1723

Appendix Specimen financial statements

This appendix contains the annual report and accounts of a mythical UK company - Good Group P.L.C., a listed public company with subsidiaries. The report and accounts are only illustrative and do not attempt to show all possible disclosure requirements. In any case of doubt as to the legal or other requirements, it is essential to refer to the relevant source and, where necessary, to seek appropriate professional advice. Although the specimen accounts attempt to illustrate the most likely disclosure requirements of a manufacturing company, they should not be regarded as a comprehensive checklist of statutory and accounting requirements. They comply with the Companies Act 1985, as amended (the Companies Act), with other requirements in force at 31 July 1997 and are drawn up in accordance with current best practice at the date of issue. The requirements of exposure drafts are not dealt with in these specimen accounts. The formats used in the specimen accounts are consolidated accounts with the profit and loss account in format 1 and the balance sheet in format 1 taken from Schedule 4 to the Companies Act. The marginal annotations accompanying the accounts contain source references to the Companies Act, Statements of Standard Accounting Practice, Financial Reporting Standards and Urgent Issues Task Force abstracts, together with the requirements of the London Stock Exchange for listed companies. The recommendations of the Committee on the Financial Aspects of Corporate Governance (the 'Cadbury Committee') have been reflected in the accounts for Good Group P.L.C.

Northern Ireland The specimen accounts are based on the statutory requirements for Great Britain. For companies incorporated in Northern Ireland the equivalent, and in substance identical, legislation is contained in the Companies (Northern Ireland) Order 1986, as amended. 1724 Generally Accepted Accounting Practice in the United Kingdom

Abbreviations The following abbreviations are used in this appendix: The Companies Act The Companies Act 1985, as amended s 238(1) Section 238(1) of the Companies Act sch 4.58(1) Paragraph 58(1) of Schedule 4 to the Companies Act sch 4 Formats Statutory formats contained in Schedule 4 to the Companies Act SI85/802 Statutory Instrument No. 802 issued in 1985 SSAP 9(25) Paragraph 25 of Statement of Standard Accounting Practice No.9 FRS 1(12) Paragraph 12 of Financial Reporting Standard No. 1 YB 12.43(e) London Stock Exchange The Listing Rules (Yellow Book) Chapter 12 Paragraph 43(e) CA89 The Companies Act 1989 OFR(2) Paragraph 2 of the Best Practice Statement Operating and Financial Review issued by the Accounting Standards Board Cadbury Committee The Committee on the Financial Aspects of Corporate Governance CR(5.11) Paragraph 5.11 of the report of the Cadbury Committee CBP(4.4) Paragraph 4.4 of the Code of Best Practice issued by the Cadbury Committee Greenbury Study Group on Directors' Remuneration chaired by Sir Richard Greenbury Greenbury (B1) Paragraph B1 of the Code of Best Practice issued by the Study Group. SAS 600(20) Paragraph 20 of the Statement of Auditing Standards No. 600 issued by the Auditing Practices Board ICAEWCP Consultative Paper issued by the Institute of Chartered Accountants in England and Wales in September 1993 on interim reports APB The Auditing Practices Board UITF 7(4) Paragraph 4 of the seventh abstract of the Urgent Issues TaskForce. Appendix: Specimen financial statements: Good Group P.L.e. 1725

REPORT AND ACCOUNTS Good Group P.L.C.

31 DECEMBER 19X4 1726 Generally Accepted Accounting Practice in the United Kingdom

REGISTERED NUMBER: 1591134 s 706

DIRECTORS Sir Joshua Barraclough (Chairman) J N Smith (Chief Executive) J Archer HCBlack FRBrown NOEvans MrsLBGreen MCHolman PAMacBryde

SECRETARY J Harris

AUDITORS Chartered Accountants & Co. 7 Christian Street London EC2 1VQ

BANKERS BankP.L.C. George Street London EC3 4AB

SOUCITORS Solicitors & Co. 7 Scott Street London WC3 4AB

REGISTRARS Registration Services 45 Market Street London W2 7JA

REGISTERED OFFICE Homefire House Ashdown Square London EC2 3AS Appendix: Specimen financial statements: Good Group P.L.C. 1727

Good Group P.L.C. CHAIRMAN'S STATEMENT The year was one when, having successfully defended the takeover offer made by Fire Products P.LC. for the company at the start of the year, strong foundations were laid for the future growth of Good Group. As in the three previous years, the results showed the increased importance of the fire prevention division, and your directors have continued to make decisions which will further develop this sector. The group has sold its loss-making subsidiary, Hose Limited, and this has led to an exceptional charge for the year of £2,437,000, although £400,000 of this relates to the goodwill previously written off against reserves. The group has continued to extend its North American activities and to this end has set up a new company, Sprinklers Incorporated, in Chicago. It is expected that, by the Summer of 19X5, Sprinklers will be manufacturing the group's newest fire-prevention products in the United States. The acquisition, on 1 April, of Extinguishers Limited, a company which has been established in Lincoln for many years, has further strengthened the fire-prevention division. This company has a well established research and development department, and will help ensure that the group's products remain 'state of the art'. The electronics division has shown only a small increase in sales during 19X4, up by 3% to £59,150,000, although profit margins have held up well. Your directors believe that the group's research and development activities will ultimately lead to a resurgence of sales in this sector, but 19X5 sales are expected to continue at 19X4 levels. This year we have further strengthened the board with the appointment of a fourth non• executive director and I welcome Laura Green. I have included a separate report on the company's corporate governance. This is set out on pages 1734 to 1736. The year's results would not have been possible without the enthusiastic participation of all our employees and I thank them all sincerely for their efforts. Robert Jones retired during the year after a long career with the group. We now look forward with confidence to a very busy and productive period for the group.

Joshua Barraclough Chairman

25 March 19X5 1728 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. DIRECTORS

Non-executive directors YB 12.43(i) Sir Joshua Barraclough, 64, joined the board of Good Group P.L.C. in 19W7 and was appointed Chairman in 19X1. He is Lord Lieutenant of Borsetshire, non-executive chairman of the Pole Star Building Society and director of Antimony Holdings PIc, Northland Bank pIc and Wessex TV PLC. Between 19W8 and 19X2, he was Chairman of the Board of Governors of Wessex College of Management Science. H C Black, 52, joined the board of Good Group P.L.C. as a non-executive director on 1 July 19X3 upon his return to the United Kingdom after spending 10 years working in North America for EFG Incorporated. Mrs L B Green. 48, joined the board as a non-executive director on 1 March 19X4. She was previously a partner with the a firm of accountants, Alpha and Beta. In addition to her role as finance director of South Supermarkets pIc, she is non-executive director of a number of companies, including Midclays pIc. M C Holman, 61, has been a non-executive director of Good Group P.L.C. since 19W8. As well as being Professor of Business Studies at Wessex College of Management Science, he is a director of St. James' Bank PLC and Sheen Palace Estates P .L.C. Until 19W5, he was a director of Ulster Extinguishers pIc. Executive directors J N Smith, 50, joined Good Group P.L.C. in 19W9 as finance director and was appointed chief executive in 19X2. Previously he held a number of senior finance positions. He is non-executive director of N&T Engineering pIc and Bridge Construction pIc. J Archer, 51, has spent 15 years working in the group. He is sales director and his other responsibilities include research and development. F R Brown. 43, joined the board of Good Group P.L.C. following its acquisition of Bright Sparks Limited in 19X2. He currently heads up the fire prevention division. He is non-executive director of C&J Chemicals pIc. N 0 Evans, 40, took over responsibility of the electronics division this year from R P Jones. He was appointed to the board two years ago. P A MacBryde, 45, was appointed finance director in 19X2 having previously been Group Financial Controller and, latterly, finance director at Good Company Limited. Prior to that he worked for Gamma and Co., Chartered Accountants. Appendix: Specimen financial statements: Good Group P.L.c. 1729

Good Group P.L.C.

OPERATING AND FINANCIAL REVIEW OFR(2), CBP (Note 10)

INTRODUcnON This review has been prepared in accordance with the Accounting Standards Board's OFR (38) statement, issued in July 1993, on the operating and fmancial review.

OPERATING REVIEW OFR (8)-(22) The group's turnover has shown an overall increase of 18.3%. However, this includes the activities of Hose Limited, which manufactures rubber hosepipes, for the eleven months up to its disposal on 30 November 19X4. Hose Limited had been loss-making for a number of years; in the current year it generated an operating loss of £563,000 on turnover of £42,196,000. Consequently, although its disposal may lead to a reduction in the overall level of future turnover in the short term, it should nevertheless result in increased profit figures. Turnover from the remaining activities increased by 28.0% which is made up of a 46.6% increase in sales of fire prevention equipment (excluding the results of Hose Limited) and a 3.2% increase in sales in the electronics division. Turnover

• Discontinued turnover Em Ii Continuing turnover

19XO 19X1 19X2 19X3 19X4

The increase in sales of fire prevention equipment is made up of two elements: a growth of 17.7% in our original operations together with the introduction of the results of Extinguishers, which contributed sales of £21,979,000 in the nine months since its acquisition on 1 April 19X4. The growth of 17.7% in the fire prevention operations before the acquisition of Extinguishers was particularly pleasing; the year has been yet another difficult one in which to operate. The property market both here and in the United States, despite small signs of recovery periodically being reported, has continued to be depressed, although more recently the property market does appear to have improved marginally. Opportunities for the installation of fire-prevention equipment in new buildings have therefore continued to be low. Nevertheless, the activity in other markets has held up well, safety being an area where cut-backs are more difficult to achieve. With this background it was therefore inevitable that profit margins would be further squeezed despite the cost efficiencies introduced at the start of the year. The margins on Extinguishers' sales were this year lower than those achieved by the rest of the operations. We are looking at ways of improving the margin in future. 1730 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

OPERATING AND FINANCIAL REVIEW OFR(2). CBP (Note 10)

OPERATING REVIEW (continued) Extinguishers is best known for its fire-retardant fabrics, which are currently sold mainly for commercial use. The company is looking into expanding production to supply manufacturers of domestic products. Sales in the electronics division have shown only a slight increase this year, although profit margins have held up well. The activity to date has been mainly on defence projects and for the aviation industry. Expenditure on defence is being cut and the group is moving its focus and reducing work in this area. The group has made a small move into the electrical safety market and is looking to expand this by means of acqUisition. The directors believe that this would be compatible with the fire prevention equipment division and would be part of an overall move to enhance our reputation in the safety market. Looking at the geographical split of sales, the increases were all generated in the United Kingdom; although sales to the United States showed a slight increase, the sales generated in the United States fell slightly in sterling terms. The US results are even more disappointing given the favourable dollar exchange rates ruling this year. Action is already being taken to improve the performance in the United States. A new company, Sprinklers Incorporated, has been set up to manufacture the group's new fire-prevention system in the United States. Manufacturing is scheduled to start this Summer. During the year the signs of recovery in the UK economy were more positive. The directors are hopeful that the construction industry will continue its recent improvements, particularly in the commercial sector. The recovery in the United States was initially ahead of that here. The directors consider that if the construction industry maintains its recent improvements, the current year will see an increase in sales of new fire-protection products in the United Kingdom. Extinguishers has a strong research and development department, with a long history of introducing new products. With the acquisition, the number of staff employed by the group on research and development has more than doubled. Today's research and development forms the basis of future years' business and therefore is an area in which we place extreme significance. This year we have increased expenditure on research and development by 135% even though the department was not enlarged until three months into the year. We will be increasing the expenditure further in the next few years to enhance further the prospects for the future. Appendix: Specimen financial statements: Good Group P.L.C. 1731

Good Group P.L.C.

OPERATING AND FINANCIAL REVIEW OFR(2), CBP (Note 10) OPERATING REVIEW (continued) There are two main fire-prevention research and development activities: improved fire detection and sprinkler systems; and fue-retardant fabrics. Research and development in the electronics business is concentrated on the development of new products capable of generating greater turnover.

Exceptional items totalling £2,192,000 were charged in the accounts this year, compared with only £850,000 last year. This year's charge includes a loss on disposal of Hose Limited of £2,437,000 (£400,000 of which represents goodwill previously written off against reserves), a loss on disposal of fixed asset investments of £350,000 and a profit on disposal of tangible fixed assets of £1,250,000. These were all charged below operating profit. The balance of this year's charge was professional expenses of £655,000 incurred in the successful defence of the bid from Fire Products P.L.C.; these were charged in arriving at operating profit. Capital expenditure on land, buildings, plant and machinery of £12,815,000 was slightly higher than usual. The expenditure on plant and machinery included the initial purchases of equipment for Sprinklers Incorporated.

Return flltribulllble to sluzre1wlllers

Eamlngs and dividends per OIdlnary share

6070 I ______

--Earnings per :~ ordinary share 30 --a-- DMdends per ordinary share 20

o+-----~~----_+------~----~ 19XO 19X1 19X2 19X3 19X4

Earnings per share are based on the results recognised in the profit and loss account. In addition to these profits there have been a number of other gains and losses, primarily movements in the value of the group's properties and exchange differences, which are not recognised in the profit and loss account. These, together with the profit for the year, are included in the statement of total recognised gains and losses. In both 19X4 and 19X3, the property market in general has fallen and we have recognised a revaluation deficit in each of the two years following the revaluation of the investment properties. 19X4 showed an overall exchange gain, although it was less than the downward movement in property, and 19X3 showed an exchange loss. 1732 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

OPERATING AND FINANCIAL REVIEW OFR(2). CBP (Note 10)

OPERATING REVIEW (continued) At the start of the year the property market had started to show a slight upward movement. However, this has since been eroded. The directors are hopeful that the properties might show a small increase in value during 19X5. In 19X4 the directors changed the dividend policy. In the past the total dividend has been paid out in two equal halves. Under the new policy the company will pay, at the interim stage, a smaller percentage of the total expected total dividend with the balance as the final dividend. The company's share price reflects many factors other than reported results and balance sheet net assets. One of the factors influencing the share price is the market's expectations of the group's future performance in relation to its competitors and this, in part, is linked with the research and development into new and improved products. The group's commitment to stronger research and development was discussed above. Uncertainty about interest rates both here and in the US has had an unsettling effect on equity prices during the year and the company's share price has at times been trading at a discount to the net asset value per share. As from 1 January 19X5 the performance-related bonus scheme for executive directors and senior employees was replaced with a long-term incentive plan based on total return to shareholders over a four year period relative to that of the company's top ten competitors. This scheme will ensure that the directors' and employees' goals will echo those of the shareholders.

FINANCIAL REVIEW OFR (23}{37) The group's capital structure is as follows: £000 £000 DebtjiMnce Loans 13,305 Finance leases 1,045

14,350 Shilreholders' funds Share capital 15,075 Reserves 40,225

55,300

69,650

The acquisition of Extinguishers Umited was funded by the issue of 2.5 million shares at £3.50 per share. Accordingly, although it has widened the share ownership of the company, it did not cause any funds to leave the group other than to the extent that the legal and professional expenses incurred exceeded the cash balance in Extinguishers Limited at the date of acquisition. Appendix: Specimen financial statements: Good Group P.L.e. 1733

Good Group P.L.C.

OPERATING AND FINANCIAL REVIEW OFR(2). CBP (Note 10)

FINANCIAL REVIEW (continued) Note 19 to the accounts sets out details of interest rates and terms of the loans and debentures. This year the group has taken out a US dollar loan to hedge its investment in the US operations and has arranged a six year multi-option facility (MOF). Under the MOF, the bank has guaranteed that over the period to 31 July 19YO the group can draw up an additional £7,500,000. At 31 December 19X4 the group had drawn down £2,500,000 under this facility.

Taxation An analysis of the taxation charge is set out in note 8 to the accounts. The taxation charge as a percentage of profit before taxation was 32.0% in the current year and 31.0% in the previous year. The effective tax rate for the current year is higher than a standard rate as a result of disallowable entertaining expenditure which has been partly offset by accelerated capital allowances.

Liquidity The cash flow statement illustrates that there was an increase in cash in 19X4 of £695,000 (19X3 - £4,611,000). The sharp reduction in cash flow for the year is caused by a number of factors; the two main changes within the total are with respect to operating cash flows and with respect to capital expenditure. OperatiIig activities generated £2,050,000 (19X3 - £5,369,000) of cash. The decrease was largely due to a significant increase in stocks and debtors and a decrease in creditors. The outflow of cash from capital expenditure and financial investment was £3,713,000 compared with an outflow of £385,000 in 19X3. Within this, increased activity in purchases and sales of tangible fixed assets accounted for an outflow of £4,190,000 this year. The group's cash position was improved by £2,172,000 upon the disposal of Hose Limited (see note 14 to the accounts).

Going concern After making enquiries, the directors have a reasonable expectation that the group has CBP (4.6) adequate resources to continue in operational existence for the foreseeable future. For YO 12.43(v) this reason, they continue to adopt the going concern basis in preparing the accounts. 1734 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

CORPORATE GOVERNANCE YB12.43G)

STATEMENT BY THE DIRECTORS ON COMPLIANCE WITH THE CODE OF BEST PRACI'lCE The directors are pleased to report that the company has been in full compliance throughout the year with the Code of Best Practice issued by the Committee on the Financial Aspects of Corporate Governance (the Cadbury Committee). A statement of the directors' responsibilities in respect of the accounts is set out on page 1747. Below is a brief description of the role of the board and its committees followed by a statement regarding the group's system of internal fmancial control and a report by the company's auditors on our corporate governance matters.

THE WORKINGS OF THE BOARD AND ITS COMMIT1'EES

TheBotml The Board currently comprises four non-executive directors and five executive directors, and is responsible to shareholders for the proper management of the group. It meets every two months, reviewing trading performance, ensuring adequate funding, setting and monitoring strategy, examining major acquisition possibilities and reporting to shareholders. The following committees deal with specific aspects of the group's affairs.

Audit Committee The audit committee, which is chaired by Sir Joshua Barraclough, comprises all the CPB (4.3), non-executive directors, and meets not less than three times annually. The committee (Notell) provides a forum for reporting by the group's external and internal auditors. Meetings are also attended, by invitation, by the Chief Executive and the Finance Director. The audit committee is responsible for reviewing a wide range of financial matters including half year and annual accounts before their submission to the board, monitoring the controls which are in force to ensure the integrity of the financial information reported to shareholders. The audit committee advises the board on the appointment of external auditors and on their remuneration both for audit and non• audit work, and discusses the nature and scope of the audit with the external auditors.

Remuneratioll Committee The remuneration committee is responsible for determining the contract terms, CBP (3.3) remuneration and other benefits for executive directors, including performance-related Greenbury (A4) bonus schemes. The committee comprises the non-executive directors. It is chaired by YB Annex A M C Holman and is advised by a leading firm of executive remuneration consultants. The report of the remuneration committee, which includes details of directors' remuneration and pension entitlements and details directors' interests in options together with information on service contracts, is set out on pages 1738 to 1742. Appendix: Specimen financial statements: Good Group P.L.e. 1735

Good Group P.L.C. CORPORATE GOVERNANCE

THE WORKINGS OF THE BOARD AND ITS COMMI1TEES (continued) Nomination Committee During the year the nomination committee comprised the non-executive directors. The COP (Note 1) committee is responsible for proposing candidates for appointment to the board, having regard to the balance and structure of the board. The committee employs the services of advisers as it deems necessary. With effect from 1 January 19X5, Sir Joshua Barraclough stepped down from this committee and Mrs L B Green was appointed as its chairman.

Management committee The management committee is chaired by J N Smith and comprises the executive directors together with key senior executives. It meets fortnightly and discusses key operational decisions.

INTERNAL FINANCIAL CONTROL CBP (4.5) The board is responsible for establishing and maintaining the group's system of internal financial control. Internal control systems are designed to meet the particular needs of the group concerned and the risks to which it is exposed, and by their nature can provide reasonable but not absolute assurance against material misstatement or loss. The key procedures which the directors have established with a view to providing effective internal financial control are as follows: • Management structure The board has overall responsibility for the group and there is a formal schedule of matters specifically reserved for decision by the board. Each executive director has been given the responsibility for specific aspects of the group's affairs. The executive directors together with key senior executives constitute the management committee, which meets fortnightly, to discuss day-to-day operational matters. • Corporate accounting and procedures manual Responsibility levels are communicated throughout the group as part of the corporate accounting and procedures manual which sets out, inter-alia, the general ethos of the group, delegation of authority and authorisation levels, segregation of duties and other control procedures together with accounting policies and procedures. The manual is updated regularly. • Quality and integrity of personnel The integrity and competence of personnel is ensured through high recruitment standards and subsequent training courses. High quality personnel are seen as an essential part of the control environment and the ethical standards expected are communicated through corporate accounting and procedures manual. 1736 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. CORPORATE GOVERNANCE

INTERNAL FINANCIAL CONTROL (continued) • Identification of business risks The board is responsible for identifying the major business risks faced by the group and for determining the appropriate course of action to manage those risks. The internal audit department focuses on these areas.

• Budgetary process Each year the board approves the annual budget and rolling three-year strategic plan. Key risk areas are identified. Performance is monitored and relevant action taken throughout the year through the monthly reporting to the board of variances from the budget, updated forecasts for the year together with information on key risk areas.

• Investment appraisal Capital expenditure is regulated by a budgetary process and authorisation levels. For expenditure beyond specified levels, detailed written proposals have to be submitted to the board. Reviews are carried out after the acquisition is complete, and for some projects, during the acquisition period, to monitor expenditure; major overruns are investigated. Proposals for research and development programmes are considered by a team led by J Archer and, proposals beyond specified limits are considered by the board. Regular progress reports are submitted to J Archer's team and to the board. Due diligence work is carried out if a business is to be acquired.

• Internal audit The group has an internal audit department. Its responsibilities include ensuring that the controls stipulated in the corporate accounting and procedures manual are being adhered to. It reports to management and to the audit committee.

• Audit committee The audit committee monitors, through reports to it by the internal audit department. the controls which are in force and any perceived gaps in the control environment. The audit committee also considers and determines relevant action in respect of any control issues raised by the internal or external auditors.

The audit committee has reviewed the effectiveness of the system of internal financial control as it operated during the year and reported its conclusions to the board.

Joshua Barraclough Chairman

25 March 19X5 Appendix: Specimen financial statements: Good Group P.L.c. 1737

Good Group P.L.C. REPORT BY THE AUDITORS to Good Group P.L.C. on corporate governance matters

In addition to our audit of the accounts we have reviewed the directors' statements on YB 12.430) pages 1733 to 1736 concerning the company's compliance with the paragraphs of the YB 12.43(v) Cadbury Code of Best Practice specified for our review by the London Stock Exchange APB Bulletin and their adoption of the going concern basis in preparing the accounts. The objective (199511), (199613) of our review is to draw attention to any non-compliance with Listing Rules 12.43(j) and 12.43(v).

We carried out our review in accordance with guidance issued by the Auditing Practices Board, and assessed whether the directors' statements on going concern and internal financial control are consistent with the information of which we are aware from our audit. That guidance does not require us to perform the aaditional work necessary to, and we do not, express any opinion on the effectiveness of either the group's system of internal financial control or the company's corporate governance procedures nor on the ability of the group to continue in operational existence.

Opinion

With respect to the directors' statements on internal financial control on pages 1735 and 1736 and going concern on page 1733, in our opinion the directors have provided the disclosures required by the Listing Rules referred to above and such statements are consistent with the information of which we are aware from our audit work on the accounts.

Based on enquiry of certain directors and officers of the company, and exantination of relevant documents, in our opinion the directors' statement on page 1734 appropriately reflects the company's compliance with the other paragraphs of the Code specified for our review by Listing Rule 12.43(j).

Chartered Accountants & Co. Chartered Accountants London

2S March 19X5 1738 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

REPORT OF TIIE REMUNERATION COMMITrEE Greenbury (B1) YB 12.43(x)

The remuneration committee's composition, responsibilities and operation comply with YB 12.43(w) the best practice provisions in Section A of the annexe to the Listing Rules of the London Stock Exchange; in implementing its policy, the committee has given full consideration to the provisions of Section B of the annexe to the Listing Rules.

Remuneration The remuneration committee is chaired by M C Holman and its other members are Sir Greenbury (AS) Joshua Barraclough, H C Black and Mrs L B Green. The committee determines an YB Annex A overall remuneration package for executive directors and other senior executives in order to attract and retain high quality executives capable of achieving the group's objectives. The package consists of basic salary, benefits, share options, performance related bonuses and pensions, with a significant proportion based on performance and dependent upon the achievement of demanding targets. In addition to consultations with J N Smith, the remuneration committee is advised by a leading firm of executive remuneration consultants to maximise comparability within the marketplace and pays particular attention to the remuneration levels of the company's ten closest competitors. Although the executive directors are encouraged to accept appointments as non- executive directors, if they accept more than two such appointments they are required to pass their fees for those appointments to the company.

The individual components of the remuneration package are discussed below. Greenbury (B2) YB 12.43(x) Basic salary and benefits: The salary and benefits are reviewed annually. No director has received an increase in basic salary for the 19X5 calendar year, although the maximum due under the new bonus scheme has increased. The increase in basic salary from 19X3 to 19X4, the maximum of which was 5.7%, is in line with the increase for all employees throughout the group. Benefits principally comprise a car and private healthcare.

Share options: The share options are awarded by the remuneration committee based YB 12.43(x) on the movement in the company's share price relative to that of the company's ten closest competitors. Since 1 January 19X4 the maximum number of options that can be awarded in a year is the number that when multiplied by the then current share price equates to half of the director's basic salary. The maximum number that may be awarded in a 10 year period is an amount equating to 30% of the basic salary in that period. The exercise price of the options granted is the higher of the nominal value of the shares and the average market price over the 10 business days prior to the date of the grant. No value is included in directors' emoluments in respect of share options granted during the year because in the absence of a readily available market value for options over the company's shares we are unable to arrive an accurate assessment of the value of the options granted. Share options issued during the year are detailed below; they are exercisable, at a price of £3.85 per share, between 1 January 19X8 and 31 December 19Y5. The directors may only exercise the options granted to them if the group's earnings per share has increased by 10% more than the increase in the RPI over the period from the date of grant of the options up to the date they first become exercisable and dividends per share have similarly increased by at least the same amount. Appendix: Specimen financial statements: Good Group P.L.c. 1739

Good Group P.L.C.

REPORT OF TIlE REMUNERATION COMMI'ITEE Greenbury (B1) YB 12.43 (x)

Remuneration (continued) On 1 January 19X5 the company replaced the above scheme with a long-term incentive YB 12.43(x) plan which was approved at last year's AGM. The bonus payable under this scheme is payable in shares at the end of four years and is based on the total return to shareholders (measured using share price and dividends) over that period relative to that of the company's top ten competitors. The Good Group Employee Share Trust will purchase shares each year in the market to cover the anticipated entitlement, the funds being provided to it by the company. The directors may choose not to take any of the shares immediately upon vesting, but to leave them within the trust; the company will increase their entitlement by 5% if they leave them in the trust for an additional two years after vesting. Under both the old and new schemes the amount of the bonus increases in accordance with the level of performance achieved, with maximum bonus being 10-14% of basic salary for the old scheme and 17% of basic salary in the first of the four years under the new scheme. PellSion: The directors are members of the Good Group Employee Pension Scheme (see note 28) which pays an annual pension of 1/60fh of the final pensionable pay (which consists solely of basic salary) for each year of service. For the last two years the company's contributions have been 17% of total pensionable earnings, which is higher than usual as the company is eliminating the deficit indicated at the last valuation.

