Accounting policies. Basis of preparation. The accounts have been prepared in accordance with the Companies Act 2. International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations, as adopted by the European Union in response to the IAS regulation (EC 1. The accounting policies adopted are consistent with those of the previous financial year except that the Group has adopted: Amendment to . Significant judgements, key assumptions and estimates. The preparation of the accounts in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The key estimates and assumptions used in these consolidated financial statements are set out below. Notes: Old UK GAAP includes a choice as to whether to present the reconciliation of movements in shareholders funds as a primary statement; as previously stated IAS 1. The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Software, patents and intellectual property. The estimated useful. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland becomes mandatory for accounting periods commencing on or after 1. IFRS The basics 1 Introduction The UK’s Accounting Standards Board (ASB) has issued an Exposure Draft FRED 43 Application of Financial Reporting. The Canadian Securities Administrators yesterday released a consultation paper in which they proposed a framework for the regulation of over-the-counter derivatives. Revenue recognition. The timing of revenue recognition on long- term funded contracts depends on the assessed stage of completion of contract activity at the balance sheet date. This assessment requires the expected total contract revenues and costs to be estimated based on the current progress of the contract. Revenue of . A 5% increase in the proportion of the contract activity recognised in the current year would have increased operating profit by an estimated . Impairment. Goodwill is tested at least annually for impairment in accordance with the accounting policy for goodwill set out below. The recoverable amounts of cash generating units are determined based on value in use calculations. These calculations require the use of estimates including projected future cash- flows and other future events. See note 1. 2 for details of the critical assumptions made and disclosures on the sensitivity of the impairment testing to these key assumptions. Provisions for liabilities and charges. The consolidated financial statements include a provision for litigation of . As previously reported, John Crane, Inc., a subsidiary of the Group, is currently one of many co- defendants in litigation relating to products previously manufactured which contained asbestos. ReadyRatios produces a complete financial analysis of your statements. Software for the intelligent financial analysis online. Financial Analysis SoftwareProvision has been made for the future defence costs which the Group is expected to incur and the expected costs of future adverse judgments against John Crane, Inc. However, because of the significant uncertainty associated with the future level of asbestos claims and of the costs arising out of the related litigation, there can be no guarantee that the assumptions used to estimate the provision will result in an accurate prediction of the actual costs that may be incurred and, as a result, the provision may be subject to potentially material revisions from time to time if new information becomes available as a result of future events. John Crane, Inc. In the current period the method used to calculate the expected costs of defending claims has been conformed to the approach used to calculate the expected cost of adverse judgments following the appointment of Bates White LLC to value both elements of John Crane, Inc.’s exposure. See note 2. 3 for details. The Group has on occasion been required to take legal action to protect its intellectual property and other rights against infringement. It has also had to defend itself against proceedings brought by other parties, including product liability and insurance subrogation claims. Provision is made for any expected costs and liabilities in relation to these proceedings where appropriate, though there can be no guarantee that such provisions (which may be subject to potentially material revision from time to time) will accurately predict the actual costs and liabilities that may be incurred. Retirement benefits. The consolidated financial statements include costs in relation to, and provision for, retirement benefit obligations. The costs and the present value of any related pension assets and liabilities depend on such factors as life expectancy of the members, the returns that plan assets generate and the discount rate used to calculate the present value of the liabilities. ![]() The Group uses previous experience and impartial actuarial advice to select the values of critical estimates. The estimates, and the effect of variances in key estimates, are disclosed in note 1. At 3. 1 July 2. 01. If the pension schemes were wound up while they still had members, the schemes would need to buy out the benefits of all members. The buy outs would cost significantly more than the present value of the scheme liabilities calculated in accordance with IAS 1. Employee benefits. Taxation. The Group has recognised deferred tax assets of . The recognition of assets pertaining to these items involves judgement by management as to the likelihood of realisation of these deferred tax assets and this is based on a number of factors, which seek to assess the expectation that the benefit of these assets will be realised, including appropriate taxable temporary timing differences and it has been concluded that there are sufficient taxable profits in future periods to support recognition. Further detail on the Group’s deferred taxation position is included in note 6. Accounting policies. ![]() Basis of consolidation. The consolidated accounts incorporate the financial statements of Smiths Group plc ( the Company ) and its subsidiary undertakings, together with the Group’s share of the results of its associates. Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which this power is transferred to the Company to the date that control ceases. Associates are entities over which the Group has significant influence but does not control, generally accompanied by a share of between 2. Investments in associates are accounted for using the equity method. Foreign currencies. The Company’s presentational currency is sterling. The results and financial position of all subsidiaries and associates that have a functional currency different from sterling are translated into sterling as follows: assets and liabilities are translated at the rate of exchange at the date of that balance sheet; income and expenses are translated at average exchange rates for the period; andall resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, the cumulative amount of such exchange differences is recognised in the income statement as part of the gain or loss on sale. Exchange differences arising on transactions are recognised in the income statement. Those arising on trading are taken to operating profit; those arising on borrowings are classified as finance income or cost. Revenue. Revenue is measured at the fair value of the consideration received, net of trade discounts and sales taxes. Revenue is discounted only where the impact of discounting is material. Sale of goods. Revenue from the sale of goods is recognised when the risks and rewards of ownership have been transferred to the customer, the amount of revenue can be measured reliably and recovery of the consideration is probable. For established products with simple installation requirements, revenue is recognised when the product is delivered to the customer in accordance with the agreed delivery terms. For products which are technically innovative, highly customised or require complex installation, revenue is recognised when the customer has completed its acceptance procedures. Services. Revenue from services is recognised in accounting periods in which the services are rendered, by reference to completion of the specific transaction, assessed on the basis of the actual service provided as a proportion of the total services to be provided. Depending on the nature of the contract, revenue will be recognised on the basis of the proportion of the contract term completed, the proportion of the contract costs incurred or the specific services provided to date. Construction contracts. Contracts for the construction of substantial assets are accounted for as construction contracts if the customer specifies major structural elements of the design, including the ability to amend the design during the construction process. These projects normally involve installing customised systems with site specific integration requirements. Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. The Group uses the . The assessment of the stage of completion is dependent on the nature of the contract, but will generally be based on the estimated proportion of the total contract costs which have been incurred to date. If a contract is expected to be loss- making, a provision is recognised for the entire loss. Employee benefits. Share- based compensation. The Group operates a number of equity- settled and cash- settled share- based compensation plans. The fair value of the shares or share options granted is recognised as an expense over the vesting period to reflect the value of the employee services received. The fair value of options granted, excluding the impact of any non- market vesting conditions, is calculated using established option pricing models, principally binomial models. The probability of meeting non- market vesting conditions, which include profitability targets, is used to estimate the number of share options which are likely to vest.
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