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Basis of Accounting
The financial statements have been prepared:
(a) under the historical cost convention modified to include the
revaluation of certain assets;
(b) in accordance with Section 227 of, and Schedule 4 to, the
Companies Act 1985; and
(c) in accordance with applicable accounting standards in the
United Kingdom.
Basis of Consolidation
(a) The Group financial statements comprise a consolidation of the
accounts of the Company and of all its subsidiaries, together with the
Group’s share of its interest in its joint ventures and associates.
(b) All major Group undertakings present accounts up to a date
within seven days of 30th September. Results of subsidiaries acquired
or disposed of during the year are incorporated from the effective date
of acquisition or up to the date of their disposal.
(c) The net assets of subsidiaries acquired are recorded at their fair
values, reflecting their condition at that date, which gives rise to
purchased goodwill.
Changes in Presentation of Financial Information
The Group has adopted the transitionary arrangements of FRS 17,
Retirement Benefits, which have no impact on the Group’s
primary statements.
Other than the further adoption of this new accounting standard,
the financial statements have been prepared in accordance with the
accounting policies adopted last year, as amended in order to discount
deferred taxation. The prior year effect of this amendmant is not
material and consequently no adjustment has been made to the prior
year primary statements.
Goodwill and Other Intangible Assets
(a) Goodwill arising on consolidation in respect of acquisitions, prior to
the adoption of FRS 10 on 28th September, 1998, was written off against
reserves in the year of acquisition. On disposal or closure of businesses,
goodwill previously written off against reserves is taken through the
profit and loss account in arriving at the gain or loss on disposal.
(b) Goodwill arising on consolidation, in respect of acquisitions
made since 28th September, 1998, is capitalised and amortised
through the profit and loss account over the lower of their useful
economic lives and a period of 20 years.
(c) In calculating the goodwill, the total consideration, both actual
and deferred, is taken into account. Where the deferred consideration
is payable in cash, the liability is discounted to its present value.
Where the deferred consideration is contingent and dependant upon
future trading performance, an estimate of the present value of the
likely consideration payable is made. This contingent deferred
consideration is re-assessed annually and corresponding adjustment
is made to the goodwill arising on acquisition. The difference between
the present value and the total amount payable at a future date gives
rise to a finance charge which is charged to the profit and loss account
and credited to the liability over the period in which the consideration
is deferred. The discount used approximates to market rates.
(d) Impairment reviews of goodwill and other intangible assets are
carried out at the end of the first financial year after acquisition and
where there is any indication of impairment.
(e) Purchased intangible assets relating to newspaper publishing
rights, titles, radio licences and certain other intangible assets are
capitalised and amortised through the profit and loss account over the
lower of their useful economic lives, if any, and a period of 20 years.
Foreign Exchange
(a) Assets and liabilities in foreign currencies are translated into
sterling at the rates ruling at the balance sheet date. Revenue items
are translated at average rates for the year, except where they are
covered by forward contracts in which case the forward rate is used.
Differences on exchange, arising from the re-translation of the opening
net investment in subsidiaries and associates and from the translation
of the results of those undertakings at average or forward rates, are
dealt with as movements on reserves.
(b) Foreign currency borrowings are matched against net assets
(adjusted to include goodwill arising on acquisitions) and the resulting
translation differences are dealt with as movements on reserves.
(c) Translation differences on the excess of foreign currency
borrowings over matching net assets (adjusted to include goodwill
arising on acquisitions) are taken to the profit and loss account.
(d) All other exchange differences are taken to the profit and
loss account.
Tangible Fixed Assets
Tangible fixed assets are stated at historical cost less accumulated
depreciation, adjusted for revaluations of certain properties at
30th September, 1994.
Specialised buildings, being those constructed specifically for
use in the business, are carried at historical cost less
accumulated depreciation.
Non-specialised buildings are carried at their frozen 1994 valuations,
as permitted by FRS 15, Tangible Fixed Assets, as adjusted for
subsequent additions, disposals, depreciation and impairment, if any.
Depreciation is calculated to write off the cost of tangible fixed assets
by equal annual instalments over their estimated useful lives as follows:
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| Freehold buildings and long leasehold properties |
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10 to 50 years |
| Short leasehold properties |
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Period of lease |
| Plant and equipment |
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3 to 25 years |
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Depreciation on freehold buildings and leasehold properties is based
on cost, or valuation where properties have been revalued. Freehold
land and assets in the course of construction are not depreciated.