Fees: The fees for non-executive directors are determined by the board within the Greenbury (A6) limits stipulated in the Articles of Association. The non-executive directors are not involved in any discussions or decisions about their own remuneration. 1740 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

REPORT OF THE REMUNERATION COMMITTEE Greenbury (B1) YB 12.43 (x) Directors' remuneration and pension entitlements The remuneration of the directors is as follows: Greenbury (84) YB 12.43(x) Performance Compensation sch 6 Part 1 Basic salary related for loss Total Total sch 6.8 and fees Benefits bonuses of office 19X4 19X3 £ £ £ £ £ £

Executive directors: JNSmith 77,700 7,173 10,256 95,129 88,997 J Archer 51,800 4,981 5,400 62,181 59,972 FRBrown 53,700 5,235 6,000 64,935 62,323 NOEvans 50,300 4,981 5,500 60,781 57,960 R P Jones (1) 19,750 1,905 16,150 37,805 55,860 PAMacBryde 59,700 6,150 7,700 73,550 70,740

Non-executive directors: Sir Joshua Barraclough 20,000 20,000 17,000 HCBlack 7,500 7,500 3,750 LB Green (2) 6,250 6,250 MCHoiman 7,500 7,500 7,500

354,200 30,425 34,856 16,150 435,631 424,102

(1) Compensation for loss of office represents the market value of a car given by the company to R P Jones upon his retirement from executive office. sch 6.8 (2) Appointed 1 March 19X4.

The pension entitlements of the directors are as follows: YB 12.43(x) sch6.7 Increase, excluding Accumulated inflation, in accrued Transfer total accrued pension at pension during the value of 31 December 31 December year increase 19X4 19X3 £ £ £ £

JNSmith 1,530 10,494 20,785 18,338 J Archer 898 2,880 14,117 12,590 FRBrown 545 1,503 14,201 13,006 NOEvans 622 1,929 12,227 11,052 RPJones 576 2,013 12,835 t 11,675 PAMacBryde 357 1,239 15,245 14,179 t Accumulated total pension at date of retirement. In addition to the amounts disclosed above, during 19X3 an additional pension payment of £40,000 was made to S B Clark who retired as an executive director in 19X2. Appendix: Specimen financial statements: Good Group P.L.C. 1741

Good Group P.L.C.

REPORT OF THE REMUNERATION COMMITTEE Greenbury (81) YB 12.43(x)

Interests in options The company has two share option schemes by which executive directors and other YB 12.43(k) executive directors are able to subscribe for ordinary shares in the company and sch 7.2 acquire shares in the company from Good Group Employee Trust. The interests of the Greenbury (85) directors were as follows: YB 12.43(x) Atl Granted Exercised Lapsed At31 UITF10 Exercise January during during during December price 19X4 the year the year the year 19X4

JNSmith (a) £2.31 10,000 10,000 (b) £2.33 10,000 - (10,000) * (c) £3.80 35,000 35,000 (d) £3.85 10,000 10,000

55,000 10,000 (10,000) 55,000

J Archer (a) £2.31 5,000 5,000 (c) £3.80 35,000 35,000 (d) £3.85 6,500 6,500

40,000 6,500 46,500

FRBrown (a) £2.31 5,000 5,000 (d) £3.85 6,500 6,500

5,000 6,500 11,500

NOEvans (d) £3.85 6,500 6,500

RPJones (c) £3.80 8,000 - (8,000)

P A MacBryde (c) £3.80 5,000 5,000 (d) £3.85 7,500 7,500

5,000 7,500 12,500

* At the date of exercise, the company's share price was £4.10 per share. Sch 6.1 Accordingly, J N Smith was able to realise a gain of £17,700. The options are exercisable between the following dates: (a) 1 July 19X5 and 30 June 19X8; (c) 1 January 19X6 and 31 December 19Y3; (d) 1 January 19X8 and 31 December 19Y5.

The directors may only exercise any of the above options if the group's earnings per YB 12.43 (x) share has increased by 10% more than the increase in the RPI over the period from the date of grant of the options up to the date they first become exercisable and dividends per share have similarly increased by at least the same amount. 1742 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.e.

REPORT OF TIIE REMUNERATION COMMI1TEE Greenbury (B1) YB 12.43(x)

Interests in options (continued) The market price of the company's shares on 31 December 19X4 was £4.43 per share and the high and low share prices during the year were £4.43 and £3.42 respectively. UITF10 The company's average share price over the 10 business days prior to the date of grant of options during the year was £3.85.

The interests of the directors to subscribe for or acquire ordinary shares have not YB 12.43 (It) changed since the year end.

Service contracts Mrs L B Green, who was appointed a director on 1 March 19X4, retires from the board at the Annual General Meeting and, being eligible, offers herself for re-election. None of the directors proposed for election or re-election at the forthcoming AGM have service contracts with notice periods, at the date of this report, of one year or more. The service contracts of J N Smith, J Archer and P A MacBryde, as for all the executive directors, expire on 31 December 19X5, being for one year's duration commencing on 1 January 19X5. None of the non-executive directors have service contracts.

On behalf of the remuneration committee

MCHolman 25 March 19X5 Appendix: Specimen financial statements: Good Group P.L.e. 1743

Good Group P.L.e. DIRECTORS' REPORT

The directors present their report and the group accounts for the year ended s 234 31 December 19X4.

RESULTS AND DIVIDENDS The group profit for the year, after taxation and minority interests, amounted to £7,456,000, an increase of 23.1 % from the previous year.

The directors recommend a final ordinary dividend of 8.67 pence per share, amounting s 234(1)(b) to £1,061,000, making totals of 15.23 pence and £1,859,000 for the year respectively, after taking account of dividends waived by Good Group Employee Share Trust (see note 10). Preference dividends of £175,000 were also paid during the year. The final ordinary dividend, if approved, will be paid on 3 July 19X5 to ordinary shareholders whose names were on the register on 13 June 19X5.

PRINCIPAL ACTIVITIES The group's principal activities during the year continued to be electronics and the s 234(2) manufacture and installation of fire-prevention equipment.

REVIEW OF THE BUSINESS The group has had a satisfactory year with an overall increase in sales. There has been s 234(lXa) a substantial increase in sales of fire-prevention equipment, which have grown in total by 25.3%. However, this included the results of Hose Limited which was sold during the year (see below); when the results of Hose Limited have been elinlinated, the sales of the continuing operations of this segment grew by 46.6%. The growth has been most marked in the home market. Although sales to the United States have shown an increase from 19X3 levels, the increase was well below that achieved in the home market and the sales generated in the United States fell slightly. However, a new company, Sprinklers Incorporated, has been set up to manufacture the group's new fire-prevention system in the USA. During the year the group acquired all of the issued share capital of Extinguishers Limited, a company which is best known for its fire-retardant fabric. The directors have decided that the group should withdraw from the manufacture of rubber hosepipes, an activity which has been loss-making for some years. To this end the directors were successful in completing a sale of the subsidiary, Hose Limited, on 30 November 19X4. The loss on disposal of the subsidiary amounted to £2,437,000, of which £400,000 represents goodwill previously written off against reserves. The group's electronics activities have shown only slight growth during the year although profit margins in this area generally remain good.

FUTURE DEVELOPMENTS The directors are hopeful that the current year will see an increase in sales of new fire- sch 7.6(b) protection products in the United Kingdom. Sprinklers Incorporated is expected to commence production in June 19X5 and this will lead to an expansion in sales in the United States. The group is looking for ways of making the electronics business more profitable by way of acquisitions and new product lines. 1744 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. DIRECTORS' REPORT

RESEARCH AND DEVELOPMENT With the acquisition of Extinguishers Limited, the number of staff employed by the sch 7.6(c) group on research and development has more than doubled. There are two main fire-prevention research and development projects: improved fire detection and sprinkler systems and fire-retardant fabrics for vehicles and aircraft. Research and development in the electronics business is concentrated on the development of new products capable of generating greater turnover.

EVENTS SINCE THE BALANCE SHEET DATE On 14 February 19X5 a short leasehold building, with a net book value of £1,695,000, sch 7.6(8) was severely damaged by flooding. It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of profits by some £750,000. No provision has been made in these accounts for this loss.

POUTICALAND CHARITABLE CONTRIBUTIONS During the year the group made a political contribution of £5,500 to the United Party sch 73-5 and various charitable contributions totalling £10,000.

DISABLED EMPLOYEES The group gives full consideration to applications for employment from disabled sch 7.9 persons where the requirements of the job can be adequately fulfilled by a handicapped or disabled person. Where existing employees become disabled, it is the group's policy wherever practicable to provide continuing employment under normal terms and conditions and to provide training and career development and promotion wherever appropriate.

EMPLOYEE INVOLVEMENT During the year, the policy of providing employees with information about the group sch 7.11 has been continued through the newsletter 'Good Group News' in which employees have also been encouraged to present their suggestions and views on the group's performance. Regular meetings are held between local management and employees to allow a free flow of information and ideas. Employees are encouraged to participate directly in the success of the business through the group's profit sharing scheme and are encouraged to reinvest in the group through participation in share option schemes. Appendix: Specimen financial statements: Good Group P.L.C. 1745

Good Group P.L.C. DURECTORS'REPORT

DIRECTORS AND THEIR INTERESTS The directors at 31 December 19X4 and their interests in the share capital of the s 234(2), company (all beneficially held except those marked with an asterisk which are held as sch 7.2A. trustee), other than with respect to options to acquire ordinary shares (which are YB 12.43(k) detailed in the analysis of options included in the remuneration committee's report), were as follows: At 1 January 19X4 or subsequent At 31 December 19X4 date of appointment Ordinary shares Ordinary shares

Sir Joshua Barraclough 15,000 15,000 JNSmith 105,000 105,000 J Archer HCBlack 1,500 1,500 FRBrown 55,000 55,000 19,000* 19,000* NOEvans 15,000 15,000 Mrs LB Green 1,000 MCHolman 1,000 1,000 PAMacBryde 40,000 40,000

No director was interested in the preference shares or debentures of the company, or in the shares or loan stock of any subsidiary company.

During the period from the end of the financial year to 18 March 19X5, P A MacBryde YB 12.43(k) acquired 1,000 ordinary shares in the company. In all other respects the interests of the directors were unchanged. The executive directors, along with other employees, have been granted options over the shares held by the Good Group Employee Trust. Details of these interests, along with options to subscribe for shares in the company, are disclosed in the remuneration committee's report.

In addition to the directors listed above, R P Jones served as a director until 31 May s 234(2) 19X4 when he resigned.

Details of directors' material interests in contracts are given in the notes to the accounts. YB 12.43(q) sch 7.2(1)

MAJOR INTERESTS On 18 March 19X5, International Fires P.L.C. held 3,958,350 ordinary shares of £1 YB 12.43(1), (r) each (31.48% of the ordinary share capital) in the company. Details of transactions between the group and International Fires P.L.C. are given in note 31 to the accounts. No other person has notified an interest in the ordinary shares of the company required to be recorded in the register under section 211 of the Companies Act 1985. 1746 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.e. DURECTORS'REPORT

SUPPLIER PAYMENT POllCY AND PRACTICE It is the company's policy that payments to suppliers are made in accordance with sch 7.12(2) those terms and conditions agreed between the company and its suppliers, provided that all trading terms and conditions have been complied with.

At the year end, the company had an average of 23 days purchases outstanding in trade sch 7.12(3) creditors.

SPECIAL BUSINESS AT THE ANNUAL GENERAL MEETING At the Annual General Meeting on 15 May 19X5 resolutions 1 to 7 are termed ordinary YB 14.17 business, while resolutions 8(A) and 8(B) will be special business. The special business covers the directors' authority to allot shares and the partial disapplication of pre- emption rights as explained below. The resolutions are set out in the Notice of Annual General Meeting on page 1793. Resolution 8(A) gives authority to the directors to allot shares up to a total nominal amount of £4,925,000 being the nominal value of the authorised ordinary share capital less the nominal value of the issued share capital at 1 January 19X5 and representing 39% of the equity share capital in issue on 1 January 19X5 and at the date of the notice of Annual General Meeting. The authority will expire at the conclusion of the Annual General Meeting to be held in 19X6 and replaces a similar authority granted on 26 May 19X4, which expires at the conclusion of the forthcoming Annual General Meeting. Save for any options granted under the share option scheme, the directors have.no present intention of exercising the authority conferred by this resolution. The passing of resolution 8(B), a special resolution, will permit the directors, until the conclusion of the Annual General Meeting of the company to be held in 19X6, to make issues of equity securities for cash either by way of a rights issue or in any other way up to a total nominal amount of £4,925,000 provided the shares issued other than by way of rights issue will be limited to shares with a nominal value of £628,750, being the equivalent of 5% of the equity share capital in issue on the date of the notice of the Annual General Meeting. The power will, if granted, replace the similar power conferred on the directors on 26 May 19X4 and which lapses on 15 May 19X5. In the opinion of the directors, the passing of these resolutions is in the best interests of the shareholders.

AUDITORS A resolution to reappoint Chartered Accountants & Co. as auditors will be put to the s 384(1) members at the Annual General Meeting.

By order of the board

J Harris s234A Secretary

25 March 19X5 Appendix: Specimen financial statements: Good Group P.L.e. 1747

Good Group P.L.C. STATEMENT OF DIRECfORS' RESPONSIBILITIES IN RESPECf OF THE ACCOUNTS

Company law requires the directors to prepare accounts for each financial year which CBP (4.4), give a true and fair view of the state of affairs of the company and of the group and of (note 12), the profit or loss of the group for that period. In preparing those accounts, the directors SAS 600(21) are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; and state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts.

The directors confirm that they have complied with the above requirements in CBP (Note12) preparing the accounts. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the group and to enable them to ensure that the accounts comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 1748 Generally Accepted Accounting Practice in the United Kingdom

REPORT OF THE AUDITORS to the members of Good Group p.L.e. S 235(1) SAS6OO(14)

We have audited the accounts on pages 1749 to 1790, which have been prepared under the historical cost convention as modified by the revaluation of investment properties and on the basis of the accounting policies set out on pages 1756 to 1759. Respective responsibilities of directors and auditors

As described on page 1747 the company's directors are responsible for the preparation SAS 600(20) of the accounts. It is our responsibility to fonn an independent opinion, based on our audit, on those accounts and to report our opinion to you. Basis of opinion

We conducted our audit in accordance with Auditing Standards issued by the Auditing SAS 600(24) Practices Board. An audit includes exantination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the group's circumstances, consistently applied and adequately disclosed. We planned and perfonned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of infonnation in the accounts. Opinion

In our opinion the accounts give a true and fair view of the state of affairs of the s 235(2)(c) company and of the group as at 31 December 19X4 and of the profit of the group for SAS 600(30) the year then ended and have been properly prepared in accordance with the Companies Act 1985.

Chartered Accountants & Co. s 236 Chartered Accountants Registered Auditor CA89 s 25 London

25 March 19X5 SAS 600(76) Appendix: Specimen financial statements: Good Group P.L.e. 1749

Good Group P.L.C.

GROUP PROFIT AND LOSS ACCOUNT s 227(2) for the year ended 31 December 19X4 sch 4A.17, 4A.21 19X4 19X4 19X3 TURNOVER Notes £000 £000 £000 Continuing operations: FRS 3(14) ongoing 148,675 133,372 acquisition - Extinguishers limited 21,979 - FRS 6(28) 170,654 133,372 Discontinued operations 42,196 46,628

2 212,850 180,000 Cost of sales 3 169,537 144,500

Gross profit 43,313 35,500

Distribution costs 3 16,836 14,330 Administrative expenses 3 16,478 12,995

33,314 27,325

9,999 8,175 Other operating income 3 688 650 Income from interests in associated undertakings 2,3 2,750 1,250 sch 4A.21(3) SSAPl(19) 13,437 10,075 Bid defence costs 3,5 655

OPERATING PROFIT Continuing operations: FRS 3(14) ongoing 12,107 10,595 acquisition - Extinguishers limited 1,238 - FRS 6(28) 13,345 10,595 Discontinued operations (563) (520) 4 12,782 10,075 Continuing operations: FRS 3(20) Profit/(loss) on disposal of tangible fixed assets 1,250 (850) (Loss) on disposal of investments (350)

900 (850) Discontinued operations (Loss) on sale of operations (2,437)

5 (1,537) (850)

11,245 9,225

Income from investments 250 200 Bank interest receivable 1,018 395 Interest payable 7 (1,094) (959)

174 (364) PROFIT ON ORDINARY ACl'IVlTIES BEFORE TAXATION 2 11,419 8,861 sch4.3(6) 1750 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

GROUP PROFIT AND WSS ACCOUNT s 227(2) for the year ended 31 December 19X4 (continued) scb 4A.17. 4.\.21 19X4 19X3 Notes £000 £000 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2 11,419 8,861 scb 4.3(6) Tax on profit on ordinary activities 8 3,652 2,749

PROFIT ON ORDINARY ACTIVITIES AFfER TAXATION 7,767 6,112

Minority interests: Equity L:11] FRS 4(60) Non-equity ~15 15 FRS 4(60) 311 55 sch 4A.17(3). FRS 2(36)

PROFIT ATTRIBUTABLE TO MEMBERS OF TIlE PARENT COMPANY 9 7,456 6,057

DIVIDENDS: Preference dividend on non-equity shares ~FRS4(59) Ordinary dividend on equity shares [Jill1859 1 266 FRS 4(59) 10 2,034 1,441 sch 4.3(7)(b)

OTHER APPROPRIATIONS: non-equity shares 10 81 74 FRS 4(59)

RETAINED PROFIT FOR TIlE YEAR 23 5,341 4,542 sch 4.3(7)(8)

Earnings per share - basic 11 62.32p 6O.09p SSAP3(14) - fully diluted 57.35p 54.93p SSAP3(16)

NOTE OF HISTORICAL COST PROFITS AND WSSES FRS 3(26) for the year ended 31 December 19X4 19X4 19X3 £000 £000

Reported profit on ordinary activities before taxation 11,419 8,861 Realisation of property revaluation gains of previous years 235 Historical cost profit on ordinary activities before taxation 11,654 8,861

Historical cost profit for the year retained after taxation, minority interests, dividends and other appropriations 5,506 4,542 Appendix: Specimen financial statements: Good Group P.L.e. 1751

Good Group P.L.C.

GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FRS3(27} for the year ended 31 December 19X4 19X4 19X3 £000 £000

Profit attributable to members of the parent company 7,456 6,057 Deficit on revaluation of investment properties (350) (474) Exchange difference on retranslation of net assets of subsidiary undertaking 460 (147) Exchange difference on loan (145)

Total recognised gains and losses relating to the year 7,421 5,436

RECONClUATION OF SHAREHOLDERS' FUNDS FRS 3(28) for the year ended 31 December 19X4

19X4 19X4 19X3 £000 £000 £000

Total recognised gains and losses 7,421 5,436 Dividends (2,034) (1,441) Other movements: New shares issued 8,825 Goodwill written off (1,500) D~~) Goodwill reinstated on sale of subsidiary 400

7,725

Total movements during the year 13,112 3,995 Shareholders' funds at 1 January 42,188 38,193

Shareholders' funds at 31 December 55,300 42,188 1752 Generally Accepted Accounting Practice in the United Kingdom ..

Good Group P.L.C.

GROUP BALANCE SHEET s 227(2) at 31 December 19X4 sch 4A.17, 4A.21 19X4 19X3 Notes £000 £000 FIXED ASSETS sch 4.17, 4.19 Intangible assets 12 2,060 1,685 Tangible assets 13 33,801 30,055 Investments 14 5,132 4,205

40,993 35,945

CURRENT ASSETS sch 4.22, 4.23 Stocks 15 26,125 20,100 Debtors 16 20,362 11,957 Cash at bank and in hand 8,724 11,330

55,211 43,387 CREDfDORS:amountsfallingduevrithinoneyeM 17 24,999 25,263

NET CURRENT ASSETS 30,212 18,124

TOTAL ASSETS LESS CURRENT LIABILITIES 71,205 54,069

CREDfDORS: amounts falling due after more thanoneyCM 18 12,563 9,465

PROVISION FOR LIABILITIES AND CHARGES 21 646 381

ACCRUAU; AND DEFERRED INCOME Deferred govemment grants 2,070 1,690

15,279 11,536

55,926 42,533 MINORITY INTERESTS Equity ~FRS4(SO) Non-equity 32 ~210 210 FRS 4(50) 626 345 sch4A.17(2), FRS2(3S) 55,300 42,188

CAPITAL AND RESERVES Called up shMe capital 22 15,075 12,500 Share premium account 23 494 500 Revaluation reserve 23 5,039 5,554 Other reserves 23 4,750 Profit and loss account 23 29,942 23,634

Shareholders' funds: Equity FRS 4(40) Non-equity FRS 4(40) Total FRS 4(38)

Sir Joshua Barraclough Chairman s.233 25 March 19X5 SSAP 17(26) Appendix: Specimen financial statements: Good Group P.L.e. 1753

Good Group P.L.C.

BALANCE SHEET 8226.1 at 31 December 19X4 sch 4 Formats 19X4 19X3 Notes £000 £000 £000 FIXED ASSETS Sch 4.17, 4.19 Tangible assets 13 16,440 14,504 Investments 14 17,110 9,145

33,550 23,649

CURRENf ASSETS Sch 4.22, 4.23 Stocks 15 11,570 7,125 Debtors: amounts falling due: 16 after more than one year 9,438 UITF4(3) within one year -.6..m 15,611 Cash at bank and in hand 4,030

31,211 24,982 CREDITORS: amounts falling due within one year 17 12,049 8,784

NET CURRENf ASSETS 19,162 16,198

TOTAL ASSETS LESS CURRENf LIABILITIES 52,712 39,847

CREDITORS: amounts falling due after more than one year 18 10,063 9,465

PROVISION FOR LIABILITIES AND CHARGES 21 28 141

ACCRUALS AND DEFERRED INCOME Deferred government grants 1,230 925

11,321 10,531

41,391 29,316

CAPITAL AND RESERVES Called up share capital 22 15,075 12,500 Share premium account 23 494 500 Revaluation reserve 23 2,765 3,084 Other reserves 23 6,250 Profit and loss account 23 16,807 13,232

Shareholders' funds: Equity 126;841 FRS4(4O) Non-equity 2732 FRS 4(40)

Total 41,391 29,316 FRS 4(38)

Sir Joshua Barraclough Chairman 8.233 25 March 19X5 SSAP 17(26) 1754 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

GROUP STATEMENT OF CASH FLOWS FRS 1(4), (6), (7), for the year ended 31 December 19X4 (48) 19X4 19X3 Notes £000 £000

NET CASH INFLOW FROM OPERATING ACTIVITIES 24(a) 2,050 5,369 FRS 1(11)

RETIJRNS ON INVESTMENTS AND SERVICING OF FINANCE FRS 1(13)-(15) Interest received 993 345 Interest paid (973) (1,090) Interest element of finance lease rental payments (40) (35) Issue costs of new long-term loans (50) (56) Dividends received 200 160 Dividends paid to minority interests (30) (30) Dividends paid to preference shareholders (175) (175)

(75) (881)

TAXATION FRS 1(16){18) Corporation tax paid (including advance corporation tax) (1,356) (550) Overseas tax paid (1,075) (980)

(2,431) (1,530)

CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT FRS 1(19){21) Payments to acquire intangible fixed assets (575) (1,010) Payments to acquire tangible fixed assets (12,815) (3,875) Receipts from sales of tangible fixed assets 8,625 3,965 Payments to acquire investments (465) (230) Receipts from sales of investments 125 Receipt of government grants 1,392 765

(3,713) (385)

ACQUISmONSAND DISPOSALS FRS 1(22){24) Sale of subsidiary undertaking 14 55 Net overdrafts disposed with subsidiary undertaking 14 2,117 Purchase of subsidiary undertaking 14 (500) Net cash acquired with subsidiary undertakings 14 230

1,902

EQUITY DIVIDENDS PAID (1,431) (1,170) FRS 1(25)

MANAGEMENT OF LIQUID RESOURCES FRS 1(26)-(28) Decrease/(increase) in short term deposits 24(b) 528 (907)

NET CASH FLOW BEFORE FINANCING (3,170) 496 Appendix: Specimen financial statements: Good Group P.L.e. 1755

Good Group P.L.e.

GROUP STATEMENT OF CASH FLOWS FRS 1(4), (6), (7), for the year ended 31 December 19X4 (48) 19X4 19X3 Notes £000 £000

NET CASH FLOW BEFORE FINANCING (3,170) 496

FINANCING FRS 1(29)-(31) Issue of ordinary share capital 175 Share issue costs (100) New long-tenn loans 24(b) 4,660 4,500 Repayment of long-tenn loans 24(b) (500) Repayments of capital element of fmance lease rentals 24(b) (370) (385)

3,865 4,115

INCREASE IN CASH 24(b) 695 4,611

RECONCILIATION OF NET CASH FLOW TO FRS 1(33) MOVEMENT IN NET DEBT

19X4 19X3 Notes £0()() £000

Increase in cash 695 4,611 Cash inflow from increase in loans (4,660) (4,500) Repayment of long tenn loans 500 Issue costs of new long-tenn loans 50 56 Repayments of capital elements of finance lease rentals 370 385 Cash inflow from short term deposits (528) 907

Change in net debt resulting from cash flows 24(b) (3,573) 1,459

Exchange differences 92 102 Other (27) (14)

MOVEMENT IN NET DEBT (3,508) 1,547 NET DEBT AT 1 JANUARY 24(b) (2,755) (4,302)

NET DEBT AT 31 DECEMBER 24(b) (6,263) (2,755) 1756 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

sch4.36 1. ACCOUNTING POUCIES sch 4.10-15 SSAP 2(17), (18) Basis ofpreptl1Yllion The accounts are prepared under the historical cost convention modified to include the revaluation of investment properties. The accounts are prepared in accordance with applicable accounting standards. The sch4.36A true and fair override provisions of the Companies Act 1985 have been invoked, see 'investment properties' below. UITF 7(7)

Basis ofconsolidation The group accounts consolidate the accounts of Good Group P.L.C. and all its 5 227(2), 5 230 subsidiary undertakings drawn up to 31 December each year. No profit and loss sch4A2(1) account is presented for Good Group P.L.C. as permitted by section 230 of the sch5.15(4) Companies Act 1985. FRS 2(23)

Extinguishers Limited has been included in the group accounts using the acquisition sch 4A.13(2)(a) method of accounting. Accordingly, the group profit and loss account and statement of sch 4A9(2), (3) cash flows include the results and cash flows of Extinguishers Limited for the nine FRS 6(20), (21) month period from its acquisition on 1 April 19X4. The purchase consideration has FRS 2(23) been allocated to assets and liabilities on the basis of fair value at the date of acquisition.

The group profit and loss account and statement of cash flows also includes the results FRS 2(23) and cash flows of Sprinklers Incorporated for the seven-month period from its sch 4A15(a) incorporation on 5 June 19X4 and includes the results and cash flows of Hose Limited for the eleven month period to 30 November 19X4, the date of its sale outside the group.

