|Statement of Accounting Policies|
A summary of the principal accounting policies is set out below. The policies have been applied consistently in all material respects throughout the current and the previous year with the exception of the adoption of uitf38.
The group prepares its annual financial statements on the historical cost basis of accounting, as modified by the revaluation of investment properties and in accordance with the companies act 1985 and applicable uk accounting standards.
Basis of consolidation
The group financial statements comprise the consolidated financial statements of the company and its subsidiaries. The financial statements of subsidiary companies are made up to 30 September.
The results of subsidiaries sold or acquired are included in the consolidated profit and loss account up to, or from, the date control passes. Intra-group sales and profits are eliminated fully on consolidation. on acquisition of a subsidiary, all of the subsidiary's assets and liabilities that exist at the date of acquisition are recorded at their provisional fair values reflecting their condition at that date.
Goodwill arising on consolidation represents the difference between the fair value of the consideration paid and the fair value of the identifiable assets acquired. Goodwill arising on the acquisition of subsidiaries prior to 30 September 1998 was eliminated or credited immediately against reserves and will be transferred to the profit and loss account on subsequent disposal of the business to which it relates. Goodwill arising subsequent to that date is shown in the balance sheet under fixed assets. Positive goodwill is amortised through the profit and loss account over its estimated useful economic life. Negative goodwill is amortised through the profit and loss account over the period in which the non-monetary assets are realised either through depreciation or sale.
Turnover comprises gross sale proceeds of trading properties and developments, gross rentals, commissions and sundry other income, and is exclusive of vat. Sales of land and properties are only recognised when the cash proceeds are received in full or the group has entered into a legally binding undertaking. Gross rentals and commissions are recognised as they fall due.
In compliance with frs9, the group accounts for joint ventures under the gross equity method. Under this method, the group's share of the joint venture's turnover and profits and losses are separately disclosed in the group's profit and loss account. The group's share of the gross assets and gross liabilities, together with goodwill, is shown on the face of the balance sheet. The group's statement of total recognised gains and losses includes its share of the joint venture's total recognised gains and losses.
Repairs and improvements
Repairs are charged in the year they are incurred. Improvement costs are capitalised.
The company makes contributions to defined contribution schemes only for all employees. Pension costs are charged in the year to which they relate.
The Bromley property holdings limited group currently contributes to two pension schemes. The first is a defined contribution scheme which is open to all employees. The contributions are charged to the profit and loss account during the year to which they relate. The second is a defined benefit scheme, which was closed to new members and employee contributions in 2003. The group will continue to contribute so as to spread the cost over the expected remaining life of the relevant employees. The transitional disclosure requirements of frs17, 'retirement benefits', are given in note 28 to the financial statements.
Tangible fixed assets
The cost of fixed assets is their purchase cost, together with any incremental costs of acquisition. in accordance with ssap 19, (i) investment properties are revalued annually and the aggregate surplus or temporary deficit is transferred to a revaluation reserve, and (ii) no depreciation or amortisation is provided in respect of freehold investment properties and leasehold investment properties with over 20 years to run. Permanent diminutions in value below cost are charged in the profit and loss account. The requirement of the companies act 1985 is to depreciate all properties, but that requirement conflicts with the generally accepted accounting principle set out in ssap 19. the directors consider that to depreciate such properties would not give a true and fair view, as the properties are not held for consumption but for investment, and that a true and fair view is given by following ssap 19 as described above. The effect of depreciation and amortisation on value is already reflected annually in the valuation of properties, and the amount attributed to this factor by the valuers cannot reasonably be separately identified or quantified. Had the provisions of the act been followed, net assets would not have been affected but revenue and profits would have been reduced for this and earlier years.
Full valuations are made by independent professionally qualified valuers every year. The basis of valuation is explained in note 10.
Depreciation is calculated so as to write off the cost of tangible fixed assets (excluding investment properties), less their estimated residual values, over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:
|Fixtures, fittings and equipment||20||straight line|
Investments in subsidiaries and other investments are included in the financial statements at cost less provisions for impairment.
Tenanted residential properties are shown in the financial statements at the lower of cost to the group and net realisable value. Cost to the group includes legal and surveying charges incurred during acquisition together with improvement costs. Net realisable value is the net sale proceeds which the group expects on sale of a property with vacant possession.
Development and trading properties are shown in the financial statements at the lower of cost to the group and net realisable value. Cost represents the acquisition price together with subsequent development costs net of amounts transferred to cost of sales. Net realisable value is the current market value as advised by the group's professional valuers.
Derivative financial instruments
The group uses derivative financial instruments to reduce exposure to interest rate movements. the group does not hold or issue derivative financial instruments for speculative.
For an interest rate swap to be treated as a hedge the instrument must be related to actual assets or liabilities or a probable commitment and must change the nature of the interest rate by converting a fixed rate to a variable rate or vice versa. Interest differentials under these swaps are recognised by adjusting net interest payable over the periods of the contracts.
If an instrument ceases to be accounted for as a hedge, for example because the underlying hedged position is eliminated, the instrument is marked to market and any resulting profit or loss recognised at that time.
Deferred tax is measured at the rate expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all evidence available, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred taxation is not recognised when fixed assets are revalued unless by the balance sheet date there is a binding agreement to sell the revalued assets and the gain or loss expected to arise on the sale has been recognised in the financial statements.
The group operates a long-term incentive plan and a deferred bonus scheme. Shares in the company are held for these purposes by the Grainger Trust Employee Trustee Limited, the assets, income and costs of which have been included in these financial statements.
Prior year adjustment
The group has adopted urgent issues task force abstract 38: 'accounting for esop trusts' for the 2004 financial statements. As a result of the implementation of the requirements of this abstract, shares in the company held by an employee share scheme trustee company which were previously reported as investments are now recorded as a deduction from equity shareholders' funds. At 30 September 2004, the carrying value of these shares was £2.3m, which has been set against the profit and loss account in the balance sheet. The comparative figures for investments and profit and loss account have been amended to reflect the change in treatment. The comparative figures have been restated in a prior year adjustment to reflect this changed treatment such that shareholders' funds at 30 September 2003 have been reduced by £2.2m. Details of the effect of the prior year adjustment are shown in note 21.