Leased Assets
Where assets are financed by leasing agreements which give rights
approximating to ownership, the assets are treated as if they had been
purchased. The present value of minimum lease payments payable
during the lease term is capitalised as a tangible asset and the
corresponding leasing commitment is included in obligations under
finance leases. Rentals payable are apportioned between interest,
which is charged to the profit and loss account, and capital, which
reduces the outstanding commitment.
Rentals payable relating to all other leases are charged to the profit
and loss account on a straight line basis over the life of the lease.
Joint Ventures and Associates
Joint ventures are those entities in which the Group holds a long-term
interest and which is jointly controlled by the Group and one or
more venturers under a contractual arrangement. Joint ventures are
accounted for using the gross equity method of accounting.
Associates are those undertakings, other than subsidiaries and joint
ventures in which the Group holds a long-term participating interest
and exerts a significant influence. The Group’s share of profits less
losses of associates is included in the Group’s profit and loss account
and the Group’s share of their net assets, together with goodwill
arising on acquisition, is included in the Group balance sheet.
The basis in which these joint ventures and associates are equity
accounted is set out in Note 23.
Investments
Listed investments, which are held for the long term, are included
at their market value at the year end date. Any change in value is
credited or charged as appropriate to the revaluation reserve, except
that a deficit against the original cost of an investment is charged
to the profit and loss account. The profit or loss on disposal of
investments is calculated by reference to their carrying value.
Unlisted investments are held at cost, less any provision for impairment.
Investments in the Company’s own shares, held within the
DMGT Share Trust, are included on the Group balance sheet at
cost. Investments in Group undertakings are held by the Company
at cost, less any provision for impairment.
Stocks and Work in Progress
Stocks and work in progress are valued at the lower of cost and
net realisable value. Cost of work in progress includes overheads
attributable to the cost of production.
Deferred Taxation
Deferred tax is provided in full on timing differences that result in
an obligation at the balance sheet date to pay more tax, or a right to
pay less tax, at a future date, at rates expected to apply when they
crystallise, based on current tax rates and on law. Timing differences
arise from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are
included in financial statements.
Deferred tax is not provided on timing differences arising from the
revaluation of fixed assets where there is no commitment to sell the
asset, or on unremitted earnings of subsidiaries and associates where
there is no commitment to remit these earnings.
Deferred tax assets are recognised to the extent that it is regarded as
more likely than not that they will be recovered. Deferred tax assets
and liabilities are not discounted.
Following an updated review of FRS 19, timing differences arising
on tax deductible goodwill written off to reserves are now recognised.
Due to the indefinite nature of these timing differences the Group
believes it appropriate to discount the resultant deferred tax assets and
liabilities as they arise on businesses expected to be held for the long
term. As a consequence, all other deferred tax assets and liabilities are
also discounted. The prior year effect of these changes is not material.
Pension Costs
The Group has taken advantage of the transitional arrangements
of FRS 17, Retirement Benefits, which permit the costs, accruals and
prepayments recorded in the financial statements to be reported under
the requirements of SSAP 24, Accounting for Pension Costs. This is
consistent with the basis adopted last year. The cost of providing
pensions is calculated using actuarial valuation methods, which
reflect the long-term costs of providing pensions.
Thus, the amount charged to the profit and loss account is calculated
so as to produce a substantially level percentage of the current
and future pensionable payroll. Variations from the regular cost
so calculated are allocated to the profit and loss account over the
average remaining service lives of employees.
The additional disclosures required by FRS 17 are explained in Note 39.
Financial Instruments
The Group uses various derivative financial instruments to manage
its exposure to foreign exchange and interest rate risks. These have
included currency swaps, forward foreign currency contracts, interest
rate swaps, interest rate caps and interest rate floors. The Group
considers its derivative financial instruments to be hedges and
matches them with the relevant hedged item.
Cash flows relating to these derivative financial transactions are netted
against hedged transactions in the Cash flow statement within net
cash inflow from operating activities, or returns on investment and
servicing of finance, or disclosed within financing, as appropriate.
Where forward foreign exchange contracts or cross currency swaps are
used to hedge borrowings, the borrowings hedged are translated at the
year end at the exchange rate implicit within the respective derivative.
Any exchange differences arising are taken to the profit and loss
account to match the accounting treatment of exchange gains or
losses on the borrowings.
Where forward foreign exchange contracts are used to hedge future
revenues or costs, the gain or loss is not recognised until the revenues
arise or the costs are incurred.
Payments or receipts on interest rate swaps, caps or floors are accrued
with interest payable. The derivatives are not revalued. Arrangement
fees on Eurobonds are amortised over the estimated life of the Bonds.
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