Transition from UK GAAP to FRS 101, UK reduced disclosure framework for IFRS in parent entity accounts

Renishaw plc – Annual report – 30 June 2016

Industry: manufacturing

Notes to the Company financial statements (extract)

Basis of preparation (extract)

The financial statements were prepared in accordance with Financial Reporting Standard 101 “Reduced Disclosure Framework” (FRS 101). The Company’s shareholders were notified of, and did not object to, the use of the EU-adopted IFRS disclosure exemptions.

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU (adopted IFRS), but makes amendments where necessary in order to comply with the Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

In the transition to FRS 101, the Company has applied IFRS 1 whilst ensuring that its assets and liabilities are measured in compliance with FRS 101. An explanation of how the transition to FRS 101 has affected the reported financial position and financial performance of the Company is provided in note C.40.

The Company has applied the exemptions available under FRS 101 in respect of the following disclosures:

– A cash flow statement and related notes.

– Comparative period reconciliations for share capital, tangible fixed assets and intangible fixed assets.

– Disclosures in respect of transactions with wholly-owned subsidiaries.

– Disclosures in respect of capital management.

– The effects of new but not yet effective IFRS.

– An additional balance sheet for the beginning of the earliest comparative period, following the reclassification of items in the financial statements (see note C.40).

– Disclosures in respect of the compensation of key management personnel.

As the consolidated financial statements of Renishaw plc include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect of certain disclosures required by IFRS 13 “Fair value measurement” and the disclosures required by IFRS 7 “Financial instruments disclosures”.

C.40. Explanation of transition to FRS 101

As stated in note C.25, these are the Company’s first financial statements prepared in accordance with FRS 101.

The accounting policies set out in note C.25 have been applied in preparing the financial statements for the year ended 30th June 2016, the comparative information presented in these financial statements for the year ended 30th June 2015 and in the preparation of an opening FRS 101 balance sheet at 1st July 2014.

In preparing its FRS 101 balance sheet, the Company has adjusted amounts reported previously in financial statements prepared in accordance with its previous basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to FRS 101 has affected the Company’s financial position and financial performance is set out in the following table and the accompanying notes:

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Notes to the table of adjustments:

(i) Property, plant and equipment

Under IFRS, software assets, with a net book value of £2,988,000 at 1st July 2014 and £3,033,000 at 30th June 2015, which were classified as tangible fixed assets under UK GAAP, have been re-classified as intangible assets.

(ii) Intangible assets

Under UK GAAP, all research and development costs were charged to the profit and loss account in the year it which they were incurred. Under IFRS, certain expenditure on development activities has been capitalised as intangible assets. The amount capitalised, net of accumulated amortisation, was £27,817,000 at 1st July 2014 and £30,651,000 at 30th June 2015.

(iii) Deferred tax asset

The deferred tax asset under IFRS comprises deferred tax on the defined pension scheme liability of £7,455,000 at 1st July 2014 and £9,172,000 at 30th June 2015.

(iv) Derivatives

Under UK GAAP, derivatives, comprising the fair value of outstanding forward contracts, were included in debtors and creditors, either within one year or due after more than one year (see also note 12). Under IFRS these amounts have been re-classified into separate lines on the face of the balance sheet.

(v) Employee benefits

Under UK GAAP, the deficit on the Company’s defined benefit pension scheme was shown net of deferred tax. Under IFRS, the net amount of £23,421,000 has been increased by £5,855,000 at 1st July 2014 to be shown gross, as required by IFRS. At 30th June 2015, the net amount of £28,528,000 was increased by £7,132,000. Also, under IFRIC 14, the pension scheme liability was increased by £8,000,000, with a deferred tax asset of £1,600,000, at 1st July 2014 and increased by £10,200,000, with a deferred tax asset of £2,040,000, at 30th June 2015 (see note 13).

(vi) Deferred tax liability

The adjustments to the deferred tax liability under IFRS comprise:

(a) £5,565,000 at 1st July 2014 and £6,130,000 at 30th June 2015, in respect of the capitalised development costs noted in (ii) above; and

(b) £1,810,000 at 1st July 2014 and £1,634,000 at 30th June 2015 in respect of property on which industrial buildings allowances were previously claimed, which was excluded under UK GAAP.

Also, the deferred tax liability has been adjusted for the re-allocation of a deferred tax asset as noted in (iii) above.

(vii) Retained earnings

Under IFRS, retained earnings have been adjusted as follows:

 

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