Undertakings, other than subsidiary undertakings, in which the group has an sch 4A20, 22 investment and over which it is in a position to exercise a significant influence are SSAP 1(18), (26) treated as associated undertakings. The group accounts include the appropriate share of these undertakings' results and reserves based on audited accounts to 31 December 19X4.

Goodwill Depending on the circumstances of each acquisition, purchased and consolidation sch 4.21 goodwill is either set off directly against reserves or amortised through the profit and sch 4A9 loss account over the directors' estintate of its useful life. SSAP 22(43)

If a subsidiary, associate or business is subsequently sold or closed, any goodwill UITF 3(10) arising on acquisition that was written off directly to reserves or that has not been FRS 2(47) amortised through the profit and loss account is taken into account in determining the profit or loss on sale or closure. Appendix: Specimen financial statements: Good Group P.L.e. 1757

Good Group P.L.C. NOTES TO TIlE ACCOUNTS at 31 December 19X4

1. ACCOUNTING POUCIES (continued)

Investment properties Certain of the group's properties are held for long-term investment. Investment properties are accounted for in accordance with SSAP 19, as follows:

(i) investment properties are revaluep annually. The swplus or deficit on SSAP 19(11), (1;3) revaluation is transferred to the revaluation reserve unless a deficit below original cost, or its reversal, on an individual investment property is expected to be permanent, in which case it is recognised in the profit and loss account for the year; and

(ii) no depreciation or amortisation is· provided in respect of freehold investment SSAP 19(10) properties and leasehold investment properties with over 20 years to run.

Although the Companies Act would normally require the systematic annual s 227(6) depreciation of fixed assets, the directors believe that this policy of not providing UITF 7(4)-(1) depreciation or amortisation is necessary in order for the accounts to give a true and fair view, since the current value of investment properties, and changes in that current value, are of prime importance rather than a calculation of systematic annual depreciation. Depreciation or amortisation is only one of the many factors reflected in the annual valuation, and the amount which might otherwise have been shown cannot be separately identified or quantified. Depreciation Depreciation is provided on all tangible fixed assets, other than leasehold investment SSAP 12 (15), (25) properties where the lease has 20 years or more to run, at rates calculated to write off the cost or valuation, less estimated residual value based on prices prevailing at the date of acquisition or revaluation, of each asset evenly over its expected useful life as follows:

Leasehold land and buildings over the shorter of the lease term and 20 years

Plant and machinery over 5 to 15 years Government grtmIs Government grants in respect of capital expenditure are credited to a deferred income SSAP 4(23}{25), account and are released to profit over the expected useful lives of the relevant assets (28) by equal annual instalments. Revenue grants are released to profit over the life of the project to which they relate.

Stocks Stocks are stated at the lower of cost incurred in bringing each product to its present SSAP 9(26), (32) location and condition, and net realisable value, as follows: Raw materials, consumables and purchase cost on a first-in, first-out goods for resale basis. Work in progress and finished goods cost of direct materials and labour plus attributable overheads based on the normal level of activity. Net realisable value is based on estimated, selling price less further costs expected to be incurred to completion and disposal. 1758 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

1. ACCOUNTING POUCIES (continued)

Research and development Research and development expenditure is written off as incurred, except that sch 4.20(2) development expenditure incurred on an individual project is carried forward when its SSAP 13(30) future recoverability can reasonably be regarded as assured. Any expenditure carried forward is amortised in line with the expected future sales from the related project.

Provisions Jor liabilities and charges Provisions for the expected costs of maintenance under guarantees are charged against profits when products have been invoiced.

DeJerred toxation Deferred taxation is provided using the liability method on all timing differences, SSAP 15(24)-(29) including those relating to pensions and other post retirement benefits, to the extent that they are expected to reverse in the future without being replaced, calculated at the rate at which it is anticipated the timing differences will reverse. Advance corporation tax which is expected to be recoverable· in the future is deducted from the deferred taxation balance.

Deferred taxation assets are only recognised if recovery without replacement by SSAP 15(30)-(32) equivalent debit balances is reasonably certain. Foreign currencies Company Transactions in foreign currencies are recorded at the rate ruling at the date of the sch 4.58(1) transaction or at the contracted rate if the transaction is covered by a forward exchange SSAP 20(46)-(51), contract. Monetary assets and liabilities denominated in foreign currencies are (59) retranslated at the rate of exchange ruling at the balance sheet date or if appropriate at the forward contract rate. All differences are taken to the profit and loss account with the exception of differences on foreign currency borrowings, to the extent that they are used to finance or provide a hedge against foreign equity investments, which are taken directly to reserves together with the exchange difference on the carrying amount of the related investments. Group The accounts of overseas subsidiary undertakings are translated at the rate of exchange Sch 4.58(1) ruling at the balance sheet date. The exchange difference arising on the retranslation SSAP 20 (52)-(59) of opening net assets is taken directly to reserves. All other translation differences are taken to the profit and loss account with the exception of differences on foreign currency borrowings to the extent that they are used to finanCe or provide a hedge against group equity investments in foreign enterprises, which are taken directly to reserves together with the exchange difference on the net investment in these enterprises.

Leasing and hire purchase commitments Assets held under finance leases and hire purchase contracts, which are those where SSAP 21(32)-(36), substantially all the risks and rewards of ownership of the asset have passed to the (57) group, are capitalised in the balance sheet and are depreciated over their useful lives. The capital element of future obligations under the leases is included as a liability in the balance sheet. The interest element of the rental obligations is charged to the profit and loss account over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding. Rentals paid under operating lease!! are charged to income on a straight line basis over SSAP 21 (37) Appendix: Specimen financial statements: Good Group P.L.e. 1759

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

1. ACCOUNTING POliCIES (continued)

Pensions The group operates two defined benefit pension schemes, both of which require SSAP 24 (79)-(80), contributions to be made to separately administered funds. Contributions to these (86), (88) funds are charged to the profit and loss account so as to spread the cost of pensions over the employees' working lives within the group. The regular cost is attributed to individual years using the projected unit credit method. Variations in pension cost, which are identified as a result of actuarial valuations, are amortised over the average expected remaining working lives of employees in proportion to their expected payroll costs. Differences between the amounts funded and the amounts charged to the profit and loss account are treated as either provisions or prepayments in the balance sheet.

Post retirement benefits other than pensions The group has agreed to provide certain additional post retirement benefits to senior UITF 6 (5)-(11) employees in the United States. The estimated cost of providing such benefits is charged against profits on a systematic basis over the employees' working lives within the group.

Capital instruments Shares are included in shareholders' funds. Other instruments are classified as FRS 4(24), (28), liabilities if they contain an obligation to transfer economic benefits and otherwise are (42), (37) included in shareholders' funds. The finance cost recognised in the profit and loss account in respect of capital instruments other than equity shares is allocated to periods over the term of the instrument at a constant rate on the carrying amount.

2. TURNOVER AND SEGMENTAL ANALYSIS Turnover represents the amounts derived from the provision of goods and services s 262(1) which fall within the group's ordinary activities, stated net of value added tax. SSAP 5(8)

The group operates in two principal areas of activity, that of electronics and the SSAP 25(34) manufacture and installation of fire-prevention equipment. It also operates within two geographical markets, the United Kingdom and the United States. The discontinued operations comprise Hose Limited, the subsidiary manufacturing rubber hosepipes.

The results of Extinguishers Limited, which was acquired on 1 April 19X4, all relate to FRS 3(15) fire-prevention activity. Its turnover, both by source and destination, all relates to the FRS 6(28) United Kingdom. Turnover, group profit on ordinary activities before tax and net assets are analysed as follows: 1760 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

2. TURNOVER AND SEGMENTAL ANALYSIS (continued) Area ofactivity Fire-prevention Electronics equipment Total 19X4 19X3 19X4 19X3 19X4 19X3 £000 £000 £000 £000 £000 £000 SSAP 2S (34)-(38) TURNOVER Continuing operations: Total sales 66,325 61,595 111,504 76,077 177,829 137,672 Inter-segment sales (7,175) (4,300) (7,175) (4,300)

Sales to third parties 59,150 57,295 111,504 76,077 170,654 133,372 FRS 3(15) Discontinued operations: Sales to third parties 42,196 46,628 42,196 46,628 FRS 3(15)

59,150 57,295 153,700 122,705 212;850 180,000 sc:h 4.55 (1)

Turnover of Extinguishers Limited included in the above 21,979 21,979 - FRS 3(15) FRS 6(28)

PROFIT Segment profit: Continuing operations 4,529 4,394 8,194 6,456 12,723 10,850 FRS 3(15) Discontinued operations (563) (520) (563) (520) FRS 3(15)

4,529 4,394 7,631 5,936 12,160 10,330

Common costs (2,128) (1,505) Profit before tax of associated undertakings 1,194 785 1,556 465 2,750 1,250 SSAP2S(36)

Operating profit 12,782 10,075 Non-operating exceptional items (1,537) (850) Net interest and income from investments 174 (364)

Profit on ordinary activities before taxation 11,419 8,861

Operating profit of Extinguishers Limited included in the above 1,238 1,238 - FRS 3(15) FRS 6(28) Appendix: Specimen fi7lJlncial statements: Good Group P.L.e. 1761

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

2- TURNOVER AND SEGMENTAL ANALYSIS (continued) Area ofactivity Fire-prevention Electronics equipment Total 19X4 19X3 19X4 19X3 19X4 19X3 £()()() £()()() £()()() £()()() £()()() £()()() SSAP 2S (34}{38) NET ASSETS Net assets by segment: Continuing operations 16,416 10,874 30,226 15,136 46,642 26,010 Discontinued operations 8,872 8,872

16,416 10,874 30,226 24,008 46,642 34,882

Unallocated net assets 6,192 5,496

52,834 40,378 Net assets of associated undertakings 2,071 1,451 1,021 704 3,092 2,155 SSAP2S(36)

55,926 42,533 Minority interest (626) (345)

Total net assets 55,300 42,188

Net assets of Extinguishers Limited included in the above 8,648 8,648

Unallocated net assets comprise certain fixed assets, loan notes, net debt, taxation and SSAP 2S (37) dividends. 1762 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO mE ACCOUNTS at 31 December 19X4

2. TURNOVER AND SEGMENTAL ANALYSIS (continued) Geographical area United Kingdom United States Total 19X4 19X3 19X4 19X3 19X4 19X3 £000 £000 £000 £000 £000 £000 SSAP 2S (34)-(38) TURNOVER Turnover by destination: Sales to third parties Continuing 116,405 84,472 54,249 48,900 170,654 133,372 FRS 3(15) Discontinued 42,196 46,628 42,196 46,628 FRS 3(15)

158,601 131,100 54,249 48,900 212,850 180,000 sch455(2)

Turnover by origin: Continuing operations: Total sales 120,777 85,557 62,567 62,440 183,344 147,997 Inter-segment sales (8,235) (11,385) (4,455) (3,240) (12,690) (14,625)

Sales to third partiesl12,542 74,172 58,112 59,200 170,654 133,372 FRS 3(15) Discontinued operations42,196 46,628 42,196 46,628 FRS 3(15)

154,738 120,800 58,112 59,200 212,850 180,000

Tumoverof~hem Limited included in the above 21,979 21,979

PROFIT Segment profit: Continuing operations 9,440 7,438 3,008 3,137 12,448 10,575 Discontinued operations (563) (520) (563) (520)

8,877 6,918 3,008 3,137 11,885 10,055

Common costs (1,853) (1,230) Profit before tax of associated undertakings 2,750 1,250 2,750 1,250 SSAP2S(36)

Operating profit 12,782 10,075 Non-operating exceptional items (1,537) (850) Net interest and income from investments 174 (364)

Profit on ordinary activities before taxation 11,419 8,861

Operating profit of Extinguishem Limited included in the above 1,238 1,238 Appendix: Specimen financial statements: Good Group P.L.e. 1763

Good Group P.L.C. NOTES TO TIIE ACCOUNTS at 31 December 19X4

2. TURNOVER AND SEGMENTAL ANALYSIS (continued) Geographical area United Kingdom United States Total 19X4 19X3 19X4 19X3 19X4 19X3 £000 £000 £000 £000 £000 £000 SSAP 25 (34}{38) NET ASSETS Net assets by segment: Continuing operations 39,468 23,331 17,883 12,199 57,351 35,530 Discontinued operations 8,872 8,872

39,468 32,203 17,883 12,199 57,351 44,402

Unallocated net liabilities (4,517) (4,024)

52,834 40,378 Net assets of associated undertakings 3,092 2,155 3,092 2,155 SSAP25(36)

55,926 42,533 Minority interest (626) (345)

Total net assets 55,300 42,188

Net assets of Extinguishers Limited included in the above 8,648 8,648

Unallocated net liabilities comprise certain fixed assets, loan notes, net debt, taxation SSAP 25(37) and dividends. 1764 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

3. COST OF SALES AND OPERATING COSTS

19X4 19X3 Contin- Discon- Contin- Discon- uing tinued Total uing tinued Total £000 £000 £000 £000 £000 £000 FRS 3(14)

Cost of sales 131,391 38,146 169,537 105,051 39,449 144,500

Distribution costs 14,449 2,387 16,836 10,134 4,196 14,330 Administrative expenses 14,252 2,226 16,478 9,492 3,503 12,995 Other operating income 688 688 650 650 Income from interests in associated undertakings 2,750 2,750 1,250 1,250 Bid defence costs 6S5 6S5

The total figures for continuing operations in 19X4 include the following amounts FRS 6(28) relating to the acquisition of Extinguishers Limited: cost of sales £17,978,000; distribution costs £1,415,000; administrative expenses £1,396,000 and other operating income £48,000. Appendix: Specimen financial statements: Good Group P.L.e. 1765

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

4. OPERATING PROFIT This is stated after charging/(crediting):

19X4 19X3 £000 £000

Auditors' remuneration - audit services - UK· 289 239 cR(s.ll) - audit services - overseas 178 146 cR(s.ll)

467 385 s390A

- non-audit services - UK 92 59 s 3908, SI 91/2128 - non-audit services - overseas 35 26 CR(s.ll)

127 85

• £147,000 (19X3 - £121,000) of this relates to the company. s390A

Research and development expenditure written off 2,140 910 SSAP 13(31) Amortisation of deferred development expenditure 175 50 sdI4 Formats, SSAP 13(31)

Total research and development 2,315 960 SSAP 13(31)

Depreciation of owned assets 3,127 2,347 sdI4 Formats, SSAP 12(25) Depreciation of assets held under finance sdI4 Formats, leases and hire purchase contracts 263 263 SSAP 21(49), (SO)

Total depreciation charge 3,390 2,610 sdI4.42

Amortisation of goodwill 95 95 sdI4 Formats, SSAP 22(45) Provision for maintenance warranties 40 50 Operating lease rentals - land and buildings 55 50 SSAP21(SS) - plant and machinery 192 130 SSAP21(SS) Government grants (1,012) (530) SSAP 4(28)(b) 1766 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

NOTES TO THE ACCOUNTS at 31 December 19X4

S. EXCEPl'IONAL ITEMS 19X4 19X4 19X3 tooo £000 £000 FRS 3(19), (20) sch4.S7 (3) Recognised in arriving at operating profit: Professional expenses incurred in respect of bid defence 655

Recognised below operating profit: Profit on disposal of land and buildings (863) (110) (Profit)lloss on disposal of plant and machinery (387) 960

(1,250) 850 Loss on disposal of investments 350

(900) 850 Loss on sale of operations (including goodwill of £400,000) 2,437 - U1TF3(10). FRS 2(47)

1,537 850

2,192 850

Minority interests' share of profit on disposal of plant and machinery (32) - FRS 3(20)

The effect on the taxation charge for the year of the exceptional items recognised below FRS 3(20) operating profit is disclosed in note 8. Appendix: Specimen financial statements: Good Group P.L.e. 1767

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

6. STAFF COSTS 19X4 19X3 £000 £000 sch4.56

Wages and salaries 8,376 7,188 Social security costs 821 702 Other pension costs (note 28) 1,290 1,093 Post retirement benefits other than pensions (note 29) 20 19 UITF6(9)

10,507 9,002

Other pension costs include £200,000 (19X3 - £175,0(0) arising from variations in SSAP 24(88) pension cost which were identified by the most recent actuarial valuation. These are being written off over 11 years, the average remaining service lives of employees.

The average monthly number of employees during the year was made up as follows:

19X4 19X3 No. No. sch4.56

Electronics 156 146 Manufacturing and installation of lire-prevention equipment 359 323 Research and development 60 32 Administration 43 38

618 539

Details of directors' remuneration in aggregate and for each director, compensation for loss of office, pension entitlements and share options are included on pages 1740 to 1742. 1768 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

7. INTEREST PAYABLE 19X4 19X3 £(J()() £(J()() sch4.S3(2}

Bank loans and overdrafts 643 559 Other loans 411 365 Finance charges payable under finance leases and hire purchase contracts 40 35 SSAP21(S3}

1,094 959

8. TAX ON PROFIT ON ORDINARY ACl'IVlTIES The taxation charge is made up as follows: 19X4 19X3 sch4.54 £(J()() £(J()() SSAP 8(22), (23)

Corporation tax 3,089 2,234 Tax credits attributable to dividends received (excluding associated undertakings) 50 40 Deferred taxation (note 21) (340) 100 SSAP 15(33), (38)

2,799 2,374 Double taxation relief (1,075) (935)

1,724 1.439 Overseas taxation 1,075 980

2,799 2,419 Corporation tax overprovided in previous years (55) (170)

2,744 2,249 Associated undertakings 908 500 SSAP 1(20)

3,652 2,749

The effective tax rate for the current year is higher than standard as a result of sch 4.54(2), disallowable entertaining expenditure The tax effect in the profit and loss account FRS 3(20), (23) relating to the exceptional items recognised below operating profit is a credit of £623,000 (19X3 - £216,000 credit).

If full provision had been made for deferred tax for the year, the tax charge would have been increased by £419,000 (19X3 - £147,000), as follows: SSAP lS(3S} 19X4 19X3 £(J()() £00()

Capital allowances in advance of depreciation 385 91 Other timing differences 34 56

419 147 Appendix: Specimen financial statements: Good Group P.L.C. 1769

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

9. PROFIT A1TRIBUTABLE TO MEMBERS OF TIlE PARENT COMPANY The profit dealt with in the accounts of the parent company was £5,383,000 (19X3 - S 230(1)(b) £4,285,(00).

10. DIVIDENDS AND OTHER APPROPRIATIONS 19X4 19X3 £()()O £()()O sch 4.3(7) Dividends:

Equity dividends on ordinary shares·: interim paid 6.56p (19X3 - 6.55p) 798 633 final proposed 8.67p (19X3 - 6.55p) 1,061 633

1,859 1,266 FRS 4(59)

Non-equity dividends on preference shares: 30 June paid 31 December paid DTIDD88 88 175 175

2,034 1,441 FRS 4(59)

Other appropriations:

Non-equity: Amortisation of redemption premium and issue costs on preference shares 81 74 FRS 4(59)

• Good Group Employee Share Trust has waived the dividends payable on the 335,000 SSAP 3(15) (19X3 - 335,(00) shares that it owns. See note 14 for further details about the shares. UITF 13(9) The trust has agreed to waive future dividends on these shares, which are under YB 12.43(0) option to employees exercisable between 1 July 19X5 and 30 June 19X8.

11. EARNINGS PER ORDINARY SHARE The calculation of earnings per ordinary share is based on earnings, after deducting SSAP 3(15) preference dividends and other appropriations in respect of preference shares, of £7,200,000 (19X3 - £5,808,(00) and on 11,552,500 (19X3 - 9,665,(00) ordinary shares, being the weighted average number of ordinary shares in issue during the year after excluding the shares owned by the Good Group Employee Share Trust.

The fully diluted earnings per share is based on 13,304,166 (19X3 - 11,408,333) SSAP 3(16) ordinary shares, allowing for the full conversion of the convertible preference shares and the full exercise of outstanding share purchase options (note 22) including the options for shares held by the Good Group Employee Share Trust, and adjusted earnings of £7,630,000 (19X3 - £6,267,(00). Earnings before the preference dividends have been adjusted, in connection with the share options, by adding interest deemed to be earned from 2~ % Consolidated Stock on the proceeds of such share issue. 1770 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

U. INTANGIBLE FIXED ASSETS Group Development sch 4 FormalS, 4.42 Goodwill expenditure Total SSAP22(4S) £000 £000 £000 SSAP 13(32) Cost: At 1 January 19X4 250 1,510 1,760 Increase during the year 575 575

At 31 December 19X4 250 2,085 2,335

Amortisation: At 1 January 19X4 25 50 75 Provided during the year 25 175 200

At 31 December 19X4 50 225 275

Net book value at 31 December 19X4 200 1,860 2,060

Net book value at 1 January 19X4 225 1,460 1,685

Goodwill arising on the consolidation of Bright Sparks Limited is being amortised over sch4.21(4) the directors' estimate of its useful economic life of 10 years. SSAP22(4S)

13. TANGIBLE FIXED ASSETS Group Land and Plant and buildings machinery Total sch 4 FormalS, 4.42 £000 £000 £000 SSAP12(2S) Cost or valuation: At 1 January 19X4 20,405 19,850 40,255 Exchange adjustment 50 775 825 Additions 2,723 10,092 12,815 Arising on acquisition of a subsidiary undertaking 2,897 4,145 7,042 Deficit on revaluation (350) (350) DisposaIs (3,625) (7,250) (10,875) Disposal of subsidiary undertaking (3,108) (2,701) (5,809)

At 31 December 19X4 18,992 24,911 43,903

Depreciation: At 1 January 19X4 1,675 8,525 10,200 Exchange adjustment 550 550 Provided during the year 425 2,965 3,390 Disposals (600) (2,700) (3,300) Disposal of subsidiary undertaking (521) (217) (738)

At 31 December 19X4 979 9,123 10,102

Net book value at 31 December 19X4 18,013 15,788 33,801

Net book value at 1 January 19X4 18,730 11,325 30,055 Appendix: Specimen financial statements: Good Group P.L.e. 1771

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

13. TANGmLE FIXED ASSETS (continued) Company Land and Plant and buildings machinery Total sch 4 Formats, 4.42 £000 £000 £000 SSAP 12(25) Cost or valuation: At 1 January 19X4 8,754 9,450 18,204 Additions 2,275 3,475 5,750 Deficit on revaluation (154) (154) Disposals (625) (4,000) (4,625)

At 31 December 19X4 10,250 8,925 19,175

Depreciation: At 1 January 19X4 950 2,750 3,700 Provided during the year 250 1,035 1,285 Disposals (2,250) (2,250)

At 31 December 19X4 1,200 1,535 2,735

Net book value at 31 December 19X4 9,050 7,390 16,440

Net book value at 1 January 19X4 7,804 6,700 14,504

The net book value of land and buildings comprises: Group Company 19X4 19X3 19X4 19X3 £000 £000 £000 £000 sch4.44

Investment properties at valuation: Long leasehold 7,163 7,003 4,184 3,900 SSAP 19(15) Other properties at cost: Long leasehold 6,841 6,198 3,952 2,902 Short leasehold 4,009 5,529 914 1,002

18,013 18,730 9,050 7,804

The long leasehold investment properties were valued by Chartered Surveyors & Co. sch 4.33, 4.43 as at 31 December 19X4, on the basis of open market value in accordance with the SSAP 19(11), (12) Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. The historical cost of investment properties included at valuation is as follows: Group Company £000 £000

At 31 December 19X4 2,124 1,419

At 1 January 19X4 1,379 746 1772 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

13. TANGmLE FIXED ASSETS (continued) Included in the amounts· for plant and machinery above are the following amounts SSAP 21(49), (50) relating to leased assets and assets acquired under hUe purchase contracts: Group and Company £000

Cost at 1 January 19X4 and 31 December 19X4 2,102

Depreciation: At 1 January 19X4 1,051 Depreciation provided during the year 263

At 31 December 19X4 1,314

Net book value at 31 December 19X4 788

Net book value at 1 January 19X4 1,051

14. INVESTMENTS Group 19X4 19X3 £000 £000

Associated undertakings (a) 3,092 2,155 Own shares (b) 774 774 UITFl3(8) Other fixed asset investments (b) 1,266 1,276

5,132 4,205

(a) Associated undertakings Shareo/net sch4.42 tangible assets Goodwill Total sch4A.22 £000 £000 £000 SSAP 1(26)

At 1 January 19X4 1,875 280 2,155 Share of profit retained by associated undertakings 1,007 1,007 sch 4A.22(1) SSAP 1(22) Amo~tionofg~ (70) (70)

At 31 December 19X4 2,882 210 3,092

Goodwill is being amortised over the directors' estimate of its useful economic life of scb 4.21(4) six years. SSAP 22(45)

The group's share of retained profits of associated undertakings at 31 December 19X4 SSAP 1(31) is £2,627,000 (19X3 - £1,620,000). Appendix: Specimen financial statements: Good Group P.L.e. 1773

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

14. INVESTMENTS (continued) (b) Own shares and other fixed asset investments Listed Unlisted Total sch 4 Fonnats, 4.42 £000 £000 £000 sch 4.45(1) Cost: At 1 January 19X4 774 2,101 2,875 Additions 465 465 Disposals (475) (475)

At 31 December 19X4 1,239 1,626 2,865

Amounts written off: At 1 January 19X4 and 31 December 19X4 825 825

Net book value at 31 December 19X4 1,239 801 2,040

Net book value at 1 January 19X4 774 1,276 2,050

The market value of the investments listed on the London Stock Exchange at sch 4.45(2) 31 December 19X4 was £2,105,000 (19X3 - £1,307,000); if they had been sold at this SSAP 15(42) value there would have been a liability to corporation tax of £260,000 (19X3 - UITF 13(9) £160,000) on the capital gain arising from the sale. £1,484,000 (19X3 - £1,307,000) of the market value relates to own shares, being 335,000 shares, with a nominal value of £1 each, acquired at a cost of £2.31 each (19X3 - 335,000 shares at £2.31 each) held by the Good Group Employee Share Trust. Options 'over these shares have been granted to senior employees, exercisable at £2.31 per share between 1 July 19X5 and 30 June 19X8. The options may not be exercised unless the company's earnings per share has increased by 10% more than the increase in the retail price index over the period from the date of the grant of the options up to the date they first become exercisable and dividends per share have similarly increased by at least the same amount.

Dividends on the shares owned by the trust, the purchase of which was funded by an UITF 13(9) interest free loan to the trust from Good Group P.L.C., are waived. All expenses incurred by the trust are settled directly by Good Group P.L.C. and are charged in the accounts as incurred. 1774 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

14- INVESTMENTS (continued) Company Subsidiary Associated Own Other undertakings undertakings shares investments Total £()()() £()()() £()()() £()()()

Cost: At 1 January 19X4 6,420 675 774 2,101 9,970 Exchange difference 200 200 Additions 10,910 10,910 Disposals (2,670) (475) (3,145)

At 31 December 19X4 14,860 675 774 1,626 17,935

Amounts written off: At 1 January 19X4 and 31 December 19X4 825 825

Net book value at 31 December 19X4 14,860 675 774 801 17,110

Net book value at 1 January 19X4 6,420 675 774 1,276 9,145

The market value of the investment in the company's own shares at 31 December 19X4 scb 4.45(2) was £1,484,000 (19X3 - £1,307,000); if they had been sold at this value there would SSAP 15(42) have been a liability to corporation tax of £213,000 (19X3 - £150,000) on the capital UIT'F 13(9) gain arising from the sale. The shares are held by Good Group Employee Share Trust. See above for details.

