Accounting policies
Financial assets and financial liabilities are recognised on the Balance sheet when the Group becomes a party to the contractual provisions of the instrument.
The Group classifies its financial instruments in the following categories:
- Available-for-sale;
- Loans and receivables;
- Other financial liabilities at amortised cost; and
- Financial assets and liabilities at fair value through profit or loss.
The classification depends on the purpose for which the financial assets and liabilities were acquired. Management determines the classification of its financial instruments at initial recognition or in certain circumstances on modification.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the Balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
Impairment of financial assets
Assets carried at amortised cost
The Group assesses whether there is objective evidence that a financial asset is impaired at the end of each reporting period. A financial asset is impaired and an impairment loss recognised if there is objective evidence of impairment as a result of a loss event that occurred after the initial recognition of the asset and the loss event has an impact on the estimated future cash flows of the financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include but are not limited to:
- Financial difficulty indicators;
- Breach of contract such as missed payments;
- Fraud;
- Bankruptcy; and
- Disappearance of an active market.
The amount of the loss is measured as the difference between the asset's carrying value and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The asset's carrying value is reduced and the loss recognised in the income statement.
If, in a subsequent period, the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in the Income statement.
Available-for-sale financial assets
Equity investments classified as available-for-sale and held at cost are reviewed annually to identify if an impairment loss has occurred. The amount of the impairment loss is measured as the difference between the carrying value of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses recognised in the income statement on equity investments are not reversed.
Fair value of financial instruments
Financial instruments carried at fair value in the Balance Sheet comprise the derivative assets and liabilities — see Note 4.6. The Group uses the following hierarchy for determining and disclosing the fair value of these financial instruments:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
- Inputs other than quoted prices that are observable for the asset and liability, either directly or indirectly (level 2);
- Inputs for the assets or liabilities that are not based on observable market data (level 3).
The Group's derivative assets and liabilities are all classified as level 2.
Set out below is a comparison by category of carrying values and fair values of all financial instruments that are included in the financial statements:
| | 30 November 2014 | 1 December 2013 |
|---|
| Notes | Carrying value
£'000 | Fair value
£'000 | Carrying value
£'000 | Fair value
£'000 |
|---|
| Financial assets | | | | | |
| Cash and cash equivalents | 3.9 | 76.3 | 76.3 | 110.5 | 110.5 |
| Trade receivables | 3.8 | 9.6 | 9.6 | 23.1 | 23.1 |
| Other receivables (incl. accrued income, excl. prepayments) | 3.8 | 26.9 | 26.9 | 17.1 | 17.1 |
| Available-for-sale financial asset | 3.3 | 0.4 | 0.4 | 0.4 | 0.4 |
| Total financial assets | | 113.2 | 113.2 | 151.1 | 151.1 |
| Financial liabilities | | | | | |
| Trade payables | 3.10 | (61.3) | (61.3) | (53.0) | (53.0) |
| Accruals | 3.10 | (46.6) | (46.6) | (42.0) | (42.0) |
| Borrowings | 4.2 | (6.7) | (6.7) | (9.5) | (9.6) |
| Finance lease obligations | 4.3 | (169.0) | (169.0) | (151.9) | (152.0) |
| Derivative liabilities | 4.6 | (0.2) | (0.2) | (0.2) | (0.2) |
| Total financial liabilities | | (283.8) | (283.8) | (256.6) | (256.8) |
The derivative liabilities relate to forward foreign exchange contracts.
The Group's only available-for-sale financial asset consists of an unlisted equity investment of which the fair value cannot be reliably determined, and which is therefore measured at cost. There has been no movement in this investment during the period.
The fair values of cash and cash equivalents, receivables, payables and accruals of a maturity of less than one financial period are assumed to approximate to their carrying values but for completeness are included in this analysis.
The interest rate used to discount borrowings is based on a LIBOR plus margin measure blended for the type of security offered and was calculated as 3.0% (2013: 3.0%).
The fair values of all other financial assets and liabilities have been calculated by discounting the expected future cash flows at prevailing market interest rates.
The Group has categorised its financial instruments as follows:
| Notes | Available-
for-sale
£m | Loans and
receivables
£m | Financial
liabilities at
amortised cost
£m | Financial
liabilities at
fair value
through profit
and loss
£m | Total
£m |
|---|
| As at 1 December 2013 | | | | | | |
| Financial assets as per the Balance sheet | | | | | | |
| Cash and cash equivalents | 3.9 | — | 110.5 | — | — | 110.5 |
| Trade and other receivables (excluding prepayments) | 3.8 | — | 40.1 | — | — | 40.1 |
| Available-for-sale financial asset | 3.3 | 0.4 | — | — | — | 0.4 |
| Total | | 0.4 | 150.6 | — | — | 151.0 |
| Financial liabilities as per the Balance sheet | | | | | | |
| Trade payables | 3.10 | — | — | 53.0 | — | 53.0 |
| Accruals | 3.10 | — | — | 42.0 | — | 42.0 |
| Borrowings | 4.2 | — | — | 9.5 | — | 9.5 |
| Obligations under finance leases | 4.3 | — | — | 151.9 | — | 151.9 |
| Derivative liabilities | 4.6 | — | — | — | 0.2 | 0.2 |
| Total | | — | — | 256.4 | 0.2 | 256.6 |
| Notes | Available-
for-sale
£m | Loans and
receivables
£m | Financial
liabilities at
amortised cost
£m | Financial
liabilities at fair
value through
profit and loss
£m | Total
£m |
|---|
| As at 30 November 2014 | | | | | | |
| Financial assets as per the Balance sheet | | | | | | |
| Cash and cash equivalents | 3.9 | — | 76.3 | — | — | 76.3 |
| Trade and other receivables (excluding prepayments) | 3.8 | — | 36.5 | — | — | 36.5 |
| Available-for-sale financial asset | 3.3 | 0.4 | — | — | — | 0.4 |
| Total | | 0.4 | 112.8 | — | — | 113.2 |
| Financial liabilities as per the Balance sheet | | | | | | |
| Trade payables | 3.10 | — | — | 61.3 | — | 61.3 |
| Accruals | 3.10 | — | — | 46.6 | — | 46.6 |
| Borrowings | 4.2 | — | — | 6.7 | — | 6.7 |
| Obligations under finance leases | 4.3 | — | — | 169.0 | — | 169.0 |
| Derivative liabilities | 4.6 | — | — | — | 0.2 | 0.2 |
| Total | | — | — | 283.6 | 0.2 | 283.8 |