves. All other currency differences charged to the profit and loss account
represents the excess of the fair value are dealt with in the profit and loss are the contributions payable in the
of consideration paid over the fair value account. period.
of the identifiable net assets acquired
and is amortised through the profit and PENSIONS LEASING
loss account over its useful economic The group operates a defined benefit Leases are classified as finance leases
life. The directors have assessed the scheme which has been closed to new whenever the terms of the lease transfer
estimated useful economic life of members, under which contributions substantially all the risks and rewards
goodwill to be either 10 or 20 years, are paid by group companies and of ownership to the lessee. Assets held
based upon their assessment of employees to provide pension and under finance leases are capitalised
durability of the underlying business. other benefits expressed in terms of and depreciated over the shorter of the
The directors review the level of percentage of pensionable salary. The lease term or the useful economic life.
goodwill for impairment at the end of amounts charged to operating profit, The capital elements of future lease
the first full financial year following as part of staff costs, are the current obligations are recorded as liabilities,
acquisition and in other periods if service costs and gains and losses while the interest elements are charged
events or changes in circumstance on settlements and curtailments. to the profit and loss account over the
indicate that the carrying value may Past service costs are recognised period of the leases on the effective
not be recovered. immediately in the profit and loss interest method. All other leases are
account if the benefits have vested. classified as operating leases and
PROVISIONS If the benefits have not vested, the rentals are charged on a straight-line
Provisions are made immediately where costs are recognised over the period basis over the lease term.
a constructive or legal obligation is until vesting occurs. The interest cost
identified, can be quantified and it is and the expected return on assets DIVIDENDS
regarded as more likely than not that an are shown as a net amount of other Dividends are recognised in the profit
outflow of resources will be required to finance costs or credits adjacent to and loss account in the period in which
settle the obligation. The group does interest. Actuarial gains and losses they are paid.
consider the impact of discounting are recognised immediately in the
when establishing provisions and statement of total recognised gains PHANTOM SHARE SCHEME
provisions are discounted when the and losses. Pension scheme assets A phantom share option scheme was
impact is material and the timing of are measured at fair value and liabilities implemented for senior executives
cash flows can be estimated with are measured on an actuarial basis during 2007, with options being granted
reasonable certainty. using the projected unit method and over a defined vesting period, settled in
discounted at a rate equivalent to the cash. The amount payable is calculated
FOREIGN CURRENCIES current rate of return on a high quality by reference to the change in value of
Assets and liabilities denominated in corporate bond of equivalent currency the group. Provision is recorded based
foreign currency are translated into and term to the scheme liabilities. on amounts payable at the balance
sterling at the rate of exchange at The resulting defined benefit asset or sheet date. No provision has been
the year-end. Exchange differences liability, net of related deferred taxation, booked in the current year results in
arising from the restatement of the is presented separately after other net respect of this scheme, given the group
net investment in overseas joint assets on the face of the balance sheet. has made a loss in the year.
ventures are taken directly to reserves. The group also operates defined
The trading results of overseas joint contribution schemes for all staff not
ventures are translated into sterling eligible to join the defined benefit
using the average exchange rate for scheme and for a small number of
the period and the difference in relation senior employees. For these defined
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