No other investments are listed. Appendix: Specimen financilll statements: Good Group P.L.C. 1775

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

14. INVESTMENTS (continued) Details of the investments in which the group or the company holds 20% or more of the nominal value of any class of share capital are as follows:

Country of operation and, Proportion where outside GB, ofvoting the country of rights and Nature of Name ofcompany incorporation Holding shares held business

SubsitlUuy undertlUdngs

All held by the company unless indicated.

Extinguishers Limited England Ordinary shares 100% Fire- sch S.lS, S.16 prevention FRS 2(33) equipment YBl2.43(f)

Bright Sparks Limited England Ordinary shares 85% Electronics Preferred shares 45%*

Wireworks Incorporated USA Common stock 90% Electronics

Sprinklers Incorporated USA Common stock 100% Fire- prevention equipment

Lightbulbs Limited Scotland Ordinary shares 100% Dormant

* held by a subsidiary undertaking.

AssociDJed undertlUdngs

All held by the company unless indicated.

Power Works Limited England Ordinary shares 25% Electronics schS.22 SSAPl(49) YB12.43(g) Showers Limited England Ordinary shares 33%t Fire- prevention equipment t 7% held by a subsidiary undertaking.

The issued share capitals of associated undertakings are: YB 12.43(g) Power Works Limited: BOO,OOO ordinary shares of £1 each Showers Limited: 925,000 ordinary shares of £1 each 1776 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

14. INVESTMENTS (continued) On 1 April 19X4 the group acquired Extinguishers Limited for a consideration of FRS 6(21), (24) £8,750,000 satisfied by the issue of 2,500,000 ordinary shares at £3.50 each. Goodwill sch4A.13(2) arising on the acquisition of Extinguishers Limited during the year has been written off against reserves. The investment in Extinguishers Limited has been included in the company's balance sheet at its fair value at the date of acquisition and the amount that would have been transferred to share premium account had it not been for the relief available under section 131 has been taken to 'Other reserves'. Analysis of the acquisition of Extinguishers Limited: Net assets at date of acquisition: Fair Book Other value value Revaluation provisions to group sch 4A.13(S), (7) £()()() £()()() £000 £()()() SSAP 22(48)

Tangible fixed assets 5,684 1,358 a 7,042 Stocks 3,804 540 b 4,344 Debtors 2,170 (434)c 1,736 Cash 230 230 Creditors due within one year (5,077) (5,077) Provisions for maintenance warranties (300) (IOO)d (400) Deferred taxation (167) 42e (125)

Net assets 6,344 1,364 42 7,750

Goodwill arising on acquisition 1,500 sch 4A.13(S) FRS6(2S)

9,250

Discharged by: Fair value of shares issued (note 22) 8,750 Costs associated with the acquisition 500

Fair value of shares issued 9,250 sch 4A.13(3) SSAP22(47) FRS 6(24)

Adjustments: sch 4A.13(S) FRS6(2S) (a) Increase in value of freehold properties since last revaluation in 19W9 and increase in value of plant and machinery to its depreciated replacement cost. (b) Increase in value of stock to its current cost. (c) Write down of debtors following reassessment of realisable value of aged debt listing. (d) Reassessment of the provision for maintenance warranties on Extinguishers Limited's products. (e) Adjustment to provision for deferred tax. Appendix: Specimen financial statements: Good Group P.L.c. 1777

Good Group P.L.e. NOTES TO TIIE ACCOUNTS at 31 December 19X4

14. INVESTMENTS (continued) Extinguishers Limited contributed £265,000 to the group's net operating cash flows, FRS 1(45) paid £85,000 in respect of net returns on investments and servicing of finance, paid FRS 6(34) £180,000 in respect of taxation and utilised £225,000 for capital expenditure and financial investment. Extinguishers Limited earned a profit of £1,128,000 in the year ended 31 December sch4A.13(4) 19X4 (19X3 - £974,000), of which £230,000 arose in the period from 1 January 19X4 FRS 6(35), (36) to 1 April 19X4. The summarised profit and loss account for the period from 1 January 19X4 to the effective date of acquisition is as follows: £000

Turnover 7,258

Operating profit 398 Loss on fixed asset disposals (61)

Profit before tax 337 Taxation (107)

Profit for the three months ended 31 March 19X4 230

There were no recognised gains and losses in the three months ended 31 March 19X4 FRS 6(36) other than the profit of £230,000 above. On 30 November 19X4, the group completed the sale of Hose Limited. The disposal is sch 4A.15 analysed as follows: FRS 2(46)-(48) SSAP22(52) Net assets disposed of: £000

Fixed assets 5,071 Stocks 3,315 Debtors 1,916 Bank overdraft (2,117) Other creditors (2,093) Goodwill 400

6,492 Loss on disposal (including goodwill of £400,000) (2,437) UITF 3(10)

4,055

Satisfied by: Loan notes 4,000 Cash 55

4,055

During the year, Hose Limited utilised £385,000 of the group's net operating cash FRS 1(45) flows, paid £96,000 in respect of net returns on investments and servicing of finance, paid £176,000 in respect of taxation and utilised £487,000 for capital expenditure and fmancial investment. 1778 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNI'S at 31 December 19X4

15. STOCKS Group Company 19X4 19X3 19X4 19X3 sch 4 FonnalS £000 £000 £000 £000 SSAP9(27)

Raw materials and consumables 7,565 6,375 3,155 2,300 Work in progress 10,840 8,425 4,715 3,125 Finished goods and goods for resale 7,720 5,300 3,700 1,700

26,125 20,100 11,570 7,125

The difference between purchase price or production cost of stocks and their sch 4.27(3} replacement cost is not material.

16. DEBTORS Group Company 19X4 19X3 19X4 19X3 £000 £000 £000 £000 sch 4 FormalS

Loannotcs 4,000 4,000 Trade debtors 14,260 10,452 4,085 3,100 Amounts owed by group undertakings 6,900 6,350 Amounts owed by associated undertakings 230 145 - SSAPl(29) Other debtors 1,318 930 256 1,507 Prepayments and accrued income 554 430 370 345

20,362 11,957 15,611 11,302

Included within prepayments and accrued income for the group and the company is SSAP 24(88} £370,000 (19X3 - £320,000) in respect of pension contnbution payments made in advance of their recognition in the profit and loss account (company - £315,000 (19X3 - £275,000».

Amounts falling due after more than one year included above are: sell 4 FonnalS (noteS) Group Company 19X4 19X3 19X4 19X3 £000 £000 £000 £000

Loan notes 2,000 2,000 Amounts owed by group undertakings 6,900 6,350 Included in other debtors: Advance corporation tax recoverable 159 223 55 Other 1,000 1,000 Included in prepayments and accrued income: Pension prepayments 370 320 315 275

3,529 1,320 9,438 6,680 Appendix: Specimen financial statements: Good Group P.L.C. 1779

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

17. CREDITORS: amounts falling due within one year Group Company 19X4 19X3 19X4 19X3 £000 £000 £000 £000 sch 4 Formats

Current instalments due on loans 1,485 480 1,485 480 Bank overdraft 760 3,770 Obligations-under finance leases and hire purchase contracts 179 370 179 370 SSAP21(Sl) Trade creditors 15,690 13,855 5,169 2,906 Corporation tax 2,877 2,280 1,473 1,280 sch 4 Formats (DOte 9) Advance corporation tax 287 180 287 180 Other taxes and social security costs 150 420 60 95 sch 4 Formats (DOle 9) Other creditors 2,510 3,275 2,335 2,840 Proposed dividend 1,061 633 1,061 633 sch4.51(3)

24,999 25,263 12,049 8,784

The bank overdraft is secured by a floating charge over certain of the group's assets. sc:b 4.48(4)

18. CREDITORS: amounts falling due after more than one year Group Company 19X4 19X3 19X4 19X3 £000 £000 £000 £000 sc:b 4 Formats

Loans 11,697 8,420 9,197 8,420 Obligations under finance leases and hire purchase contracts 866 1,045 866 1,045 SSAP21(Sl)

12,563 9,465 10,063 9,465

19. LOANS Group Company 19X4 19X3 19X4 19X3 £000 £000 £000 £000 Amounts falling due: FRS 4(33) In one year or less or on demand 1,500 500 1,500 500 Between one and two years 1,500 1,500 1,500 1,500 Between two and five years 2,350 3,400 2,350 3,400 In five years or more 7,955 3,600 5,455 3,600

13,305 9,000 10,805 9,000 Less issue costs 123 100 123 100

13,182 8,900 10,682 8,900 Included within amounts falling due within one year 1,485 480 1,485 480

11,697 8,420 9,197 8,420 1780 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO TIlE ACCOUNTS at 31 December 19X4

19. LOANS (continued) Details of loans not wholly repayable within five years are as follows: sch 4.48

Group Company 19X4 19X3 19X4 19X3 £000 £000 £000 £000

8.25% secured loan of US$3,600,000 repayable on 31 May 19YO 2,305 2,305 Secured loan repayable on 31 July 19YO· 2,500 8% debentures repayable in annual instalments of £450,000 commencing 1 January 19X7 4,500 4,500 4,500 4,500

9,305 4,500 6,805 4,500 Less issue costs 96 53 96 53

9,209 4,447 6,709 4,447

• This loan has been drawn down under a six year multi-option facility (MOF). The FRS 4(36) loan is repayable within twelve months of the balance sheet date, but has been classified as long term because under the MOF immediate replacement funding is available through to 31 July 19YO. The rate of interest payable on the loan is 2.0% above LmOR.

The long-term loans are secured by. fixed charges over various of the group's sch 4.48(4) properties. Company and group loans wholly repayable within five years include £1,500,000 (19X3 - £1,500,000) secured by a floating charge over the company's assets. Appendix: Specimen financil21 statements: Good Group P.L.e. 1781

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

20. OBliGATIONS UNDER LEASES AND HIRE PURCHASE CONTRACTS Amounts due under finance leases and hire purchase contracts: Group and company 19X4 19X3 £000 £000 SSAP 21(51). (52)

Amounts payable: within one year 214 410 between two and five years 1,029 1,243

1,243 1,653 Less: finance charges allocated to future periods 198 238

1,045 1,415

Annual commitments under non-cancellable operating leases are as follows:

Land and buildings Other 19X4 19X3 19X4 19J(3 sch 4.50(5) Group £000 £000 £()()() £()()() SSAP21(56) Operating leases which expire: within one year 50 30 between two and five years 100 75 over five years 60 50 40 70

60 50 190 175

Company Operating leases which expire: within one year 20 15 between two and five years 90 45 over five years 60 50 10 40

60 50 120 100 1782 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

21. PROVISIONS FOR LIABILITIES AND CHARGES Group Company Provision Post- for retirement maintenance Deferred Deferred benefits warranties taxation Total taxation scb 4.46 £000 £000 £000 £000 £000 UITF 6(9)

At 1 January 19X4 95 60 226 381 141 Exchange adjustment 2 2 Arising on the acquisition of subsidiary undertaking 400 125 525 ACf movement 58 58 (67) Arising during the year 20 40 (340) (280) (46) Utilised (40) (40)

At 31 December 19X4 117 460 69 646 28

Deferred taxation provided in the accounts and the amounts not provided are as follows:

Group Provided Not provided 19X4 19X3 19X4 19X3 scb 4.47 £()()() £()()() £()()() £()()() SSAP 15(37), (40)

Capital allowances 175 320 1,270 885 Other timing differences 80 46

175 320 1,350 931 Less: advance corporation tax 106 164

69 156 1,350 931 Taxation on valuation surplus 70 530 180

69 226 1,880 1,111

No provision has been made for deferred taxation in respect of earnings which are SSAP 15(44) retained overseas because the availability of double tax relief will ensure that no tax will be payable on any earnings remitted to the United Kingdom. The deficit arising on the valuation of investment properties at the end of the year reverses, in part, previous surpluses. No deferred tax has been provided on the previous revaluation surpluses as there is no present intention to dispose of the properties. Accordingly there are no deferred tax implications of the deficit recognised this year. Appendix: Specimen financial statements: Good Group P.L.e. 1783

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

21. PROVISIONS FOR LIABILlTIES AND CHARGES (continued) Deferred taxation provided in the accounts and the amounts not provided are as follows:

Company Provided Not provided 19X4 19X3 19X4 19X3 sch4.47 £000 £000 £000 £000 SSAP 15(37), (40)

Capital allowances 70 180 635 645 Other timing differences 70 55

70 180 705 700 Less: advance corporation tax 42 109

28 71 705 700 Taxation on valuation surplus 70 365 150

28 141 1,070 850

22. SHARE CAPITAL Authorised 19X4 19X3 £()()() £000 sch4.38(I)

Ordinary shares of £1 each 17,500 15,000 7% convertible cumulative redeemable preference shares of £1 each 2,500 2,500

20,000 17,500

Allotted, called up and fully paid sch 4 FormalS 19X4 19X3 19X4 19X3 (note 12) thousands thousands £000 £000 sch4.38(I)

Ordinary shares of £1 each 12,575 10,000 12,575 10,000 7% convertible cumulative redeemable preference shares of £1 each 2,500 2,500 2,500 2,500

15,075 12,500 15,075 12,500

During the year the authorised share capital was increased by £2,500,000 by the sch4.39 creation of 2,500,000 ordinary shares of £1 each. Shares were allotted fully paid as follows:

On 1 April 19X4, 2,500,000 ordinary shares were issued at £3.50, in consideration of FRS 6(24) the acquisition of Extinguishers Limited for £8,750,000. On 1 November 19X4 75,000 ordinary shares were allotted at £2.33 each, totalling £174,750 upon the exercise of options (see below). 1784 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

22. SHARE CAPITAL (continued) The company has a share option scheme under which options to subscribe for the sch 4.40 company's shares have been granted to certain executives. At 1 January 19X4 options under this scheme were outstanding over (a) 75,000 ordinary shares at £2.33 each, exercisable between 1 November 19X4 and 31 October 19X5, and (b) 500,000 ordinary shares at £3.S0 each, exercisable between 1 January 19X6 and 31 December 19Y3. During the year options were granted over 250,000 ordinary shares at £3.S5 each, exercisable between 1 January 19X5 and 31 December 19Y5. All options under (a) above were exercised during the year.

The 7% convertible cumulative redeemable preference shares, which were issued at par sch 4.38(2), 4.40, on 1 January 19W5, are convertible at the option of the company or the shareholder FRS 4(56) into ordinary shares on 1 January 19X7, 19X8 or 19X9 on the basis of one ordinary share for every three preference shares. They are redeemable at the option of the shareholder on 1 January 19X7, 19X8 and 19X9 at £1.20 per share. Any preference shares not converted.are redeemable at £1.20 per share on 31 December 19Y3. The preference shares carry a dividend of 7% per annum, payable half-yearly in arrears on 30 June and 31 December. The dividend rights are cumulative. The preference shares carry no votes at meetings unless the dividend thereon is six months or more in arrears or the company fails to redeem the shares on the redemption date or the business of the meeting includes a resolution for the winding up the company or reducing its share capital, in which event each holder will be entitled to one vote on a show of hands or one vote per share on a poll. On a winding up of the company the preference shareholders have a right to receive £1 per share plus any accrued dividend. Appendix: Specimen financial statements: Good Group P.L.e. 1785

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

23. RESERVES Group Share Profit premium Revaluation Other and loss sch 4.46 account reserve reserves account SSAP 19(15) £000 £000 £000 £000

At 1 January 19X4 500 5,554 23,634 Exchange differences on retranslation of net assets and results of subsidiary undertakings 460 SSAP2O(60) Exchange difference on loan (145) SSAP2O(60) Deficit on ievaluation of investment properties (350) Realised revaluation surplus on sale of investment property (235) 235 Deferred tax released on sale of investment property 70 (70) Arising on share issues 100 6,250 Goodwill on acquisition of Extinguishers Limited written off (1,500) Goodwill reinstated on disposal of Hose Limited 400 Share issue costs (100) Retained profit for the year 5,341 Other appropriations added back 17 64 Transfer in respect of issue costs on debentures and preference shares (23) 23 FRS 4(97)

At 31 December 19X4 494 5,039 4,750 29,942

The cumulative amount of goodwill written off at 31 December 19X4, net of goodwill sch 4A.14 relating to undertakings disposed of, is £2,820,000 (19X3 - £1,720,000). 1786 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

23. RESERVES (continued) Company Share Profit premium Revaluation Other and loss account reserve reserves account £000 £000 £000 £000

At 1 January 19X4 500 3,084 13,232 Exchange difference on investment in subsidiary undertaking 200 SSAP 20(60) Exchange difference on loan (145) SSAP 20(60) Deficit on revaluation of investment properties (154) Realised revaluation surplus on sale of investment property (235) 235 Deferred tax released on sale of investment property 70 (70) Arising on share issues 100 6,250 Share issue costs (100) Retained profit for the year 3,268 Transfers in respect of other appropriations 17 64 Transfer in respect of debenture and preference share issue costs (23) 23 FRS 4(97)

At 31 December 19X4 494 2,765 6,250 16,807

24. NOTES TO THE STATEMENT OF CASH FLOWS (a) Reconciliation of operating profit to net cash inflow from operating activities

19X4 19X3 £000 £000 FRS 1(12)

Operating profit 12,782 10,075 Depreciation 3,390 2,610 Amortisation of development expenditure 175 50 Amortisation of goodwill 95 95 Income from interests in associated undertakings (2,750) (1,250) Dividends received from associated undertaking 835 650 FRS 1(11) Provision for maintenance warranties utilised (40) (25) Deferred government grants released (1,012) (530) Increase in debtors (4,181) (2,745) Increase in stocks (4,976) (2,585) Decrease in creditors (2,328) (1,045) Increase in provision for maintenance warranties 40 50 Increase in provision for post-retirement benefits other than pensions 20 19

Net cash inflow from operating activities 2,050 5,369 Appendix: Specimen financial statements: Good Group P.L.e. 1787

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

24. NOTES TO THE STATEMENT OF CASH FLOWS (continued) (b) Analysis of net debt At Other At 31 1 January Cash Exchange non-cash December 19X4 flow differences movements 19X4 £000 £000 £000 £000 £000 FRS 1(33)

Cash at bank and in hand 9,291 7,241 Bank overdrafts (3,770) (760)

Cash 5,521 695 265 6,481 Short term deposits· 2,019 (528) (28) 1,483 Loans (8,900) (4,110) (145) (27) (13,182) Finance leases (1,415) 370 (1,045)

At 31 December 19X4 (2,755) (3,573) 92 (27) (6,263)

• Short term deposits are included within cash at bank and in hand in the balance sheet.

(c) Major non-cash transactions FRS 1(46)

See note 14 for an analysis of the acquisition of Extinguishers Limited and the disposal of Hose Limited.

(d) Exceptional items FRS 1(37)

Cash flows reloting to operating exceptional items Net cash inflow from operating activities in 19X4 includes £630,000 of cash outflows in respect of professional expenses incurred in respect of the bid defence.

Cash flows reloting to non-operating exceptional items Capital expenditure cash flows include £8,625,000 from the sale of tangible fixed assets (19X3 - £3,965,000) and £125,000 from the sale of fixed asset investments (19X3 - £nil).

25. POST BALANCE SHEET EVENT On 14 February 19X5 a short leasehold building with a net book value of £1,695,000 sch 4.12(b) was severely dantaged by flooding. It is expected that insurance proceeds will fall SSAP 17(23) - (25) short of the costs of rebuilding and loss of profits by some £750,000. No provision has been made in these accounts for this loss.

26. CAPITAL COMMITMENTS Amounts contracted for but not provided in the accounts amounted to £4,500,000 for sch 4.50(3) the group and £1,750,000 for the company (19X3 - £4,250,000 and £950,000 respectively). 1788 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

27. CONTINGENT LIABILITY The company has guaranteed the bank overdraft of a subsidiary undertaking to the sch 4.50(2) extent of £1,500,000 (19X3 - £1,000,(00), of which £760,000 was utilised at 31 sch4.59A December 19X4 (19X3 - £375,000). SSAP 18(18)

28. PENSION COMMITMENTS The group operates two defined benefit pension schemes, one in the United Kingdom, sch 4.50(4) the Good Group Employee Pension Scheme, and one in the United States, the Good SSAP 24(88) Group Employee Pension Plan. Both schemes are funded by the payment of contributions to separately administered trust funds. The pension costs are determined with the advice of independent qualified actuaries on the basis of triennial valuations using the projected unit credit method. The results of the most recent valuations. which were conducted as at 31 December 19X1, were as follows: United UK States

Main assumptions: Rate of return on investments (% per annum) 10.0 10.0 Rate of salary increases (% per annum) S.O 7.0 Rate of pension increases (% per annum) 6.0 Nil

Market value of scheme's assets (£000) 4,550 1,450 Level of funding being the actuarial value of assets expressed as a percentage of the benefits accrued to members. after allowing for future salary increases 90% 106%

Further contributions. in addition to the employer's current contribution of 12% of pensionable earnings, are being made in order to eliminate the deficiency in the UK scheme by 19X5. The deficit in the UK and the surplus in the US scheme are being recognised as variations from regular cost over 11 years, the average expected remaining service lives of both the UK and the US employees. Since the date of these valuations. the group has acquired Extinguishers Limited and sold Hose Limited. The group's actuarial advisers have confirmed that these events are unlikely to have had a significant effect on the position of the UK fund. A valuation as at 31 December 19X4 is currently being underataken.

29. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS The group also operates a plan in the United States which provides employees with sch 4.50(5) certain post-retirement benefits other than pensions. The liabilities in respect of these UITF 6(9) benefits are assessed by qualified independent actuaries, applying the projected unit credit method. The charge for the year is £20,000 (19X3 - £19,(00). The main assumptions used in the calculation were: Rate of inflation in the cost of providing benefits (% per annum) 9.0 Discount rate for obligations (% per annum) 7.0 Appendix: Specimen financial statements: Good Group P.L.c. 1789

Good Group P.L.e. NOTES TO THE ACCOUNTS at 31 December 19X4

30. DIRECTORS' LOAN At the Annual General Meeting held on 15 July 19X4 approval was given for an sch 6, part II interest-free loan up to a maximum of £10,000 to be made as necessary to F R Brown to enable him to meet expenditure to be incurred in his capacity as sales director at marketing exhibitions and tours in the USA. During the year £6,500 was advanced to him for this purpose and at 31 December 19X4 £2,432 was outstanding and is included in debtors.

31. OTIIER DIRECTORS' INTERESTS During the year, purchases totalling £510,000 (19X3 - £490,000), at normal market sch 6, part II prices have been made by group companies from UK Gnome Industries Limited, of YB 12.43(q) which P A MacBryde's wife is a director and controlling shareholder. £10,000 was FRS 8(6) outstanding at 31 December 19X4 {l9X3 - £9,000). F R Brown was interested throughout the year, through his 25% equity interest in Homes Fires Limited, in a contract for the supply of fire extinguishers to that company. During the year the company supplied extinguishers to Home Fires Limited to a value of £225,000 at normal market prices. At 31 December 19X4 Home Fires Limited owed £20,000 to the company (19X3 - £nil).

32. OTIIER RELATED PARTY TRANSACTIONS During the year the group entered into the following transactions, in the ordinary course of business, with other related parties:

Purchases Amounts Amounts Sales to from owed to owed from FRS 8(6) related related related related party party party party Related party £()()() £()()() £()()() £()()()

International Fires PLC 19X4 6,975 600 19X3 6,410 550 Power Works Limited 19X4 2,800 230 19X3 2,300 145 Showers Limited 19X4 580 30 19X3 430 12

International Fires P L.C. International Fire P.L.C. owns 31.48% of the shares in the company. Power Works Limited The group has a 25% interest in Power Works Limited. Showers Limited The group has a 33% interest in Showers Limited. 1790 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C. NOTES TO THE ACCOUNTS at 31 December 19X4

33. MINORITY INTERESTS The non-equity minority interests represent a holding of 55% of the preferred shares in FRS 4(61) Bright Sparks Limited (see note 14). The holders of those shares have no rights against any other group company. Appendix: Specimen financial statements: Good Group P.L.e. 1791

Good Group P.L.e.

FIVE YEAR SUMMARY 1964 leiter from Stock Exchange Years ended 31 December 19X4 19X3 19X2 19X1 19XO £000 £000 £000 £000 £000 TURNOVER: Continuing 170,654 133,372 126,704 97,913 107,696 Discontinued 42,196 46,628 44,296 31,587 38,104

212,850 180,000 171,000 129,500 145,800

OPERATING PROFIT: Continuing 13,345 10,595 9,935 6,713 7,645 Discontinued (563) (520) (500) (475) (497)

12,782 10,075 9,435 6,238 7,148

NON-OPERATING EXCEPTIONAL ITEMS: Continuing: profit/(loss) on fixed asset disposals 900 (850) (258) (328) 26 loss on sale! termination of operations (412) Discontinued: loss on fixed asset disposals (387) (213) (97) loss on sale! termination of operations (2,437)

(1,537) (850) (645) (541) (483)

Net interest receivable/ (payable) 174 (364) (262) 593) (345)

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 11,419 8,861 8,528 5,104 6,320 Tax on profit on ordinary activities (3,652) (2,749) (2,875) (2,030) (2,455) Minority interests (311) (55) Dividends and other appropriations (2,115) (1,515) (1,316) (1,182) (1,031)

RETAINED PROFIT 5,341 4,542 4,337 1,892 2,834

STATISTICS Earnings per ordinary share 62.32p 60.09p 55.98p 28.37p 36.34p Dividends per ordinary share 15.23p 13.1Op 11.1Op 9.45p 8.00p Dividend cover (times) 4.1 4.6 5.0 3.0 4.5 Operating margin (%) 4.7 4.9 4.9 4.8 4.9 1792 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

FIVE YEAR SUMMARY 1964 letter from Stock Exchange Years ended 31 December 19X4 19X3 19X2 19X1 19XO £000 £000 £000 £000 £000

EMPWYMENT OF GROUP CAPITAL Fixed assets 40,993 35,945 32,871 29,650 24,500 Net current assets (less provisions and deferred tax government grants) 27,496 16,053 11,217 12,154 13,724

68,489 51,998 44,088 41,804 38,224

GROUP CAPITAL EMPWYED Creditors falling due after more than one year 12,563 9,465 5,895 6,780 7,430 Minority interests 626 345 Capital and reserves 55,300 42,188 38,193 35,024 30,794

68,489 51,998 44,088 41,804 38,224

SHAREHOLDERS' FUNDS Equity 52,487 39,456 35,535 32,434 28,266 Non-equity 2,813 2,732 2,658 2,590 2,528

55,300 42,188 38,193 35,024 30,794

NET DEBT Cash at bank and in hand 7,241 9,291 5,233 4,489 3,808 Bank overdraft (760) (3,770) (4,425) (3,185) (1,025) Short term deposits 1,483 2,039 1,132 1,456 1,222 Loans (13,182) (8,900) (4,442) (4,884) (5,383) Finance leases (1,045) (1,415) (1,800)

(6,263) (2,755) (4,302) (2,124) (1,378)

Net gearing (%) 11.3 6.5 11.3 6.1 4.5 Appendix: Specimen financial statements: Good Group P.L.e. 1793

Good Group P.L.e. NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the company will be held at Homefire House, Ashdown Square, London EC2 3AS on 15 May 19X5 at lUX! a.m. for the following purposes: 1. To receive the directors' report and accounts for the financial year 19X4 and the auditors' report thereon. 2. To re-elect Mrs L B Green as a director following her appointment as a director during the year. 3. To re-elect J N Smith, who is retiring by rotation, as a director. 4. To re-elect J Archer, who is retiring by rotation, as a director. 5. To re-elect P A MacBryde, who is retiring by rotation, as a director. 6. To reappoint Chartered Accountants & Co. as auditors. 7. To authorise the directors to fix the remuneration of the auditors. 8. As special business to consider and, if thought fit, to pass resolutions (A) and (B) of which resolution (A) will be proposed as an ordinary resolution and resolution (B) will be proposed as a special resolution: (A) To authorise the directors to allot relevant securities in accordance with section 80 of the Companies Act 1985 subject to the following restrictions and provisions: (i) this authority shall be limited to the allotment of relevant securities up to an aggregate nominal value of £4,925,000; (ii) this authority shall exPire at the conclusion of the next Annual General Meeting, save that the company may before such an expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired. (B) Subject to the passing of the resolution (A) as an ordinary resolution, to empower the directors in terms of section 95 of the Companies Act 1985 to allot equity securities (as defined by section 94 of the said Act) for cash as if section 89(1) of the said Act did not apply to such allotment, provided that such powers shall be limited to: (i) the allotment of such equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities allotted are in proportion (as nearly as may be) to the respective number of ordinary shares held by such ordinary shareholders subject to such exclusions and other arrangements as the directors may deem necessary or expedient; and (ii) the allotment (otherwise than pursuant to paragraph (i) above) of such equity securities up to an aggregate nominal value of £628,750; and provided that this power shall expire at the conclusion of the next Annual General Meeting of the company. By order of the board,

J Harris Secretary 14 April19X5 1794 Generally Accepted Accounting Practice in the United Kingdom

Good Group P.L.C.

NOTICEOFANNUALG~MEETING

A member entitled to attend and vote at the above meeting is entitled to appoint one or S.372(1) more proxies to attend and vote instead of him. A proxy need not also be a member of the company.

Forms of proxy must be deposited at the company's registrars, Registration Services YB 9.26, 13.28, Limited, 45 Market Street, London W2 7JA, not less than 48 hours before the time 13.29 fixed for the meeting.

A statement or summary of transactions of directors (and their family interests) in the sch 13.29 share capital of the company and copies of their service contracts will be available for YB 16.9, 14.20 inspection at the company's registered office during normal business hours on each business day from the date of this notice to 14 May 19X5 inclusive, and during the meeting and will be available for inspection at the place of the Annual General Meeting for at least 15 minutes prior to and during the meeting. Index of extracts from accounts

Company Page Number

Aesis Group pIc ...... 1362 Adwest Group p.l.e ...... 1052 Aegis Group pIc ...... 162 Alexon pIc ...... 871 Alfred McAlpine PLC ...... 1595 Alliance Trust PLC (The) ...... 261 Allied Colloids pIc ...... 1664,1668 Allied Domeeq PLC ...... 242,523,643,1442,1686 AMEC p.l.e ...... 1397 Amersham International pIc ...... 747, 1324, 1382 Amstrad pIc ...... 507,1270 Anglian Water PIc ...... 1486 APVple ...... 376,382, 1169, 1342, 1646 Argos pIc ...... 1237, 1327 Arjo Wiggins Appleton p.l.e ...... 851, 1064, 1223, 1421, 1447, 1448 Associated British Engineering pIc ...... 1229 Associated British Foods pIc ...... 1554 Associated Nursing Services pIc ...... 1026,1546 B.A.T Industries p.l.e ...... 32,33,748,1417,1425 B.S.G. International pIc ...... 1033 BAA pIc ...... 786, 1326 Babcock International Group PLC ...... 483 Bank of Scotland ...... 1716 Barelays PLC ...... 259,1083,1173 Barratt Developments PLC ...... 957 Bass PLC ...... 609, 695, 1717 BBA Group pIc ...... , ...... 873 Belhaven pIc ...... 359 Berisford International pIc ...... 1327 Berisford pIc ...... 692, 1422, 1661 1796 Generally Accepted Accounting Practice in the United Kingdom

BET Public Limited Company ...... 1091 BG pic ...... 606, 1422 BICC pIc ...... 282,317,830, 1139, 1238, 1332, 1427 Blue Arrow PLC ...... 337, 518, 699,1496 BOC Group pIc (The) ...... 603, 655, 905,1076,1135,1589,1589,1628 Body Shop International PLC (The) ...... 1591, 1592 Booker pic ...... 233, 256,816,1671 Boots Company PLC(The) ...... 523, 1638, 1667, 1682 BPB pic ...... 1557 Brammer pic ...... 661, 1416 Bridon pIc ...... 448, 953 British Aerospace Public Limited Company ...... 425, 869, 940, 1034, 1557, 1602 British Airways Pic ...... 509, 788, 1082 British Coal Corporation ...... 1168 British Gas pic ...... 1436, 1596 British Land Company PLC (The) ...... 636, 761 British Nuclear Fuels Limited ...... 1453 British Petroleum Company p.l.c. (The) ...... 479, 514, 609, 656, 811, 812, 813, 1077, ...... 1093, 1130, 1452, 1453, 1453, 1483, 1484, 1485 British Polythene Industries pIc ...... 1427 British Steel pic ...... 650,816 British Telecommunications pic ...... 242, 611, 635,1002 Brunei Holdings pic ...... 1221 BTR pic ...... 1094 Bunzl pic ...... 492 Burton Group pIc (The) ...... 643, 1481, 1485, 1541 C. E. Heath PLC ...... 1626 Cable and Wireless pIc ...... 192,377,501,1013, 1224, 1502, 1627 Cadbury Schweppes p.l.c ...... 519, 628, 660, 893, 896, 1001, 1137, 1386, 1488, 1672 Caledonia Investments pIc ...... 1624, 1679 Caradon pic ...... 1426 Carlton Communications PIc ...... 1497, 1498 Central Transport Rental Group pIc ...... 624 Charter pic ...... 1418 Charterhall PLC ...... 344 Chloride Group PLC...... 191, 329, 610, 1627, 1628, 1665 Christian Salvesen PLC ...... 1675, 1690 Index of extracts from accounts 1797

Chrysalis Group PLC...... 158, 1068, 1592, 1597 Coats Viyella PIc ...... 727,1073,1277,1279,1346,1595,1715 Commercial Union pIc ...... 377 Cookson Group pIc ...... 287, 805, 807, 952,1089,1225,1287 Cordiant pIc ...... 1445, 1591 Costain Group pIc ...... 1394 Countryside Properties PLC ...... 936 Courtaulds pIc ...... 533, 942 Courtaulds Textiles pIc ...... 1434 Courts PIc ...... 387 Crest Nicholson PIc ...... 169 Creston Land and Estates pIc ...... 254 Daejan Holdings PLC ...... 690 Daily Mail and General Trust pIc ...... 492, 647, 773, 1347, 1491 Dalgety PLC ...... 207,566,1645 Davis Service Group PIc (The) ...... 1222 Dawson International PLC ...... 1475 De La Rue pIc ...... 260, 1662 Delta pIc ...... 700 ECC Group pIc ...... 1121 EMAP pIc ...... 1080 EMI Group pIc ...... 1224, 1233, 1575 English China Clays pIc ...... 519 Enterprise Oil pIc ...... 904 Fairway Group PIc ...... 1280 Ferguson International Holdings PLC ...... 1384 Field Group pIc ...... 1648, 1652, 1683 Fine Art Developments p.l.c...... •...... 259 First Choice Holidays PLC ...... 1420 First Leisure Corporation PLC ...... 1081, 1592 Firth Rixson pIc ...... 1094 Fisons pIc ...... 536 FKI pIc ...... 300, 1623 Forte PIc ...... 1024, 1025 Friendly Hotels pIc ...... 643 Friends Provident Life Office ...... 1543, 1591 Frogmore Estates pIc ...... 190 1798 Generally Accepted Accounting Practice in the United Kingdom

Geest PLC ...... 1392 General Accident pIc ...... 1140 General Electric Company p.l.c. (The) ...... 377 George Wimpey PLC ...... 283 Gerrard Group pIc ...... 1634, 1647, 1649 GKN pIc ...... 432, 533, 651, 314, 1171, 1418, 1419 Glaxo Wellcome pIc ...... 233, 355, 722,1226 Glynwed International pIc ...... 272, 1139, 1232,1345, 1349 Grampian Holdings pIc ...... 746 Granada Group PLC ...... 310, 335, 366, 376, 646, 855 Grand Metropolitan Public Limited Company ...... 336, 446, 602, 852, 906 Graseby pIc ...... 187, 304, 1409, 1445, 1661 Greenalls Group pIc (The) ...... 1487 Greycoat PLC ...... 1490 Guinness PLC ...... 200, 338, 378, 536, 627, 679, 769, 885,1495 Haden MacLellan Holdings pIc ...... 999 Hall Engineering pIc ...... 1334 Hambro Insurance Services Group PLC...... 1632 Hammerson pIc ...... 170,636,704 Hanson PLC...... 1271, 1285 Hardy Oil & Gas pIc ...... 490 Harrisons & Crosfield pIc ...... 1435 Henlys Group pIc ...... 951 Hepworth PLC ...... 1132 Hillsdown Holdings pIc ...... 901 HSBC Holdings pIc ...... 243,900, 1012, 1174 Hex Limited ...... 1289 Imperial Chemical Industries PLC ...... 244, 400, 473,518,651, 700, 969,1050, ...... 1070, 1138, 1452, 1503, 1603, 1668, 1688, 1699 Inchcape pIc ...... 874, 939,1348,1424 J D Wetherspoon pIc ...... 659 J Sainsbury pIc ...... 452, 1505, 1506, 1622, 1644 J. Bibby & Sons PLC...... 815, 1051, 1078 John Lewis Partnership pIc ...... 1220 John Mowlem & Company PLC ...... 440, 1653 Johnson Fry Holdings pIc ...... 243, 1416 Johnson Fry pIc ...... 341 Index of extracts from accounts 1799

Johnston Press pIc ...... 297 Kingfisher pIc ...... 306, 965 Kwik-Fit Holdings pIc ...... 721,1547,1548 Ladbroke Group PLC ...... 473 Laird Group Public Limited Company (The) ...... 1350 Land Securities PLC ...... 704, 769,1626 Laporte pIc ...... 1223 Laura Ashley Holdings pIc ...... 801 Leeds Group pIc ...... 1052 Leigh Interests pIc ...... 1631 Liberty International Holdings PLC ...... 671 Lloyds Bank PIc...... 693 Lloyds TSB Group pIc ...... 644, 1210 Logica pIc ...... 165 London & Scottish Marine Oil PLC ...... 499 London and Metropolitan pIc ...... 255 Lonrho PIc ...... 432, 532, 946 Lookers pIc ...... 951, 1176 Low & Bonar PLC ...... 257,800 M J Gleeson Group pIc ...... 698, 957 Macfarlane Group (Clansman) P.L.C...... 1326 Marks and Spencer p.l.c...... 193, 199, 205, 510, 660, 827, 1238, 1344, ...... 1476, 1627, 1635, 1660, 1676, 1680, 1716 Madey pIc ...... 1424 McKechnie pIc...... 1391 Medeva pIc ...... 1449 MEPC pIc ...... 313, 636, 705, 773, 778, 791 Metal Bulletin pic ...... 161, 162 Meyer International PLC ...... 1168 Microvitec PLC ...... 1115 Mirror Group pIc ...... 1200, 1420, 1441 More Group PIc ...... 1425 National Power PLC ...... 1714 National Westminster Bank PIc ...... 244, 1600, 1676, 1341 Norcros p.l.c...... •...... 382, 1644 Pearson pIc ...... 203, 207, 401, 435,730,874,1068,1298 Peninsular and Oriental Steam Navigation Company (The) ...... 450, 729, 787, 809 1800 Generally Accepted Accounting Practice in the United Kingdom

Pentos pIc ...... 995, 996 Persimmon pIc ...... 308 Pilkington pIc ...... 891,1457,1648,165.0 Plessey Company pIc (The) ...... 809 Post Office (The) ...... 722, 725 Powell Duffryn pIc ...... 1397 Powerscreen International PLC ...... 1691 Premier Farnell pIc ...... 309, 370 Prism Rail PLC ...... 909 Prudential Corporation pIc ...... 1673 Queens Moat Houses P.L.C...... 680 Racal Electronics PIc ...... 478, 494,1001,1030 Raglan Property Trust pIc ...... 671 Rank Group PIc (The)...... 424, 666, 872,1221,1445,1541 Ranks Hovis McDougall PLC ...... 629 Ransomes pIc ...... 870 Rebus Group pIc ...... 1692 Reckitt & Colman pIc ...... , ...... 362, 363, 364, 474, 491, 492, 697,1328,1472,1472 Redland PLC...... 423, 646, 866,1552 Reed Elsevier pIc ...... 1159 Regal Hotel Group pIc ...... 254 Rentokil Group PLC ...... 1460 Rentokil Initial pIc ...... 186, 232, 323, 367 Reuters Holdings PLC ...... 483,604,1084,1419,1501 RMC Group p.l.c...... 655,1012 Rolls-Royce pIc ...... 512, 1272, 1332 Royal & Sun Alliance Insurance Group pIc ...... 1552 Royal Bank of Scotland Group pic (The) ...... 426, 1595 RTZ Corporation PLC (The) - CRA Limited ...... 229, 770,1078,1125,1159,1596 Rugby Group pIc (The) ...... 802, 1388, 1458 Rush & Tompkins Group PLC ...... 1401 Saatchi & Saatchi Company PLC ...... 383 Safeway pIc ...... 472, 778, 819, 1087, 1694 Scholl PLC...... 524, 1244 Scottish Power pIc ...... 970 Scottish Television pic...... 298 Sears pIc ...... 701, 816, 863, 1239, 1400 Index of extracts from accounts 1801

Sedgwick Group pIc ...... 1225 Sema Group pIc ...... 229, 230 Senior Engineering Group pIc ...... 864 Severn Trent PIc ...... 1056 Sidlaw Group pIc ...... 182, 437 Signet Group pIc ...... 724, 895, 952 Silentnight Holdings PIc ...... 1425 Slough Estates pIc ...... 771, 773, 1351 SmithKline Beecham pIc ...... 745,1136 Smiths Industries pIc ...... 447,814,1134 South West Water PIc ...... 862, 1459, 1628, 1675 Spring Ram Corporation PLC (The) ...... 192 St Ives pIc ...... 1457 Standard Chartered PLC ...... ;..... 1089 Storehouse PLC ...... 445 T & S Stores PIc ...... 339 T&N pIc ...... 286,1349,1390,1414,1425 Tarmac pic ...... 284, 645 Tate & Lyle Public Limited Company ...... 607, 861,1353 Taylor Woodrow pIc ...... 455, 701, 1224 Tesco PLC ...... 445, 446, 605, 609, 644, 862, 1352 Thames Water PIc ...... 645 Thomas Cook Limited ...... 1560 THORN EM! pic ...... 354 Thorn pIc ...... 1460 Thorntons PLC ...... 384, 658 TI Group plc ...... 315,545,731,1575,1669 Tibbett & Britten Group pIc ...... 288 Tomkins PLC...... 335, 514 Total Systems pic...... 166 Trafalgar House Public Limited Company ...... 690, 785 TransAtlantic Holdings PLC ...... ·...... 1389 Travis Perkins pic ...... 281 Trinity Holdings PLC ...... 1428 TT Group PLC ...... 287,1558 UniChem PLC ...... ;...... 1426 Unilever PLC ...... 234, 532,1088 1802 Generally Accepted Accounting Practice in the United Kingdom

United Biscuits (Holdings) pic ...... ,...... 471 United News & Media pIc ...... 372,425,435,546,1489,1493,1496 United Utilities PLC ...... 311, 318, 322,1666,1700 Vickers P.L.C ...... 656 Volex Group pic ...... 1621, 1643 W H Smith Group PLC ...... 1131 Wace Group PLC ...... 302,1388 Weir Group PLC (The) ...... 698, 1048 Whitbread PLC ...... 1090, 1159, 1494 Wickes pIc ...... 201 Williams Holdings PLC ...... 437, 449, 856,1359,1507 Wilson Bowden pIc ...... 186, 705, 1596 Wolseley pIc ...... 624, 952, 1126 WPP Group pIc ...... 628, 648,1696

Yorkshire Group Plc ...... ~ ...... 1063 Zeneca Group PLC ...... 399 Index of Statutes and Standards

This index refers to places in the text where individual paragraphs of accounting standards, exposure drafts, the Companies Act 1985 and the Stock Exchange Listing Rules are discussed.

SSAJP1,Accounangfor (SSAJP 2) (SSAJP 3) associoted companies, ASC, para. 14(d), 1276, n.46 Appendix 1, para. 31, 1357, n.38 Amended December 1990 para. 14,64, n.98 Appendix 1, para. 33, 1356, n.36 para. 14,64, n.99 Appendix 2, para. 1, 1336, n.16 para. 11,425, n.8 para. 14, 132, n.6 para. 13, 422, n.3 para. 14, 1413, n.26 SSAJP 4, Accounting for para. 13, 424, n.6 para. 15,65, n.l02 government grants, ASC, paras. 14 and 15,424, n.7 para. 16,66, n.l03 Revised July 1990 paras. 19-22,450, n.73 para. 16,656, n.70 para. 23,451, n.74 para. 18,66, n.104 para. 7, 1054, n.23 paras. 23 and 30, 431, n.26 para. 9, 1055, n.25 para. 24, 438, n.46 SSAJP 3, Earnings per share, para. 15, 1047, n.8 para. 24, 439, n.49 ASC, Amended October 1992 para. 17, 1053, n.22 para. 25, 424, n.5 para. 18,1051, n.16 para. 26, 430, n.24 para. 5, 1324, n.9 para. 22, 1045, n.l para. 26, 451, n.76 para. 8, 1339, n.22 para. 23, 1050, n.12 paras. 27 and 28, 451, n.77 para. 8, 1339, n.23 para. 23, 1055, n.24 para. 29,451, n.78 para. 9, 1339, n.24 para. 24, 1049, n.9 para. 30,451, n.80 para. 10, 1323, n.5 para. 27, 1049, n.lO para. 31,451, n.79 para. 12, 1339, n.26 para. 27, 1049, n.ll para. 32,451, n.75 para. 14, 1324, n.8 para. 28(a), 1052, n.17 para. 33, 436, n.42 para. 16, 1339, n.25 para. 28(b), 1050, n.15 para. 35, 438, n.48 para. 16, 1352, n.29 para. 28(b), 1052, n.18 para. 36, 435, n.38 para. 16, 1352, n.32 para. 28(c), 1053, n.21 para. 37, 435, n.39 para. 16, 1353, n.33 para. 29, 1052, n.19 para. 37, 451, n.82 Appendix 1, para. 4, 1336, n.17 para. 38,451, n.83 Appendix 1, para. 4,1337, n.18 SSAJP 5, Accounang for value para. 39,444, n.68 Appendix 1, para. 6, 1337, n.19 added tax, ASC, April 1974 para. 40, 452, n.84 Appendix 1, para. 7, 1337, n.20 para. 43, 443, n.61 Appendix 1, para. 10, 1324, n.lO para. 8, 1208, n.26 para. 49, 451, n.81 Appendix 1, para. 10, 1337, n.21 para. 9, 1208, n.27 Appendix 1, para. 11, 1333, n.12 SSAJP 2, Disclosure of Appendix 1, para. 18, 1329, n.ll SSAJP 8, The treatment of accounang policies, ASC, Appendix 1, para. 22, 1353, n.34 Iilxation under the imputation November 1971 Appendix 1, para. 24, 1352, n.31 system in the accounts of Appendix 1, para. 27,1352, n.30 companies, ASC, August 1974 para. 2, 64, n.97 Appendix 1, para. 27, 1359, n.39 para. 13, 656, n.69 Appendix 1, para. 29, 1353, n.35 para. 2, 1214, n.39 para. 14(d), 571, n.157 Appendix 1, para. 31,1357, n.37 1804 Generally Accepted Accounting Practice in the United Kingdom

(SSAP8) (SSAP9) (SSAP 12) para. 7, 1235,0.86 para. 26, 814, 0.37 para. 16,681, 0.125 para. 7, 1238,0.89 para. 27,808,0.33 para. 17,649,0.59 para. 9, 1213, 0.37 para. 27, 808, 0.34 para. 19,661,0.77 para. 12, 1214, n.4O para. 27, 814, 0.38 paras. 19 aod 20, 649, n.60 para. 13, 1211, 0.32 para. 27, 1078,0.45 para. 20, 661, 0.73 para. 14, 1214, 0.41 para. 28,828,0.76 para. 20, 661, 0.78 para. 17, 1214,0.42 para. 28, 828, n.77 para. 21, 66, 0.105 para. 18, 1215, n.43 paras. 28 and 29, 164,0.90 para. 21, 652, 0.66 para. 19, 1215, n.44 para. 29,828, n.78 para. 21,656,0.68 para. 20, 1210,0.31 para. 30, 830, n.81 para. 22, 640, 0.44 para. 20, 1215,0.45 para. 32, 829, 0.80 para. 22, 649, 0.61 para. 2O(c), 1235,0.83 Appeodix I, para. 1,637,0.29 paras. 25(a) and (b), 694, 0.162 para. 21, 1215, n.46 Appendix I, para. 2, 820, 0.55 para. 25(c), 695, n.l66 para. 22, 1212, n.35 Appeodix I, paras. 4-7,634, para. 25(d), 695,0.167 para. 23, 1213, n.36 n.26 para. 26, 697, 0.168 para. 23, 1215, 0.47 Appeodix I, para. 5, 821, 0.58 para. 26, 700, 0.177 para. 24, 1209, 0.30 Appendix 3, para. 5, 830, 0.82 para. 53, 667, 0.92 paras. 24-26, 1215, 0.48 Appeodix I, para. 6, 821, 0.59 para. 81, 667, 0.91 para. 25, 1212, 0.33 Appendix I, para. 7, 821, 0.60 paras. 27 aod 28, 1216,0.50 Appeodix 1, para. 8, 821, 0.63 SSAP 13, Accounting for para. 29, 1216,0.52 Appeodix I, para. 8, 822, 0.64 research and development, para. 30, 1217,0.53 Appeodix I, para. 10,807,0.31 ASC, Issued December 1977, para. 31, 1218,0.56 Appeodix I, para. 12,802,0.19 Revised January 1989 para. 32, 1218, 0.57 Appeodix I, para. 12, 803, 0.26 paras. 33 and 34, 1218, 0.58 Appendix 1, para. 14,826, n.73 para. I, 739, 0.4 paras. 37 and 40, 1219,0.63 Appendix I, para. 20, 823, 0.68 para. 2, 742, 0.12 para. 41,1219, 0.64 Appeodix I, para. 21, 762, 0.23 para. 5, 748, 0.39 Appeodix, para. 4, 1215, 0.49 Appeodix I, para. 21, 842, 0.102 para. 6, 749, 0.40 Appeodix, para. 4, 1216, 0.51 Appeodix I, para. 22, 841, 0.100 para. 7, 749, 0.41 Appeodix, para. 14, 1217,0.54 Appeodix I, para. 23, 839, 0.96 para. 8, 743, 0.18 Appendix, para. 15,1217,0.55 Appeodix I, para. 26, 823, 0.69 para. 9, 743, 0.19 Appeodix 1, para. 26, 841, 0.98 para. 16,742,0.16 SSAP 9, Stoc1cs mullong-term Appeodix 1, para. 27, 841, 0.99 para. 17,742,0.14 contracts, Issued May 1975, para. 18,742,0.13 Revised September 1988 SSAP 22, Accounting for para. 21, 742, 0.11 goodwiU, ASC, Revised July para. 22, 744, 0.29 para. 1,807,0.29 1989 para. 23, 742, 0.15 paras. 1, 3 and 4, 818, 0.51 para. 24,743,0.17 para. 3, 797, 0.6 paras. 3, 39 and 41, 430, 0.25 para. 25, 744, 0.20 para. 3, 807, 0.30 para. 14,346,0.163 para. 26, 744, 0.21 para. 3(3), 814, n.4O para. 15,674,0.111 para. 27, 744, 0.22 para. 4, 800, 0.17 paras. 26 and 27, 342, 0.147 para. 28, 744, 0.23 para. 9, 839, 0.95 para. 27, 630, 0.15 para. 29, 744, 0.24 para. 9, 839, 0.97 para. 36, 334, 0.141 para. 30, 744, 0.25 para. 11, 1440,0.33 paras. 39 and 41328, 0.120 para. 31, 744, 0.26 para. 11, 1443;0.44 para. 41, 533, 0.116 para. 32, 744, 0.27 para. 16, 796, n.1 para. 43, 368, 0.214 para. 32, 744, 0.28 para. 17,798, n.9 paras. 44 and 47, 368, 0.215 para. 17,798,0.10 para. 45, 369, 0.216 SSAP IS, Accounting for para. 17, 7990.13 para. 52, 388, 0.245 deferred tDx, ASC, Revised para. 17,820,0.53 paras. 53 and 55, 388, 0.246 May 1985, Amended paras. 17 to 19,818,0.50 December 1992 para. 18,798, n.11 SSAP 12,Accountingfor paras. 18 and 19(c), 819, 0.52 depreciation, ASC, Revised para. I, 1207,0.23 para. 19,634,0.25 January 1987 para. 1,1214,0.38 para. 19,798,0.12 para. 16, 1202,0.11 para. 21, 823, 0.67 para. 5, 666, 0.90 para. 20, 1241,0.92 para. 22, 164,0.89 para. 10, 639, 0.36 paras. 24-36, 1171, o.68para. para. 22, 796, 0.4 para. 13, 681, 0.124 31, 1235,0.84 para. 22, 828, n.75 para. IS, 648, 0.57 para. 32, 1235, 0.85 para. 22, 827, n.74 para. IS, 652, 0.65 para. 32A, 1171, n.69 para. 22, 807, 0.32 para. 16,595,0.17 para. 35, 1218, 0.60 para. 23, 829, n.79 para. 16,648,0.58 para. 36, 1219, 0.62 Index of Statutes and Standards 1805

(SSAP IS) (SSAP 19) (SSAP20) para. 43, 1231, n.82 para. 15,701, n.18O para. 53, 575, n.169 para. 44, 1243, n.94 para. 15,701, n.l84 paras. 53 and 54, 475, n.36 Appendix, para. 4, 1226, n.78 para. 54, 475, n.30 Appendix, para. 11, 1242, n.93 SSAP 20, Foreign currency para. 54, 475, n.35 Appendix, para. 14,1228, n.80 translation, ASe, April 1983 para. 54, 579, n.l71 Appendix, para. 17, 1235, n.87 paras. 54 and 6O(b), 581, n.l84 para. 1,465, n.1 para. 57, 569, n.155 SSAP 17,Accountingfor post para. 2, 468, n.15 para. 59, 490, n.50 iHIIIlnce sheet events, ASe, para. 2, 475, n.31 para. 60(a), 581, n.183 August 1980 para. 2, 563, n.147 para. 60,490, n.51 para. 5, 496, n.61 para. 60, 490, n.52 para. 18, 1377, n.1 para. 6, 496, n.60 para. 60, 490, n.53 para. 18, 1379, n.8 para. 7, 470, n.20 para. 68, 786, n.96 para. 19, 1379, n.9 para. 8, 470, n.22 para. 20, 1380, n.11 para. 12,558, n.138 SSAP 21, Accounting for leases para. 22, 1381, n.13 para. 13,474, n.25 and hire purchase contracts, para. 23(a), 1397, n.18 para. 14,474, n.26 ASe, August 1984 para. 23(b), 1401, n.23 para. 16,475, n.29 para. 23, 1381, n.14 para. 16,475, n.34 Introductory paragraph, 981, n.9 para. 24, 1396, n.16 para. 17,475, n.32 para. 14,969, n.69 para. 26, 1396, n.15 para. 17,475, n.33 para. 14,980, n.1 Appendix, 1379, n.lO para. 18, 520, n.96 para. 15,985, n.18 Appendix, 1380, n.12 para. 20,560, n.142 paras. 15 and 16, 985, n.20 Appendix, 1398, n.20 paras. 20 and 43, 563, n.l44 para. 17,985, n.19 para. 21, 474, n.27 para. 18, 980, n.2 SSAP 18, Accountingfor para. 22, 479, n.37 para. 19, 986, n.26 contingencies, ASC, August para. 22, 480, n.41 para. 20, 986, n.24 1980 para. 23, 479, n.38 para. 23, 1004, n.58 para. 24, 480, n.4O para. 24, 985, n.22 para. 4, 1409, n.13 para. 26,530, n.108 para. 25, 985, n.21 para. 6, 1411, n.16 para. 26, 581, n.18O para. 26, 986, n.25 paras. 7, 9 and 24,1428, n.34 para. 28, 472, n.23 para. 28, 1003, n.56 para. 14, 1407, n.1 para. 30; 484, n.42 para. 30, 1028, n.89 para. 14, 1408, n.lO para. 36, 575, n.l68 para. 34, 1018, n.76 para. 14, 1409, n.11 paras. 36-44, 469, n.16 para. 35, 992, n.33 para. 14, 1409, n.14 para. 37, 489, n.47 para. 37, 995, n.35 para. 15, 1409, n.15 para. 42,504,n.76 para. 39, 1004, n.57 para. 15, 1413, n.23 para. 42, 568, n.153 para. 39, 1010, n.64 para. 16, 1423, n.3O para. 43, 534, n.117 para. 41,1004, n.59 para. 17; 1409, n.12 para. 43, 545, n.l26 para.43,1003,n.55 para. 18, 1411, n.18 para. 44, 496, n.59 para. 45, 1029, n.96 para. 18, 1415, n.28 para. 44, 571, n.158 para. 47, 1026, n.85 para. 19, 1411, n.19 para. 46, 470, n.17 para. 48, 1019, n.77 para. 20, 1411, n.20 para. 46, 494, n.56 para. 50, 997, n.44 para. 20, 1430, 0.43 para. 46, 500, n.70 para. 50, 997, n.45 paras. 20 and 66,1429, n.35 paras. 46 and 47, 500, n.65 paras. 51 and 52, 997, n.46 para. 21, 1411, n.17 paras. 46 and 48, 568, n.152 para. 53, 997, n.43 para. 25, 1429, n.36 paras. 46 and 48, 580, n.l78 para. 54, 998, n.48 para. 26, 1429, n.37 paras. 46-51,563, n.145 para. 54, 1003, n.54 para. 27, 1429, n.38 para. 47,470,0.19 para. 55, 997, n.42 para. 28, 1429, n.39 para. 48, 470, n.18 para. 56, 997, n.47 para. 48, 558, 0.136 para. 57, 997, n.41 SSAP 19,Accountingfor para. 49, 499, 0.64 para. 58, lOll, n.69 investtMnt properlies, ASe, para. 49, 558, n.137 para. 59,1011, n.71 amended November IfJfJl paras. 49 and 50, 470, n.21 para. 60, lOll, n.66 para. 51, 484, n.43 para. 60, 1011, ri.67 para. 6, 670, n.98 para. 51, 484, n.44 para. 61, 1011, n.68 para. 7, 640, n.41 para. 51,500, n.69 para. 61, 1011, n.70 para. 8, 640, n.42 para. 51, 569, n.154 Guidance Notes on para. 20, para. 9, 640, 0.43 paras. 51 and 58, 580, n.176 992,n.34 paras. 10 and 11,669, n.97 para. 52, 474, 0.24 Guidance Notes on para. 38, para. 12,701, n.181 para. 52, 489 n.46 1018, n.75 para. 13,701, n.182 para. 52, 490, 0.49 1806 Generally Accepted Accounting Practice in the United Kingdom

(SSAP 21) (SSAP25) FRS 1 (Revised 1996), Cash Guidance Notes on para. 82, paras. 3 and 40,1063, n.15 flow statements, ASH, 1028, n.9O paras. 4 and 41,1063, n.16 September 1991 Guidance Notes on para. 82, paras. 4 and 41, 1067, n.39 1028, n.92 paras. 7 and 8,1064, n.19 para. 1, 1504, n.108 Guidance Notes on para. 92, para. 8, 1064, n.20 para. 1, 1526, n.178 1004, n.60 para. 9, 1065, n.24 para. 2,1500, n.93 Guidance Notes on para. 116, para. 12, 1064, n.21 para. 2, 1480, n.39 1010, n.65 para. 15, 1065, n.22 para. 2, 1480, n.40 Guidance Notes on para. 124, para. 16, 1065, n.23 para. 2, 1500, n.92 1011, n.72 para. 21, 1066, n.35 para. 2, 1504, n.109 Guidance Notes on para. 165, para. 22, 1066, n.34 para. 2, 1504, n.ll0 1032, n.97 para. 22, 1089, n.51 para. 2, 1515, n.133 para. 23, 1070, n.43 para. 5, 1477, n.32 SSAP 22, Accounting for para. 23, 1070, n.44 para. 5, 1516, n.141 goodwill, ASC, Revised July para. 23, 1088, n.50 para. 6, 1474, n.28 1989 para. 24, 1066, n.36 para. 7, 1482, n.42 para. 24, 1092, n.54 para. 7, 1482, n.43 paras. 3, 39 and 41, 430, n.25 para. 25, 1066, n.37 para. 7, 1482, n.44 para. 14,346, n.163 para. 25, 1092, n.55 para. 8, 1483, n.46 para. 15,674, n.111 para. 34(a), 1065, n.28 paras. 8, 14, 15, 1491, n.69 paras. 26 and 27, 342, n.147 para. 34, 1065, n.26 para. 8, 1489, n.6O para. 27,630, n.15 para. 34, 1065, n.27 para. 9, 1483, n.47 para. 36, 334, n.141 para. 34, 1066, n.29 para. 9, 1483, n.49 paras. 39 and 41328, n.120 para. 34, 1066, n.33 para. 9, 1485, n.50 para. 41, 533, n.116 para. 34, 1090, n.52 para. 10, 1486, n.51 para. 43, 368, n.214 para. 35, 1063, n.17 para. 11, 1487, n.53 paras. 44 and 47, 368, n.215 para. 36, 1067, n.40 para. 11, 1487, n.55 para. 45, 369, n.216 para. 36, 1067, n.41 para. 11, 1489, n.63 para. 52, 388, n.245 para. 36, 1069, n.42 para. 12, 1479, n.38 paras. 53 and 55, 388, n.246 para. 37, 1066, n.38 para. 12, 1489, n.62 para. 43, 1063, n.18 para. 12, 1489, n.64 SSAP 24, Accounting for para. 44, 1066, n.30 para. 12,1489, n.65 pension costs, ASC, May 1988 para. 13,1491, n.68 Foreword to Accounting para. 15, 1491, n.70 para. 12, 1111, n.12 Standards, ASH, June 1993 para. 15, 1506, n.116 para. 14, 1141, n.42 para. 16, 1492, n.72 para. 16, 1111, n.11 para. 4, 93, n.222 para. 19, 1495, n.78 para. 18, 1132, n.36 para. 4, 1266, n.33 para. 19, 1495, n.80 para. 20, 1115, n.16 para.4(c), 1269, n.39 para. 22, 1479, n.36 para. 21, 1116, n.18 para. 14,1266, n.31 para. 22, 1479, n.37 para. 23, 1157, n.61 para. 14, 1267, n.34 para. 22, 1495, n.79 para. 26 (as revised by FRS 3, para. 15, 1266, n.30 para. 22, 1497, n.83 para. 33(k)). 1120, n.23 para. 15, 1267, n.35 para. 23, 1498, n.85 para. 48, 1132, n.35 para. 16,5, n.14 para. 24, 1498, n.84 para. 49, 1132, n.39 para. 17, 1268, n.36 para. 32, 1501, n.101 para. 75, 1111, n.8 para. 18,5, n.15 para. 25, 1499, n.9O para. 78, 1114, n.13 para. 34, 7, n.20 para. 26, 1500, n.95 para. 79, 1149, n.55 para. 36, 8, n.24 para. 27, 1500, n.96 para. 80, 1157, n.62 para. 39, 1266, n.32 para. 28, 1500, n.97 para. 81, 1120, n.21 para. 42, 1269, n.38 para. 29, 1501, n.99 para. 81, 1121, n.24 para. 43, 1268, n.37 paras. 30-31, 1501, n.1oo para. 82, 1125, n.28 para. 43, 1269, n.40 para. 33, 1480, n.41 para. 83, 1124, n.26 para. 43, 1269, n.41 para. 33, 1504, n.106 para. 87,1114, n.14 para. 44, 1270, n.42 para. 33, 1505, n.111 para. 88, 1131, n.33 para. 33, 1506, n.112 para. 91, 1169, n.67 FRS 1, Cash flow statements, para. 34, 1515, n.134 para. 92, 1125, n.29 ASH, September 1991 para. 34, 1516, n.136 para. 92, 1133, n.40 para. 35, 1517, n.l44 para. 1,1473, n.26 para. 35, 1517, n.146 SSAP 25, Segmental reporting, para. 12, 1473, n.27 para. 36, 1478, n.34 ASC, June 1990 para. 37, 1513, n.126 para. 36, 1516, n.140 para. 81,1494, n.76 para. 36, 1517, n.145 para. 1, 1062, n.14 para. 37, 1502, n.103 Index of Statutes and Standards 1807

(FRS 1 (Revised 1996» FRS 2, Accounting for (FRS 2) para. 37, 1503, n.104 subsidiary undertakings, ASB, para. 89, 353, n.177 para. 41,1510, n.123 July 1992. para. 89, 354, n.178 para. 41,1513, n.124 para. 91, 386, n.243 para. 41,1513, n.125 para. xxii. 380, n.232 para. 42, 1513, n.127 para. 1,225, n.3 FRS 3, Reporting Financial para. 43, 1506, n.115 para. 5, 241, nA6 Performance, ASB, December para. 43,1506, n.1l7 para. 7, 231, n.19 1992 para. 45,1506, n.1l8 para. 10, 422, nA para. 45, 1508, n.1l9 para. 11,258, n.103 para. 1, 1260, n.27 para. 45, 1508, n.121 para. 12, 233, n.24 para. 2, 1280, n.53 para. 46, 1515, n.130 para. 18,225, nA para. 3, 1277, nA7 para. 47, 1514, n.129 para. 21, 246, n.69 para. 5, 1281, n.54 para. 48, 1506, n.1l3 para. 22, 250, n.85 para. 6, 1279, n.51 para. 48, 1506, n.1l4 para. 25(b), 258, n.104 para. 7, 1300, n.79 para. 48, 1508, n.122 para. 25, 251, n.88 para. 12, 1266, n.29 para. 52, 1500, n.94 para. 27, 257, n.100 para. 13,680, n.120 para. 53, 1504, n.107 para. 28, 258, n.lOl para. 14,1261, n.28 para. 56, 1489, n.59 para. 29, 258, n.105 para. 14, 1294, n.70 para. 56, 1489, n.61 para. 30, 252, n.94 para. 15, 1092, n.53 para. 58, 1487, n.54 para. 31(d), 252, n.96 para. 15, 1278, nA9 para. 58, 1487, n.56 para. 31, 262, n.ll1 para. 16, 1277, n.48 para. 58,1490, n.67 para. 32, 262, n.1l2 para. 18, 380, n.234 para. 60, 1516, n.135 para. 34, 232, n.23 para. 18, 1275, n.44 para. 63, 1503, n.105 para. 37, 237, n.34 para. 18, 1440, n.32 Appendix I, Example 2,1498, paras. 37 and 81, 238, n.38 para. 19, 1281, n.55 n.86 paras. 38 and 82, 238, n.37 para. 20; 694, n.161 Appendix I, Example 2,1498, para. 39, 245, n.62 para. 20, 1280, n.52 n.87 para. 39,445, n.70 para. 20, 1282, n.56 Appendix I, Example 3, Note 3 paras. 39 and 83, 238, nAl para. 20, 1294, n.66 1516, n.139 paras. 39 and 83, 245, n.60 para. 20, 1487, n.57 Appendix III, para. 12, 1478, para. 40, 241, nA8 para. 21, 684, n.131 n.33 para. 41, 241, n.52 para. 21, 1288, n.59 Appendix III, para. 12, 1479, para. 43, 243, n.55 paras. 21 and 31, 721, n.21 n.35 para. 43, 243, n.56 para. 22, 1294, n.67 Appendix III, para. 13, 1482, para. 44, 244, n.57 paras. 22 and 20, 1218, n.59 nA5 para. 45, 278, n.30 para. 23, 1219, n.61 Appendix III, para. 14, 1493, para. 45, 379, n.231 para. 23, 1224, n.73 n.74 para. 45, 1334, n.15 para. 23, 1230, n.S1 Appendix III, para. 14, 1494, para. 47, 386, n.241 para. 24, 1294, n.68 n.75 paras. 47 and 87, 443, n.62 para. 25, 1295, n.73 Appendix III, para. 14,1494, para. 48, 389, n.248 para. 25, 1323, n.6 n.77 para. 49, 360, n.195 para. 25, 1342, n.27 Appendix III, para. 17,1492, para. 50, 352, n.176 para. 26, 1289, n.61 n.71 para. 51, 354, n.180 para. 28, 1296, n.75 Appendix III, para. 18, 1490, paras. 51 and 90, 238, n.39 para. 29,1301, n.86 n.66 para. 52, 386, n.242 para. 29, 1305, n.87 Appendix III, para. 20, 1515, paras. 52 and 91, 238, n.40 paras. 29 and 62, 523, n.98 n.132 para. 54, 1223, n.71 paras. 29 and 62, 656, n.71 Appendix III, para. 21,1516, para. 54, 1243, n.95 para. 31A, 1288, n.60 n.137 para. 62, 234, n.25 para. 31A, 1293, n.65 Appendix III, para. 21, 1516, para. 63, 234, n.26 para. 42, 1284, n.58 n.138 para. 67, 234, n.27 para. 45, 1275, nA5 Appendix III, para. 23, 1517, paras. 69-73, 231, n.20 para. 46,1283, n.57 n.147 para. 72, 232, n.21 para. 46, 1299, n.78 Appendix III, para. 24, 1517, para. 73, 232, n.22 para. 50, 1294, n.69 n.142 para. 78(a), 260, n.106 para. 52,1295, n.72 Appendix III, para. 24, 1517, para. 78(b), 251, n.89 para. 55,1290, n.62 n.143 para. 78(c), 253, n.99 para. 56, 683, n.128 Appendix III, para. 30,1514, para. 78(e), 252, n.92 para. 59,1296, n.76 n.128 para. 80, 238, nA2 para. 60, 1300, n.80 para. 83, 245, n.63 para. 60, 1300, n.81 para. 85, 279, n.31 para. 61, 1300, n.82 para. 87, 388, n.244 para. 63,1301, n.84 1808 Generally Accepted Accounting Practice in the United Kingdom

FRS 4, Capillll Instruments, (FRS 4) (FRS 5) ASD, December 1993 para. 57, 872, n.62 para. 024, 965, n.57 para. 58, 872, n.61 para. 2, 849, n.6 para. 59, 875, n.71 Application Note A para. 3(7)(b) and (c), 878, n.90 para. 60, 875, n.72 paras. All and A12, 951, n.47 para. 8, 856, n.23 para. 61, 873, n.63 para. 8, 858, n.31 para. 62, 874, n.66 Application Note B para. 10,858, n.32 para. 63, 875, n.67 para. 86, 1021, n.83 para. 11,857, n.28 para. 63, 889, n.106 para. 811, 1022, n.84 para. 12,850, n.12 para. 64, 875, n.69 para. 819, 956, n.48 para. 13,875, n.70 para. 65, 875, n.68 para. 820, 1020, n.82 para. 16, 859, n.35 para. 81, 867, n.45 para. 821, 956, n.49 para. 17,867, n.47 para. 90, 851, n.14 para. 21, 849, n.7 para. 93, 1293, n.64 Application Note C para. 21c, 877, n.81 para. 99, 868, n.52 para. C12, 958, n.50 para. 22, 854, n.19 para. 99, 897, n.1l9 para. C19, 958, n.52 para. 24, 849, n.10 para. 102,875, n.75 para. 25, 852, n.15 Application Notes, 892, n.112 Application Note D para. 25, 868, n.57 para. 020, 965, n.59 para. 25, 891, n.110 FRS S, Reporting the para. 08, 963, n.54 para. 26, 854, n.2O Substance o/Transactions, para. 26, 890, n.108 ASD,l994 Application Note E para. 26, 891, n.ll1 para. E15, 967, n.62 paras. 27 and 11, 856, n.22 paras. 2 and 29, 930, n.12 para. E22, 967, n.63 para. 28, 856, n.24 paras. 4 and 29, 930, n.13 para. E23, 967, n.65 para. 28, 858, n.30 para. 7, 943, n.38 para. E24, 968, n.66 para. 29, 856, n.25 para. 8, 943, n.39 paras. E19 and E20, 967, n.64 para. 31, 889, n.107 paras. 12 and 29, 928, n.7 para. 32, 856, n.26 para. 12(d), 968, n.68 FRS '-Acquisitions and para. 32, 860, n.37 para. 13,990, n.31 Mergers, ASB, September para. 33, 873, n.64 paras. 13 and 29, 928, n.8 1994 para. 34, 863, n.43 paras. 16 and 29, 929, n.l0 para. 35, 864, n.44 para. 17,930, n.15 para. 2, 275, n.9 para. 35, 1483, n.48 para. 18, 930, n.16 para. 2, 275, n.11 para. 36, 867, n.46 para. 20, 930, n.17 para. 2, 390, n.249 para. 36, 873, n.65 para. 21, 933, n.23 para. 4, 275, n.10 para. 37, 857, n.27 para. 22, 932, n.21 para. 6, 276, n.13 para. 38(1), 877, n.85 para. 24, 936, n.26 para. 7, 276, n.16 para. 38, 868, n.59 para. 25, 932, n.22 para. 8, 276, n.19 para. 39, 878, n.87 para. 26, 937, n.30 para. 9, 277, n.21 para. 40, 868, n.54 paras. 26 and 27, 936, n.27 para. 10,277, n.22 para. 40, 878, n.88 para. 27, 938, n.31 para. 11,277, n.23 para. 42, 857, n.29 paras. 28 and 88, 940, n.34 paras. 11(5)-(6),357, n.l88 para. 42, 859, n.33 para. 29, 862, n.41 para. 12, 277, n.25 paras. 42 and 28, 896, n.ll7 para. 29, 941, n.36 para. 13, 390, n.250 para. 43, 878, n.91 para. 29,941, n.37 paras. 16 and 17,356, n.l83 para. 43, 894, n.1l6 paras. 29 and 43, 298, n.9 para. 17,356, n.l84 paras. 45 and 11, 877, n.80 paras. 29 and 47, 929, n.11 para. 18,357, n.l86 para. 45, 867, n.48 para. 30, 947, n.45 para.18, 357, n.19O para. 46, 867, n.49 para. 31, 947, n.46 para.18, 357, n.191 para. 46, 893, n.113 para. 33, 943, n.4O para. 19,358, n.l92 para. 47, 867, n.50 para. 35, 946, n.43 para. 21, 360, n.l94 para. 47, 893, n.114 para. 36, 947, n.44 para. 22, 371, n.221 para. 48, 868, n.51 para. 38, 945, n.42 para. 23, 360, n.l96 para. 48, 868, n.53 para. 44, 905, n.l23 para. 24, 360, n.197 para. 49, 851, n.13 para. 45, 990, n.32 para. 25, 361, n.198 para. 49, 878, n.89 para. 72, 935, n.24 para. 26, 361, n.l99 para. 50, 868, n.56 para. 73, 935, n.25 para. 27, 362, n.200 para. 51, 859, n.34 para. 81, 936, n.29 para. 28, 366, n.204 para. 52, 849, n.8 para. 82, 938, n.32 para. 29, 366, n.205 para. 52, 875, n.73 para. 83, 938, n.33 para. 30, 365, n.201 para. 54, 868, n.58 para. C20, 959, n.53 para. 31, 367, n.208 para. 55, 868, n.55 para. 022, 964, n.55 para. 32, 365, n.203 para. 56, 872, n.6O para. D23, 964, n.56 para. 33, 367, n.206 Index of Statutes and Standards 1809

(FRS 6) (FRS 7) (FRS 8) para. 34, 367, n.207 para. 43, 295, n.72 para. 10, 1556, n. 42 para. 35, 369, n.217 para. 47, 296, n.74 para. 11, 1535,n.8 para. 36, 370, n.220 para. 47, 296, n.76 para. 13, 1535,n. 12 para. 36, 1279, n.50 para. 48, 296, n.77 para. 14, 1536, n. 13 para. 37,369, n.218 para. 51, 296, n.79 para. 14, 1537,n. 14 para. 38, 275, n.8 paras. 53 and 54, 305, n.84 para. 14, 1537,n. 16 para. 41, 357, n.187 para. 55, 305, n.SS para. 15,1540,n.21 para. 49, 368, n.212 para. 56, 305, n.86 para.16, 1563, n. 51 para. 50, 368, n.213 para. 57, 305, n.87 para. 18, 1564, n. 52 para. 51, 358, n.193 para. 58, 310, n.89 para. 19, 1550,n.35 para. 56, 277, n.26 para. 61,311, n.91 para.20,1550,n.37 para. 58, 276, n.12 para. 62, 312, n.92 para.20,1551,n.38 paras. 60-77, 277, n.27 para. 63, 312, n.93 para. 21, 1558,n. 45 para. 61, 276, n.14 paras. 65 and 66, 325, n.113 para. 22, 1555, n. 41 para. 62, 276, n.15 para. 69,326, n.115 Appendix III, 1576, n. 108 para. 64, 276, n.17 para. 71, 316, n.98 Appendix IV, para 12, 1560, para. 66, 276, n.18 para. 72,316, n.99 n.48 para. 68, 277, n.20 para. 77, 280, n.37 Appendix IV, para. 14, 1565, para. 76,277, n.24 para. 77, 285, n.43 n.61 para. 78, 391, n.253 para. 78, 280, n.38 para. SS, 365, n.202 para. 79281, n.4O ASB Statement, Operating 41111 para. 86, 367, n.209 para. 79, 281, n.41 Financilll Review, ASB, July para. 87, 368, n.210 para. 80, 282, n.42 1993 Appendix I, para. 15, 272, n.2 para. 81, 285, n.44 Appendix I, para. 15, 877, n.82 para. 81, 287, n.48 para. 3, 213, n.61 Appendix I, para. 16, 291, n.57 para. 82, 288, n.49 para. 4, 213, n.62 para. 83, 289, n.50 para. 5, 213, n.63 FRS 7, Fair Values in para. 84, 289, n.51 para. 8, 214, n.64 Acquisition Accoulllillg, ASB, para. SS, 289, n.53 paras. 9--22, 214, n.65 September 1994 Appendix Ill, para. 14,293, n.65 para. 12, 1548, n.l para. 23, 215, n.66 para. 2, 292, n.61 FRS 8, Reloled Ptu'tJ paras. 25-37, 215, n.67 para. 2, 293, n.68 Disclosures, ASB, November para. 38, 216, n.68 para. 2, 296, n.75 1995 para. 5, 292, n.60 FRED 1l,Associates aruljoint para. 6, 293, n.67 para. 2.1,1547,n. 29 ventures, ASB, March 1996 para. 7, 293, n.66 para. 2.2, 1535, n. 10 para. 7, 319, n.104 paras. 2.2 and 2.5(c )(iii) para. 2, 428, n.16 para. 7, 321, n.l07 (footnote), 1544, n. 26 para. 2,428, n.17 para. 9, 296, n.78 para. 2.3, 1542, n. 25 para. 2, 433, n.30 para. 10, 303, n.81 para. 2.4, 1544, n. 27 para. 2, 441, n.57 para. 11,305, n.82 para. 2.5, 1535, n. 9 para. 8,441, n.58 para. 12, 305, n.83 para. 2.5, 1546, n. 28 para. 9, 441, n.59 para. 13, 309, n.88 para. 2.5(a), 1535, n. 9 para. 10, 433, n.33 para. 14,311, n.90 para 2.5(a), 1538, n. 18 para. 10,447, n.71 para. 15,314, n.94 para 2.5(a), 1559, n. 47 para. 11,433, n.31 para. 16,325, n.ll1 para.2.5(b), 1539, n. 19 para. 11, 434, n.35 para. 17,325, n.112 para.2.5(b)(iv), footnote, 1540, para. 12, 434, n.36 para. 19,315, n.96 n.20 para. 12, 456, n.90 para. 20, 316, n.100 para. 2.5(c), 1541, n. 23 para. 13, 434, n.37 para. 21, 318, n.102 para. 2.5(c), 1541, n. 24 para. 13, 456, n.91 para. 22,319, n.103 para. 2.6, 1549, n. 34 para. 16, 457, n.96 paras. 23-24, 295, n.70 paras. 2.6 and 19, 1550, n. 36 para. 18, 443, n.63 para. 25, 295, n.71 para.3,1559,n.46 para. 19, 444, n.64 para. 26, 279, n.36 para. 4, 1549,n. 31 para. 20, 444, n.65 para. 27, 285, n.45 para. 4, 1549,n.33 para. 21,437, n.43 para. 28, 289, n.52 para. 5, 1564,n.53 para. 23,439, n.51 para. 30, 279, n.35 para. 5, 1565, n. 55 paras. 24 and 25, 456, n.92 para. 35, 292, n.62 para.5,1565,n.59 para. 27,456, n.94 para. 37, 314, n.95 para. 6, 1553, n. 39 para. 28, 456, n.93 para. 38, 292, n.63 paras. 6 and 21, 1555, n. 40 para. 36, 429, n.18 para. 39, 292, n.64 para. 7, 1534, n. 5 para. 37,429,n.19 para. 40, 320, n.105 paras. 8-10, 1532, n. 1 para. 45, 441, n.6O 1810 Generally Accepted Accounting Practice in the United Kingdom

(FRED 11) (FRED 13) (FRED 14) para. 46, 433, n.32 para. 28,599, n.25 para. 43, 1446, n.54 para. 47, 434, n.34 para. 29, 613, n.56 paras. 44 and 45,1446, n.55 para. 49, 447, n.72 para. 30,614, n.57 paras. 46 and 47,1446, n.56 para. 51, 437, n.44 paras. 31 and 70, 612, n.52 para. 48,1452, n.63 Appendix II 458, n.104 para. 49, 603, n.31 para. 49, 1437, n.12 Appendix III, para. 2, 429, n.21 para. 50, 604, n.32 para. 50,1438, n.20 Appendix III, para. 2, 429, n.22 para. 51, 604, n.33 para. 51, 1438, n.22 Appendix III, para. 7, 429, n.20 para. 53,601, n.28 para. 52,1439, n.23 Appendix III, para. 38, 430, n.23 para. 54, 601, n.30 paras 53-55,1438, n.19 para. 58, 605, n.36 para. 61, 1446, n.50 FRED 12, GoodwiU and paras. 59 and 60, 607, n.39 para. 62, 1448, n.58 Intangible Assets, ASH, June para. 65, 608, n.44 para. 63,1446, n.51 1996 para. 68, 610, n.49 para. 64, 1441, n.38 para. 69, 610, n.50 para. 67, 1451, n.61 para. 2, 625, n.5 para. 69, 611, n.51 Appendix 1, para. 5, 1433, n.4 para. 2, 625, n.6 paras. 74 and 75, 609, n.47 Appendix III, para. 21, 1440, para. 5, 741, n.10 paras. 86-88, 614, n.58 n.35 para. 6, 331, n.l25 para. 7, 331, n.l26 FRED 14, Provisions and FRED 15, Impairment ofFixed para. 7, 331, n.127 contingencies, ASH, June 1997 Assets and GoodwiU, ASH, para. 8, 626, n.11 June 1997 para. 9, 626, n.12 para 1, 1437, n.7 para. 9, 632, n.18 para. 2, 322, n.108 Preface. 333, n.139 para. 11,626, n.14 para. 2, 1433, n.3 para. 2, 625, n.4 para. 12,331, n.129 para. 2, 1442, n.43 para. 2, 625, n.8 para. 13,647, n.52 para. 2, 1445, n.48 paras. 4 and 5, 723, n.26 paras. 14 and 15, 331, n.l28 para. 4, 1437, n.8 para. 8, 663, n.81 paras. 16 and 21, 332, n.133 para. 5,1437, n.10 para. 11,663, n.82para. 17,663, paras. 16 and 21, 332, n.134 para. 5, 1442, n.42 n.83 para. 17, 332, n.132 para. 5(b), 1446, n.52 paras. 26 and 27,1202, n.12 para. 18, 332, n.130 para. 5(c), 1452, n.62 para. 34, 663, n.84 para. 20, 332, n.138 para. 6, 1437, n.11 para. 37, 663, n.85 para. 22, 332, n.137 para. 7, 1438, n.18 para. 38, 664, n.86 para.22, 328, n.117 para. 7, 1439, n.30 para. 40, 664, n.87 paras. 38 and 39, 332, n.135 paras. 8 and 57-59, 1455, n.64 para. 52, 686, n.136 para. 39, 332, n.136 para. 9, 1439, n.24 para. 55, 687, n.139 para. 58, 333, n.14O para. 9, 1439, n.26 para. 69, 626, n.13 para. 10 and 60,1439, n.27 FRED 16, Earnings Per Share, para. 78, 332, n.131 para. 10(a), 1439, n.28 ASH,June 1997. para. 11, 1439, n.25 FRED 13, Derivatives and para. 12,1448, n.57 para. 2, 1363, n.45 other financial instruments: para. 13, 1455, n.65 para. 2, 1364, n.50 Disclosures, ASH, April 1997. para. 14,1455, n.67 para. 3, 1362, n.42 para. 15, 1439, n.29 para. 5, 1362, n.43 para. 4, 599, n.22 para. 16,1440, n.31 paras. 6-9, 1362, n.44 para. 6, 599, n.26 para. 17,1437, n.13 para. 10, 1364, n.49 para. 7, 600, n.27 para. 18, 1440, n.36 para. 11, 1364, n.53 para. 8, 601, n.29 para. 19,1441, n.37 para. 12, 1364, n.54 para. 10, 605, n.34 para. 20, 1441, n.4O para. 13, 1364, n.55 para. 11, 605, n.35 paras. 20 and 66,1441, n.39 para. 14, 1366, n.57 para. 12, 605, n.37 para. 21, 1451, n.59 para. 15, 1363, n.48 para. 12,607, n.38 para. 22, 1451, n.60 para. 16, 1369, n.62 paras. 13 and 14, 607, n.4O para. 23, 1441, n.41 para. 17, 1369, n.63 paras. 15 and 16,608, n.41 para. 24, 1428, n.33 para. 18, 1369, n.64 para. 17,608, n.42 para. 31, 1437, n.9 para. 19, 1369, n.65 para. 18, 608, n.43 para. 32, 1434, n.5 para. 22, 1364, n.51 para. 19,609, n.45 para. 33, 1445, n.49 para. 30, 1363, n.46 para. 20, 609, n.46 para. 36,1437, n.14 para. 33, 1363, n.47 para. 21, 609, n.48 paras. 37 and 39, 1438, n.16 para. 33, 1364, n.52 para. 22, 612, n.53 para. 38, 1438,n.17 para. 43, 1364, n.56 para. 23, 612, n.54 para. 40, 1437, n.15 para. 47, 1366, n.58 paras. 24-26, 613, n.55 para. 41, 1443, n.45 para. 48, 1366, n.59 para. 27, 599, n.24 para.42, 1446, n.53 para. 49, 1366, n.60 Index of Statutes and Standards 1811

(FRED 16) UITF 7, True and fair override Companies Act 1985 para. 50, 1366, 0.61 disclosures, UITF, December 1992 5 23, 392, 0.255 Draft Statemeot, Interim 55. 117 aod 118, 877, 0.83 Reports, ASH, November 1996, para. 4, 702, 0.187 5130(1),876,0.77 para. 4, 1056, 0.26 5 130(2), 876, 0.78 para. 8, 1712, 0.32 para. 7, 702, 0.188 5130,893,0.115 para. 8, 1712, 0.33 55.131 aod 132,877,0.79 para. 10, 1716, 0.42 UITF 9, Accounting for 55. 159-181, 880, 0.101 para. 12, 1712, 0.35 Opertztions in Hyper• 5170,881,0.102 para. 13, 1712, 0.36 inj1lltionary Economies, UITF, 5 171 et seq, 883,0.103 para. 17, 1709,0.20 Juoe 1993 5 223(5), 242, 0.53 para. 22, 1714 0.38 55226(4) and 227(5), 1533,0.1 paras. 22-24,1712,0.31 para. 5, 531, 0.109 55226(5) aod 227(6), 733, 0.55 paras. 25 aod 34, 1710, 0.23 para. 6, 532, 0.112 5 227(2)-(3), 225, o. 1 para. 26, 1713, 0.37 para. 7, 533, 0.114 5227(4),225, 0.2 para. 27, 1710,0.25 para. 8, 533, 0.115 5227(5) aod (6), 945, 0.41 para. 28, 1710, 0.24 5228(1),246,0.70 para. 30, 1714, 0.39 UITF 12, Lessee accounting for 5 228(2)(a), 246, 0.72 para.31, 1715,0.40 reverse premiums and similllr 5 228(2)(c), 246, 0.73 para. 33, 1715, 0.41 incentives, UITF, December 5 228(2)(d), 246; 0.74 para. 34, 1717, 0.43 1994 5 228(2Xe)-(t), 247, 0.75 para. 39, 1711, 0.30 5 228(3), 246, 0.71 para. 42, 1710, 0.26 para. 6, 997, 0.40 5228(5),641,0.47 para. 43, 1711, 0.27 para. 8, 996, 0.38 5228(6),354,0.179 para. 44, 1718, 0.44 para. 9, 997, 0.39 5228(6),702,0.186 para. 44, 1718, n.46 5 228, 246, 0.66 para. 45, 1718, n.45 UITF 13,Accounting for ESOP 5229(2)-(4),251,0.87 para. 46, 1711,0.28 Trustr,UITF,Juoel995 5 229(3Xa), 253, 0.98 para. 47, 1711, 0.29 5 229(3)(c), 258, 0.102 paras. 48 aod 49, 1709, 0.21 para. 8, 902, 0.120 5229(4),251,0.90 para. 8, 902, 0.121 55232(1)-(2) and Sch. 6, para. UITF 3, Treatment ofGoodwill para. 9, 903, 0.122 29,1602,0.76 on Disposal ofa Business, Appeodix I, 905, 0.124 55232(1)-(2) and Sch. 6, paras. UITF, December 1991 15(a)-(b) and 16(a)-(b), 1589, UITF 14, Disclosure of 0.31 para. 10,381,0.237 changes in accounting policy, 55 232(1)-(2) and Sch. 6, paras. para. 11,381, n.238 UITF, November 1995 15(c) aod 16(c), 1592,0.35 para. 12, 380, 0.236 S5 232(1)-(2) and Sch. 6, Part H, para. 7, 380, n.235 para. 3, 1306, 0.91 1587,0.23 para. 9, 381, n.239 55 232(1 )-(2) and Sch. 6, Part UITF 15,. Disclosure of 111,1602,0.75 UITF 5, Tmnsfers from substontilll acquisitions, UITF, 5232(1)-(2) and Sch. 6, paras. CllITent Asset! to Fixed Assetr, January 1996 15-16, 1587,0.26 UITF, July 1992 5232(3),1619, n. 17 para. 3, 370, 0.219 5232(3),1619, o. 18 para. 2, 690, 0.142 5 234(2), 1565, n.64 para. 5, 690, 0.143 UITF 16, Income and expenses 5240(3), 1709,0.22 para. 5, 727, 0.38 subject to non-standard rtzIes of 5 243, 253, n.97 para. 27, 727, n.39 taz, UITF, February 1997 55 245-245B, 1301, n.85 5247(5),250, n.81 UITF 6, Accounting for post• para. 7, 1212, 0.34 55. 248-249, 246, n.68 retirement benefits other than para. 11, 1208, n.29 5248(4),249, n.77 pensions, UITF, November 5249(1)-(2),250, n.83 1992 UITF 17, Employee share 5 249(1)(a), 250, n.84 schemes, UITF, April 1997 5249(3),249, n.78 para. 7, 1172,0.72 para. 13(a), 907, n.129 5249(4),249, n.79 para. 7, 1173,0.73 para. 13(c), 907, n.128 5249(5), 250, n.82 para. 8, 1172, 0.71 para. 13(c), 907, 0.126 5251(4) (a), 31, n.77 para. 8, 1301, 0.83 para. 13(d), 907, 0.130 5251(4) (b), 31, n.80 para. 9, 1173, 0.74 para. 13(d), 907, 0.131 5251(4) (c) aod (d), 31, n.79 para. 15,907, 0.132 5251,30, n.70 para. 16,907,0.127 5 258(1 )-(2), 227, 0.8 para. 17, 907, 0.133 5259(1),227,0.7 1812 Generally Accepted Accounting Practice in the United Kingdom

(Companies Act 1985) (Companies Act 1985) (Companies Act 1985) s 260(1), 231, n.15 s 335(1), see also s 339, 1605, Sch. 4, para. 12(a), 140, n.28 s 260(2), 231, n.17 n.98 Sch. 4, para. 12(a), 437, n.45 s 260(3), 231, n.16 s 335(2), 1605, n.99 Sch. 4, para. 12,529, n.101 s 262(1), 624, n.3 s 336, 1606, n.lOl Sch. 4. para. 14,65, n.101 s 262(1), 633, n.20 ss 337(1)-(3),1606, n.102 Sch. 4, para. 14,664, n.88 s 262(1), 719, n.7 s 337(3), see also s 339, 1606, Sch. 4, para. 14,727, n.42 s 263, 748, n.36 n.103 Sch. 4, para. 15 820, n.54 s 264, 341, n.146 ss 338(1)-(4), see also s 339, Sch. 4, para. 15, 808, n.35 s 264, 573, n.164 1606, n.104 Sch. 4, para. 15, 1305, n.88 s 266 and Sch. 4, para. 73, 721, s 338(6), 1606, n.l05 Sch. 4, para. 15, 1305, n.89 n.19 s 340(6),1596, n.44 Sch. 4, para. 17, 633, n.19 s 269(1), 748, n.37 s 340(7), 1596, n.45 Sch. 4, paras. 17 and 22, 500, s 269(2), 748, n.38 s 341(1) 1607, n.l08 n.66 ss. 270-273, 692, n.153s 270(4), s 341(2),1607, n.109 Sch. 4, paras. 17, 22 and 26(3), 1706, n.l s 341(4),1607, n.ll0 769, n.67 s 275(2), 691, n.149 s 341(5) 1607, n.111 Sch. 4, paras. 19 and 34, 687, s 275(5), 691, n.151 s 3421608, n.1l2 n.140 s 275(6) s 343(2), 1599, n.61 Sch. 4, para. 19(1),723, n.25 ,691, n.152 ss 343(5)-(6), 1599, n.62 Sch. 4, paras. 19(1) and (2), 661, s 276, 401, n.256 s 346(6)(a), 1584, n.13 n.76 s 310(3)(a), 1626, n.27 s 346(7) and Sch. 13, para. 5, Sch. 4, paras. 19(1) and 19(2), s 311(1), 1618, n.9 1584, n.14 694, n.160 s 311(2), 1618, n. 10 s 346(8),1584, n.15 Sch. 4, para. 19(2),661, n.74 s 312, 1618, n.12 s 346, 1584, n.12 Sch. 4, paras. 19(2) and (3), 723, s 316(3), 1618, n.14 s 739(1), 1609, n.122 n.24 s 317(1),1608, n.1l4 s 741(1), 1582, n.6 Sch. 4, para. 19(3),661, n.75 s 317(2), 1608, n.1l6 s 741(2), 1582, n.8 Sch. 4, para. 19(3),751, n.42 s 317(2), 1608, n.1l8 s 741(3), 1582, n.9 Sch. 4, para. 20(2), 747, n.32 s 317(3), 1608, n.1l9 s 744, 879, n.99 Sch. 4, para. 22,724, n.31 s 317(6),1587, n.22 s 744,1323, n.7 Sch. 4, para. 23, 724, n.32 s 317(6), 1608, n.1l5 s 744,1584, n.16 Sch. 4, para. 25(2), 803, n.27 s 317(7),1608, n.1l3 Sch. 4, Balance Sheet Fonnats, Sch. 4, para. 25,659, n.72 s 317(8),1608, n.120 814, n.39 Sch. 4, para. 25, 803, n.25 s 318, 1618, n.15 Sch. 4, note (17) on the profit Sch. 4, para. 26, 818, n.50 s 319, 1619, n. 16 and loss account fonnats, 694, Sch. 4, para. 26(1), 633, n.21 s 320(1),1609, n.l23 n.159 Sch. 4, para. 26(1), 720, n.13 s 320(2),1609, n.124 Sch. 4, para. 3(2), 746, n.30 Sch. 4, para. 26(2), 787, n.98 s 321, 1609, n.125 Sch. 4, para. 3(4) 702, n.185 Sch. 4, paras. 26(2) and 26(3), ss 317(1), (8), 1587, n.21 Sch. 4, para. 3(7), 1299, n.77 633, n.23 ss 317(8), 320(3), 330(5), 1604, Sch. 4, para. 5, 941, n.35 Sch. 4, para. 26(3)(b), 755, n.l n.86 Sch. 4, para. 5, 1047, n.7 Sch. 4, para. 26(3)(b), 772, n.73 ss 317, 320, 330-346,1604, Sch. 4, para. 8 Balance sheet Sch. 4, para. 26(3)(b), 842, n.85 fonnats. 1226, n.75 n.101 ss 322(1)-(2), 1609, n.126 Sch. 4, para. 8 Profit and loss Sch. 4, para. 26(3), 500, n.67 s 322(2),1609, n.127 account fonnats and para. 54(3), Sch. 4, para. 26(3), 500, n.68 s 322(5),1609, n.l28 1226, n.74 Sch. 4, para. 26(3), 762, n.24 s 322(6),1610, n.129 Sch. 4, para. 8, 789, n.101 Sch. 4, para. 26(3), 789, n.100 s 330(2) 1604, n.87 Sch. 4, para. 8, 850, n.11 Sch. 4, para. 26(3), 790, n.103 s 330(2)(b), 1604, n.89 Sch. 4, para. 8, 879, n.93 Sch. 4, para. 27(2)(b), 802, n.20 s 330(2)(b), 1604, n.91 Sch. 4, para. 8, 998, n.49 Sch. 4, para. 27(3),802, n.21 s 330(3)(c), 1604, n.92 Sch. 4, para. 8, 1011, n.73 Sch. 4, para. 31(1), 670, n.lOl ss 330(3)-(4),1604, n.93 Sch. 4, para. 8,1050, n.14 Sch. 4, para. 31(2), 670, n.100 ss330-346,Sch.6,PartsIIand Sch. 4, para. 8, balance sheet Sch. 4, para. 31(3), 670, n.102 III, 1582, n.5 fonnats, 719, n.6 Sch. 4, para. 31(3), 720, n.14 s 330(6), 1604, n.94 Sch. 4; para. 8, balance sheet Sch. 4, para. 31(5), 724, n.33 s 330(7), 1605, n.95 fonnats, 1569, n. 83 Sch. 4, para. 32, 647, n.55 s 331(3),1585, n.18 Sch. 4, para. 8, balance sheet Sch. 4, para. 32, 687, n.138 s 331(6) 1604, n.88 fonnats. 693, n.156 Sch. 4, paras. 32(1) and (3), 682, s 331(7), 1586, n.19 Sch. 4, para. 8, profit and loss n.126 s 331(8), 1586, n.20 account fonnats, 694, n.158 Sch. 4, para. 33, 527, n.100 s 332, 1605, n.97 Sch. 4, para. 8, profit and loss Sch. 4, paras. 33(1) and (2) 697, s 333, 1606, n.l00 account fonnats, 1569, n.83 n.l71 s 334. S 339, 1605, n.96 Sch. 4. paras. 9-13, 65, n.100 Sch. 4, para. 33(2), 699, n.175 Index of Statutes and Standards 1813

(Companies Act 1985) (Companies Act 1985) (Companies Act 1985) Sch. 4, para. 33(3), 698, n.l72 Sch. 4, s 245B, 22, n.51 Sch. 5, para. 15(2) and (3) 1567, Sch. 4, para. 33(3), 728, n.49 Sch. 4, s 246(1)(a), 22, n.50 n.70 Sch. 4, para. 33(4), 698, n.173 Sch. 4, s 262(3), 140, n.29 Sch. 5, para. 15(2),261, n.107 Sch. 4, para. 34(1), 680, n.119 Sch. 4, s 263(3), 690, n.145 Sch. 5, para. 15(4),261, n.108 Sch. 4, para. 34(1), 685, n.132 Sch. 4, s 275(1), 691, n.146 Sch. 5, para. 15(4), 1568, n.74 Sch. 4, para. 34(2), 701, n.178 Sch. 4, s 275(2), 691, n.147 Sch. 5, para. 15(5), 1568, n.73 Sch. 4, para. 34(2), 701, n.183 Sch. 4A, 240, n.44 Sch. 5, para. 17(2),251, n.110 Sch. 4, para 34(3), 336, n.143 Sch. 4A, para. 1, 336, n.l44 Sch. 5, para. 17,261, n.109 Sch. 4, para. 34(3), 680, n.121 Sch. 4A, para. 1(1) 342, n.150 Sch. 5, para. 17, 1568, n.75 Sch. 4, para. 34(3), 680, n.122 Sch. 4A, para. 2(2), 243, n.54 Sch. 5, para. 19, 244, n.58 Sch. 4, para. 34(3), 680, n.l23 Sch. 4A, para. 3(1), 241, n.49 Sch. 5, para. 19, 1568, n.76 Sch. 4, para. 34(3), 690, n.l44 Sch. 4A para. 3(2), 241, n.51 Sch. 5, para. 21, 1568, n.78 Sch. 4, para. 34(4), 701, n.179 Sch. 4A para. 3(3), 241, n.50 Sch. 5, para. 22, 1567, Sch. 4, para. 36A, 22, n.49 Sch. 4A, para. 6(3), 237, n.32 Sch. 5, Part II, para. 21,454, Sch. 4, para. 41(1), 879, n.97 Sch. 4A, para. 6, 245, n.61 n.88 Sch. 4, para. 41(3), 879, n.98 Sch. 4A, para. 7(1), 354, n.182 Sch. 5, Part II, para. 22(3), 452, Sch. 4, paras. 42 to 44, 998, n.51 Sch. 4A, para. 9, 278, n.29 n.85 Sch. 4, paras. 42-44, 1011, n.74 Sch. 4A, para. 9, 354, n.181 Sch. 5, s 262(3), 1, n.2 Sch. 4, paras. 42(1)(a) and Sch. 4A, para. 9(2), 291, n.58 Sch. 6 para. 22(2), 1590, n.33 42(2),695, n.163 Sch. 4A, para. 9(2), 625, n.7 Sch. 6 para. 27(c), 1590, n.34 Sch. 4, paras. 42(1)(a) and Sch. 4A, para. 9(2), 630, n.16 Sch. 6, para 22(2)(t) 1594, n.43 42(2), 728, n.48 Sch. 4A, paras. 9(2) and 17(2), Sch. 6, para. 1(1 )(a), 1620, n.20 Sch. 4, para. 42(1)(b), 695, 236, n.29 Sch. 6, para. 1(1)(b), 1634, n.35 n.l64 Sch. 4A, para. 9(4), 289, n.54 Sch. 6, para. l(l)(c), 1636, n.40 Sch. 4, para. 42(1)(b), 728, n.50 Sch. 4A, para. 10(2),274, n.7 Sch. 6, para. l(l)(d), 1640, n.46 Sch. 4, para. 42(3), 695, n.165 Sch. 4A, para. 100c), 390, n.251 Sch. 6, para. l(l)(e), 1641, n.52 Sch. 4, para. 42(3), 728, n.51 Sch. 4A, para. 10, 274, n.6 Sch. 6, para. 1(2), 1636, n.39 Sch. 4, para. 43(a), 699, n.174 Sch. 4A, para. 11, 356, n.185 Sch. 6, para. 1(3)(a), 1622, n.24 Sch. 4, para. 43(b), 700, n.176 Sch. 4A, para. 13, 375, n.222 Sch. 6, para. 1(3)(b), 1623, n.25 Sch. 4, para. 44, 697, n.169 Sch. 4A, para. 13(2), 375, n.223 Sch. 6, para. 1(4), 1637, n.41 Sch. 4, para. 45(1), 729, n.52 Sch. 4A, para. 13(3), 378, n.229 Sch. 6, para. 1(5), n.21 Sch. 4, para. 45(2), 729, n.53 Sch. 4A, para. 13(6),378, n.230 Sch. 6, para. 1(5), 1620, n.36 Sch. 4, para. 46(1) and (2), Sch. 4A, para. 15, 388, n.247 Sch. 6, para. 1(5), 1633, n.37 1434, n.6 Sch. 4A, para. 18, 252, n.93 Sch. 6, para. 1(5), 1634, n.38 Sch. 4, para. 46, 1226, n.76 Sch. 4A, para. 19,439, n.52 Sch. 6, para. 1(5), 1634, n.42 Sch. 4, para. 47,1226, n.77 Sch. 4A, para. 20, 427, n.9 Sch. 6, para. 1(5), 1636, n.4 7 Sch. 4, para. 48(1) and (2), 879, Sch. 4A, para. 22,422, n.1 Sch. 6, para. 1(5), 1640, n.49 n.95 Sch. 4A, s 151 et seq., 391, Sch. 6, para. 1(5), 1641, n.53 Sch. 4, para. 48(4), 879, n.96 n.252 Sch. 6, para. 1(5), 1641, n.54 Sch. 4, para. 48, 998, n.52 Sch. 4A, s 260(1), 427, n.l0 Sch. 6, para. 1(6)(b), 1622, n.23 Sch.4,para. 50, 1570,n. 83 Sch. 4A, s 260(3), 427, n.ll Sch. 6, para. 1(7), 1641, n.51 Sch. 4, para. 50(2), 1053, n.20 Sch. 5, paras. 2(2) and 16(1), Sch. 6, para. 1(8), 1642, n.55 Sch. 4, para. 50(2), 1408, n.7 1568,n.71 Sch. 6, para. 10(2), 1630, n.29 Sch. 4, para. 50(2), 1423, n.32 Sch, 5, para. 4, 1567, n.1 Sch. 6, para. 10(2), 1631, n.32 Sch. 4, para. 50(4),1175, n.75 Sch. 5, paras. 7 and 8, 729, n.54 Sch. 6, para. 10(4), 1630, n.34 Sch. 4, para. 50(5), 513, n.87 Sch. 5, paras. 7-9,439,n.50 Sch. 6, para. 11(1), 1627, n.28 Sch. 4, para. 50(5), 998, n.50 Sch. 5, paras. 7-9 and 23--28 Sch. 6, para. 11(2), 1629, n.30 Sch. 4, para. 53(2), 789, n.102 1570, n. 82 Sch. 6, para. 11(2), 1630, n.31 Sch. 4, para. 53(2), 879, n.loo Sch. 5, paras. 9A and 28A, Sch. 6, para. 12, 1630, n.33 Sch. 4, para. 54(2),1224, n.72 1569, n. 80 Sch. 6, para. 13(2)(a), 1620, Sch. 4, para. 54(2), 1230, n.81 Sch. 5, para. 10(1)(d), 1, n.1 n.22 Sch. 4, para. 55, 1062, n.8 Sch. 5, paras. 11 and 30 1565, Sch. 6, para. 13(3)(a), 1623, Sch. 4, para. 56(4), 1176, n.77 n.56 n.26 Sch. 4, para. 56(4) 1653, n.77 Sch. 5, paras. 11 and 30, 1567, Sch. 6, para. 13(3), 1640, n.48 Sch. 4, para. 59A, 1571, n.86 n.69 Sch. 6, para. 13(3), 1641, n.50 Sch. 4, para. 83(1), 697, n.170 Sch. 5, paras. 11 and 30, 1565, Sch. 6, para. 15, 1587, n.24 Sch. 4, para. 85, 879, n.94 n.57 Sch. 6, para. 17(2), 1592, n.38 Sch. 4, para. 88, 1433, n.2 Sch. 5, paras. lland 30, 1562, Sch. 6, para. 17(2), 1592, n.37 Sch. 4, para. 89, 1433, n.1 n.49 Sch. 6, para. 17(2), 1598, n.52 Sch. 4, para. 94(2), 1176, n.78 Sch. 5, paras. 12 and 31, 1565, Sch. 6, para. 18(a), 1598, n.46 Sch. 4, Part V, 718, n.4 n.58 Sch. 6, para. 18(b), 1598, n.47 Sch. 4, s 245, 22, n.52 Sch. 5, paras. 12 and 31, section Sch. 6, para. 18(c), 1598, n.48 Sch. 4, s 245A, 22, n.53 740,1567, n.73 Sch. 6, para. 19, 1588, n.30 1814 Generally Accepted Accounting Practice in the United Kingdom

(Companies Act 1985) (Companies Act 1985) (London Stock Exchange, The Sch. 6, para. 2(1)(a), 1649, n.69 Sch. 9, Part IV, para. 3(1), 1603, Listing Rules) Sch. 6, para. 2(1)(b), 1649, n.70 n.81 Chapter 12, para. 12.43(q), Sch. 6, para. 2(2),1649, n.71 Sch. 9, Part IV, para. 3, 1599, 1572,n.88 Sch. 6, para. 2(3),1652, n.75 n.59 Chapter 12, para. 12.43(q), Sch. 6, para. 2(4), 1652, n.76 Sch. 9, s 232(1)--(2), and Sch. 6, 1601, n.71 Sch. 6, para. 2(5), 1651, n.73 paras. 15-16, 1588, n.28 Chapter 12, para. 12.43(r), 1571, Sch. 6, para. 2(5),1651, n.74 Sch. lOA, para. 2(1), 227, n.lO n. 72 Sch. 6, para. 2(a), 1637, n.43 Sch. lOA, para. 3(1), 228, n.12 Chapter 12, para. 12.43(s), 1572, Sch. 6, para. 2(b), 1637, n.44 Sch. lOA, para. 4(1)--(2), 230, n.91 . Sch. 6, para. 20, 1598, n.53 n.13 Chapter 12, para. 12.43(t), 1574, Sch. 6, para. 21, 1599, n.56 Sch. lOA, para. 4(1), (3), 231, n. 102 Sch. 6, para. 22(1), 1590, n.32 n.18 Chapter 12, para. 12.43(v), 204, Sch. 6, para. 22(1), 1594, n.41 Sch. lOA, paras. 5~, 227, n.11 n.41 Sch. 6, para. 22(2)(c), 1594, Chapter 12, para. 12.43(w), n.42 London Stock Exchange, The 1657, n. 80 Sch. 6, para. 23, 1598, n.51 Listing Rules Chapter 12, para. 12.43(x), Sch. 6, para. 24, 1598, n.50 1657, n. 81 Sch. 6, para. 25, 1599, n.57 Chapter 10, para. 10.5 and Chapter 12, para. 12.44, 1572, n. Sch. 6, para. 29(2), 1602, n.80 Chapter 11, para. 11.8, 1573, n. 89 Sch. 6, para. 29, 1602, n.77 98 Chapter 12, para. 12.44, 1601, Sch. 6, para. 30, 1600, n.64 Chapter 11, 1573, n. 97 n.72 Sch. 6, para. 30, 1602, n.79 Chapter 11, 1600, n.65 Chapter 12, para. 12.47, 1707, Sch. 6, para. 7(1),1642, n.56 Chapter 11, para. 11.1, 1574, n. n.5 Sch. 6, para. 7(2), 1642, n.57 99 Chapter 12, para. 12.48, 1708, Sch. 6, para. 7(2), 1642, n.58 Chapter 11, para. 11.1, 1574, n. n.13 Sch. 6, para. 7(4), 1643, n.59 100 Chapter 12, para. 12.49, 1708, Sch. 6, para. 8(1), 1643, n.60 Chapter 11, para. 11.8, 1574, n. n.15 Sch. 6, para. 8(2)(b), 1644, n. 101 Chapter 12, para. 12.50, 1708, 63. Chapter 11. para. 11.1, 1601, n.14 Sch. 6, para. 8(3), 1644, n.64 n.66 Chapter 12, para. 1252, 1707, Sch. 6, para. 8(3), 1645, n.65 Chapter 11. para. l1.1O(c), n.4 Sch. 6, para. 8(4), 1643, n.61 1601,n.67 Chapter 12, para. 12.53, 1707, Sch. 6, para. 8(4), 1643, n.62 Chapter 11. para. 11.3, 1601, n.9 Sch. 6, para. 9(1), 1648, n.66 n.69 Chapter 12, para. 12.55, 1707, Sch. 6, para. 9(2), 1649, n.68 Chapter 11. para. 11.4(c), 1601, n.ll Sch. 6, para. 9(3), 1648, n.67 n.68 Chapter 12, para. 1256, 1708, Sch. 6, paras. 15(b) and 16(b), Chapter 11. paras. 11.7 and n.12 1598, n.49 11.8, 1601, n.70 Chapter 12, para. 12.58, 1707, Sch. 6, paras. 15(c) and 16(c), Chapter 12, para. 12.43(c), 762, n.6 1592,n.36 n.26 Chapter 12, para. 12.58, 1707, Sch. 6, paras. 28 and 29(1), Chapter 12, para. 12.43(c), 780, n.7 1602, n.78 n.94 Chapter 12, para. 12.60, 1708, Sch. 7, para. 1(2),693, n.155 Chapter 12, para. 12.43(c), 790, n.16 Sch. 7, para. ZA, 1566, n.65 n.104 Chapter 12, paras. 12.46 and Sch. 7, para. 6(a), 1396, n.17 Chapter 12, para. 12.43(d), 12.52, 1707, n.3 Sch. 7, para. 6(a), 1397, n.19 1660,n.83 Chapter 12, para. 12.59, 1707, Sch. 7, para. 6(c), 748, n.33 Chapter 12, para. 12.43(e), n.8 Sch. 7, para. 8, 1573, n.95 1573,n.94 Chapter 13, paras. 13.30-31, Sch. 7, paras. 2-2B, 1564, n.54 Chapter 12, para. 12.43(j), 179, 1699,n.102 Sch. 7, paras. 8 and 9, 884, n.8 Chapter 16, para. 16.9, 1700, n. n.104 Chapter 12, para. 12.43(k), 105 Sch. 9, Part 1, paras. 33 and 34, 1683,n.99 Chapter 3, para. 3.12, 1571, 726, n.37 Chapter 12, para. 12.43(k). n.92 Sch. 9, Part I, para. 76, 1066, 1572,n.87 Chapter 6, para. 6.E.15(a), 538, n.31 Chapter 12, para. 12.43(1), 878, n.123 Sch. 9, Part II, para. 1, 251, n.91 n.92 Chapter 12, para. 12.43(g), 454, Sch. 9, Part IV, 1588, n.27 Chapter 12, para. 12.43(1), 1572, n.86 Sch. 9, Part IV, para. 2, 1599, n.90 Definitions, 1700, n. 104 n.58 Chapter 12, para. 12.43(n),886, Definitions. 1670, n. 91 Sch. 9, Part IV, para. 3 and Sch. n.105 Chapter 13, paras. 13.13A and 6, Part III, 1600, n.63 Chapter 12, para. 12.43(n), 13.14, Chapter 12, para. 1573,n.96 12.43(u), 1659, n. 82 Index

A Acxounting policies (Accruals concept) changes in acxounting policy, advance royalty/licence Abandonment costs 666, 1300-301 receipts, 156-8 permanent diminution of fixed definition, 66 government grants, 1050 asset value, 115, 662 disclosure, 64-66 negative goodwill, 347 see also Decommissioning costs; fundamental accounting Fixed assets Acxounting principles concepts, 64 definition of UK GAAP, 1-3 revenue recognition, 130 Abbreviated acxounts link with accounting concepts, consolidated accounts 65 Acquisition aexounting small and medium sized revenue recognition, 129-30 see Business combinations groups,250 Acxounting standards Acquisitions of subsidiaries Aexountability development, 16-25 see Business combinations corporate governance exemptions for small companies, see Corporate governance 26 Actuarial valuation methods public accountability, 67, 68, 119 interaction with the law, 4-7 see Pension costs international, 7-9 Acxountants Digest other countries, 9-16 Actuaries business combinations, 290 US, 9-14 pension benefits contingencies, 1423 Canada, 14-15 joint consultation papers, taxation, 1227, 1242 Germany, 14-15 1678 see also Index ofStatutes and see also Pension costs Acxounting bases Standards change in accounting policy, true and fair, 3-16 Additioual paid-in capital 1300-301 see Capital instruments-US definition, 65-66 Acxounting Standards Board link with accounting concepts, (ASH) Advance payment bonds 65 Dearing Report, 22 contingencies,1427 link with accounting policy, 66 purpose, 22-24 Statement of Aims, 2 Advance Corporation Tax Acxounting concepts statutory regulation,S (AC1) CICA financial statements see Deferred taxation and concepts, 117 Acxounting Standards taxation Corporate Report, 68 Committee (ASC), 1~22 FASH exposure draft adoption of SORPs, 24 Advertising future cash flows in creation, 17 Operating and Financial Review, accounting measurement, 47, Dearing Report, 18-22 214 60 introduction, 16-17 revenue recognition, 162 fundamental accounting McKinnon Report, 18 treatment in the US, 1721 concepts, 64-65 objects and terms of reference, IASC conceptual framework, 17-18 Agriculture 115-117 Watts Report, 18 interim reporting, 1714 revenue recognition, 130 revenue recognition, 134-5 see also conceptual framework Acxruals IASC project, 139 defmition, 1434 Accounting estimates AICPA prior period adjustments, 1300 Acxmals concept see conceptual framework acxruais and deferred income 1816 Generally Accepted Accounting Practice in the United Kingdom

(AICPA) (Assignment) (Associates and joint ventures) AIM companies section 330 transactions, 1589 foreign currencies, 488-9 directors' and officers' loans and loan transfers, 966 goodwill, 430 transactions lAS comparison 458-{)0 Stock Exchange requirements, Associates and joint ventures associates, 458 1601-2 accounting treatment, 430-4 joint ventures, 458-{)0 earnings per share, 1322 ASB Discussion Paper, 427-8 interim reporting, 1708, 1711 related parties, 1575 ASB Draft Statement of investor not preparing group Principles financial statements, 437-8 Aircraft industry reporting entity, 106 exposure draft proposals, 439 capitalisation of borrowing costs, cash flow statement, 1496, 1510 joint ventures 769 deficiency of net assets, 436 see Joint ventures depreciation, 656 exposure draft proposals, 437 loss of associate status, 442-4 research and development, 740 definition, 422-30 exposure draft proposals, sale and leaseback, 1034 accounting standard, 422-7 443-4 Companies Act 1985,427 non-

B Basic earnings per share Business combinations, Balance sheet see Earnings per share 269-414 approach to accounting acquisition accounting ASB Draft Statement of Bene6ts-in-kind introduction, 269 Principles, 50 see Directors' remuneration acquisition expenses, 289 problems with approach, 107, issue costs, 289 143 Bonds acquisitions ASB Statement of Principles, financial instruments, 591 basic principles, 278-9 130,1316 foreign currency convertible date of acquisition, 278-9 FASB,50 bonds,497-9 date of transfer of control, fixed assets performance bonds, 1427-1428 278-9 statutory format, 694 see also Capital instruments disclosure requirements, see also off balance sheet 360-71 transactions; post balance sheet Bonus issue private treaties, 278 events earnings per share public offers, 278, 280 summary financial statements, 31 five year summaries, 1336 Stock Exchange disclosure, post balance sheet changes in 369-70 Bank of England capital, 1333-34 acquisitions - measuring the fair qualifying conditions for loan rights issue, 1329-32 value of the consideration, transfers, %2, 966 share split, 1325 279-91 equity eliminations in merger acquirer's shares ranking for Banking industry accounting, 358 dividend, 281 cash flow statements scrip dividends acquisition expenses, 289 small companies exemption, accounting treatment, 897, capital instruments, 28(}"'2 1479 898,899 cash and other monetary specific provisions, 1515-16 consideration, 280 consolidated accounts Bonus share approach contingent consideration, exclusion of subsidiaries from accounting for scrip dividends, 285-9 group accounts, 252 897,898 deferred consideration, 285 exemption from preparing non-monetary assets, 282 group accounts, 249 Bonuses pre-acquisition dividends, depreciation of High Street business combinations 289-91 outlets, 642 contingent consideration, 289 acquisitions - measuring the fair directors' loans and transactions, interim reporting, 1717 value of the net assets acquired, 1599-1600 291-327 investments Borrowing costs basic principles, 291-4 accounting treatment, 718 see Capitalisation of borrowing businesses held exclusively current asset investments, 726 costs for subsequent resale, 324-6 leases choice of accounting policy, determining lease type, 990 Brands 293-4 intermediate party in intangible fixed assets contingencies, 314-5 agreement, 1034 accounting for homegrown deferred tax assets and officers' loans and transactions, brand names, 629, 632 liabilities, 318-9 1603 acquired brands, 626, 632 deprival value of non• related parties criteria for recognition, 626 monetary assets, 282-4 applicability of standard, debate surrounding brands, fair value definition, 293 1553 629-32 intangible assets, 303-4 providers of loans, 1548 measuring non-monetary assets investments, 309-11 research and development, 745 on aquisition, 303 long-term contracts, 305 segmental reporting Solomons Report, 91, 303 long-term maturing stocks, additional provisions, 1063 305 banking SORP, 1066 Brewing industry monetary assets and disclosure, 1067 non-depreciation of licensed liabilities, 311-13 summary financial statements, 31 premises, 642 non-monetary assets acquired, users of financial statements 295-311 . small companies, 29 Building societies pension schemes, 315-18 exemption from preparing cash post-acquisition items, 292 Banks flow statements, 1479 provisional valuation, 295 commitment fees, 159 provisions, 319-24 fmancial instruments Buildings push-down accounting, disclosure, 599 see Land and buildings 326-7 recognition and measurement, Barter transactions 293-4 revenue recognition, 171-2 1818 Generally Accepted Accounting Practice in the United Kingdom

(Business combinations) (Business combinations) (Business combinations) recoverable amount of non• disclosure, 413 push-down accounting, 326-7 monetary assets, 296 goodwill, 413 reorganisation or rationalisation reorganisation or uniting of interests, 411-12 provisions, 319-21 rationalisation provisions, merger accounting step-by-step acquisitions, 319-21 accounting treatment, 356-60 348-56 replacement cost of non• Companies Act conditions, associate becoming a monetary assets, 296 274-5,379 subsidiary, 353 requirements for individual criteria, 276-8 background, 348 assets and liabilities, 295-326 different from merger relief, example, 348-52 stocks and work in progress, 271 increased investment in 305-9 dividends of the subsidiary, existing subsidiary, 354-6 subsequent amendments, 326 359-60 investment becoming a tangible fixed assets acquired, equity eliminations, 356-7 subsidiary, 352-4 296-303 expenses of the merger, requirements of accounting taxation, 318-19 357-8 standard, 352~ tax losses, 319 introduction, 269 US comparison, 402-10 use of hindsight, 294-5 non-coterminous accounting acquisition date, 406 businesses held exclusively for periods, 358-9 wlocation period, 409-10 subsequent reswe, 324-6 vendor placings, 273 businesses sold or held capital instruments as see also mergers; merger exclusively with a view to consideration, 280-82 relief subsequent rewe, 408 cash and other monetary merger relief, 271-72 cost of the acquired consideration, 280 acquirer's shares ranking for enterprise, 406 contingencies acquired, 314-5 dividend, 281 deferred taxation, 408-9 deferred tax assets and liabilities Companies Act requirements, disclosures in respect of acquired, 318-9 271-2 acquisitions, 410 definition, 275 differellt from merger fair vwues of identifiable development of rules on criteria accounting, 271 assets and liabilities, 407-9 for mergers and acquisitions, goodwill emerging on an goodwill, 410 270-78 acquisition, 272 intangible assets, 407 disclosure requirements, 360-78 historicru development, 271 inventories, 407 acquisitions, 360-71 merger reserve, 334-6 investments, 408 wi business combinations, see also merger accounting; main differences between US 361 mergers and UK, 403-10 Companies Act, 375-8 mergers, 356-60 monetary assets and mergers, 371-5, 378 basic principles, 357 liabilities, 408 discounting, 280 basic Companies Act negative goodwill, 345 disposws, 378-388 requirements, 356 pensions and OPEBs, 408 basic principles, 378 definition, 275-6 pooling-of-interests method, businesses held for resrue, 325 disclosure requirements, 371- 403-5 deemed disposws, 386-7 5 pre-acquisition contingencies, disclosure requirements, 387- dividends of the subsidiary, 408 88 359-60 provisions for reorganisations effective date of disposW, equity eliminations, 356-7 and future losses, 409 379-80 expenses of the merger, 357- purchase method, 405 goodwill of subsidiaries 8 tangible fixed assets, 407 disposed of, 380--84, 390 non-coterrninous accounting goodwill per UITF Abstract, periods, 358-9 C 380--84 see also merger relief; merger introduction, 270 accounting Cadbury partiw disposWs, 384-6 monetary assets and liabilities see also Corporate governance; provision for expected loss on acquired, 311-13 Operating and Financiw we of subsidiary, 380 negative goodwill, 344-8 Review earn outs, 285, 314 onerous contracts, 321-2 references to Cadbury Report fair vwue of individuw assets pension schemes of acquired and Cadbury Code in Index of and liabilities acquired, 295 company, 315-18 Statutes and Standards fair value of the consideration, pre-acquisition dividends, 279-91 289-91 Cadbury Code goodwill provisions for future operating audit committee see Goodwill losses, 321 involvement of auditors, group reorganisations provisions of acquired company, 189-90 see Group reorganisations 319-24 membership, 190-1 IASC comparison, 411-13 purchase consideration terms of reference, 190 acquisitions, 412-13 forms of, 279-91 working in practice, 190 Index 1819

(Cadbury Code) (Cadbury Code) CaD options auditors report definition, 196-7 allocation of finance costs, 860 auditing standard SAS 600, directors' statement, 195--6 leases 192-3 effectiveness, 195, 197 determining the lease type, options for reporting, 208 expectation gap, 204 989 Stock Exchange requirements, key elements of control, sale and leaseback, 1021-6 207-8 197-8 sale and repurchase agreements, board of directors opinion on effectiveness, 954 chairman's role, 182 195-6 chief executive's role, 182 working group, 195 Canada company secretary, 184 non-compliance Canadian accounting standards, composition of the board, main areas, 190-1 14-15 181-3 non-executive directors capital instruments, 917 division of responsibilities, calibre, 182-3 CICA financial stataments 181-2 fees, 185-6 concepts, 117 format of directors report, 207 independence from contingencies, 1412 frequency of board meetings, management, 183, 185--6 earnings per share, 1334 181 independent judgement, 183, financial instruments, 617 functions of the board, 181-4 185 foreign currency transactions, independent professional nomination committee, 188 468 advice, 184 number, 182-3 Stamp Report, 80 matters for the board's previous executive statement of source and decision, 183-4 involvement, 185, 1644 application of funds, 1468 policies and procedures selection process, 188 manuals, 183 share option schemes, 185 Capital aDowances presentation of company's term, 186-7 accelerated, 1188 position, 189 Operating and Financial Review, allocation between periods, 1188 relationship with auditors, 189 changes in tax rates, 1240 189-90 principles early accounting standards, 1205 relationship with accountability, 179 leases, 980 management, 181 integrity, 179 revaluation of fixed assets, 1241 report on going concern, 204- openness, 178-9 timing differences, 1188 7 related parties, 1552, 1571 report on internal control, reporting on compliance with the Capital appreciation 194-204 Code, 180-208 investments, 718 responsibility for accounts research programme, 210 leases,989,1019 preparation, 192-4 smaller quoted companies, 209 see also executive directors; City Group for Smaller Capital bonds non-executive directors; Companies (CISCO), 208-10 see Financial instruments Operating and Financial definition, 208 Review recommendations, 209-10 Capital changes City Group for Smaller statement of directors' effect of post balance sheet Companies, 208-10 responsibilities, 192-4 changes on EPS, 1333 continuing debate, 210-12 Stock Exchange directors' remuneration Listing rules, 179-80 Capital contributions summary recommendations, non-compliance, 179 definition, 401 1616,1654 survey of compliance, 210-11 FASB conceptual framework, executive directors 57,59 disclosure of total Cadbury Committee treatment in the financial emoluments, 1655 history, 177 statements of the paying Greenbury Code, 189 link with Greenbury, 1616, 1654 company, 401-2 see also remuneration objectives, 178 treatment in the financial committee terms of reference, 177-8 statements of the receiving full text, 177 see also Cadbury Code; Cadbury comany, 402 going concern Report UK subsidiary with overseas foreseeable future, 205--6 parent company, 564 information to consider 204-5 Cadbury Report possible conclusions, 205 Cadbury Committee, 178 Capital funding Stock Exchange Listing Rules directors' remuneration Operating and Financial Review, amendment, 179 see Directors' remuneration 215 working group, 180 interim reporting, 1709 Hampel Committee, 211-12 Sir Adrian Cadbury, 177 Capital grants internal control see also Cadbury Code purchase price of fixed assets, annual report requirements, 633 197 see also Government grants 1820 Generally Accepted Accounting Practice in the United Kingdom

Capital instruments, 845-922 (Capital instruments) (Capital Instruments) accounting for acquisitions deep discounted bonds, 888 imputed interest approach, acquisition expenses, 289 defeasance, 862 853 contingent consideration, definition of capital instruments, problem with FRS 4 285~ 849 approach, 854, 855 purchase consideration, 280-2 development of FRS 4, 846 split accounting, 852 accounting treatment of debt disclosure requirements lAS comparison, 917 instruments, 856 Companies Act, 877 imputed interest approach accounting treatment of share debentures, 879 see hybrid instruments capital, 857 debt maturities, 863 index-linked bonds, 889 additional paid-in capital FRS 4, 868 interest payable see US comparison interest, 879 Companies Act requirements, allocation of finance costs, 858 investment companies, 875 879 arrangement fees, 859 loan capital, 879 see also bonds; finance costs ASB financial instruments share capital, 877 interest rate swaps, 896 project discussion paper, 847 investment companies link with, 846 distinction between debt and finance costs charged to market value of debt, 875 share capital capital, 849 narrative disclosures, 876 FRS 4, 849 issue costs timetable, 848 traditional distinction, 845 accounting treatment of debt bonds dividends instruments, 856 deep-discounted bonds, 888 allocation of finance costs, accounting treatment of share fixed interest rate bonds, 886 858 capital, 857 index-linked bonds, 889 disclosure requirements, 875 allocation of finance costs, see also convertible bonds redeemable preference shares, 859,860 stepped bonds, 887 894 definition, 858 variable interest rate bonds, US comparison, 912 fixed interest rate bonds, 886 886,887 see also scrip dividends variable interest rate bonds, call option employee share schemes, 901 886 i~ueradloption,860 ESOP trust accounting, 901 loan capital, 879 capital contributions, 401-2, 925 link with off balance sheet loan stock with detachable capital redemption reserve finance, 902 warrants, 890 purchase of a company's own UITF on employee share measurement of share capital shares, 880 schemes, 906, 1640, 1698 Companies Act requirements, redeemable preference shares, US treatment, 916 876 894 equity shares foreign currency share capital, commercial paper, 865 definition, 1323 877 see also Cash flow statements see also share capital group reconstructions, 876 committed facilities, 603, 864, ESOP trusts share premium account, 876 867 see employee share schemes minority interests convertible bonds exclusions from FRS 4, 849 disclosure requirements, 868 convertible capital bonds, 891 finance costs distinction between debt and perpetual debt, 892 accounting treatment, 856 share capital, 849, 850 traditional convertible bonds, allocation of finance costs, finance costs, 859 890 858 multiple option funding facility with premium puts or committed facilities, 864, agreements, 866 enhanced interest, 891 1484 negative finance cost, 855 with share warrants attached, definition, 858 net proceeds 890 investment companies, 849, accounting treatment, 857 convertible debt 875 allocation of finance costs, disclosure requirements, 868 non-equity shares, 857 858 distinction between debt and relationship with i~ue costs, split accounting, 852 share capital, 849, 852 876 warrants, 867 see also convertible bonds see also negative finance non-equily shares convertible loan stock, 854 costs accounting for non-equity convertible preference shares, fixed interest rate bonds, 886 shares, 857 896 FRS 4 allocation of finance costs, cumulative preference dividends, development, 846 859 894 requirements, 849-76 definition, 850 debentures scope, 849 disclosure, 868 definition, 879 hybrid instruments see also preference shares disclosure, 879 cl~ification, 852 Operating and Financial Review, i~ue costs, 876 convertible bonds 215 repurchase of debt or shares, see convertible bonds options 8~3 Index 1821

(Capital instruments) (Capital instruments) (Capital instruments) allocation of finance costs, share capital extinguishment of debt, 914 859 accounting treatment, 857 financial instruments project, call option, 863 Companies Act disclosure 916 convertible bonds, 890 requirements, 877 redeemable shares, 910 convertible capital bonds, 891 Companies Act measurement share capital, 731, 732, 891, disclosure of options to requirements, 876 909 subscribe, 878 distinction with debt, 849 treasury stocks, 911 employee share schemes, 907 foreign currency, 877 troubled debt restructuring, imputed interest approach to FRS 4 disclosure 915 hybrid instruments, 853 requirements, 868 variable interest rate bonds, 886, loan with issuer call option, see also net proceeds; non• 887 860 equity shares warrants option to purchase a US comparison, 909, 911 accounting for warrants, 893 company's own shares, 886 share options bonds with share warrants redemption options, 896 see options attached, 890 share options, 893, 1683 share premium disclosure requirements, 868 US requirements, 914 Companies Act disclosure requirements of FRS 4, 867 participating dividends, 875 requirements, 877 split accounting, 852 perpetual debt, 892 Companies Act measurement US requirements, 913 preference shares requirements, 876 warrants issued to employees, convertible preference shares, employee share schemes, 907 849 896 excess over nominal value, see also Capitalisation of participating preference 857 borrowing costs; Derivatives; shares, 850 issue costs, 857 Financial instruments; Off redeemable preference shares, purchase of a company's own balance sheet transactions 894 shares, 881 premium on issue reinvestment approach to Capital Jease see share premium scrip dividends, 897 see also Leases premium on redemption split accounting, 853 US finance lease, 1037 allocation of finance costs, US equivalent, 911 858 warrants, 893 Capital maintenance disclosure, 878 shareholders' funds ASB Statement of Principles, purchase of a company's own see share capital 104 shares, 881 split accounting Corporate Report, 68 purchase of a company's own IASC requirements, 617, 855, FASB conceptual framework, shares 917 56,59 accounting treatment, 880 see hybrid instruments IASC conceptual framework, disclosure, 885 stepped bonds, 887 116 redemption out of capital for Stock Exchange requirements, provisions, 1440 private companies, 883 863,878 Sandilands Report, 73, 76, 77 redeemable preference shares, subordinated debt, 849 Solomons Report, 89 894 subsidiary company issue Stamp Report, 81 differences from fixed interest convertible capital bonds, 892 borrowings, 894 convertible preference shares, Capital markets dividends in arrears, 894 896 Operating and Financial Review, treatment of dividends, 894 definition of capital 217 US comparison, 910 instruments, 849 variable dividends, 896 disclosure, 868 Capital redemption reserve renegotiated debt, 848 distinction between debt and accounting for goodwill, 338 repurchase of debt minority interests, 850-51 capital instruments accounting treatment, 856, supplemental interest, 847 Companies Act disclosure 860 tax implications, 845 requirements, 877 disclosure, 875 term of debt instrument, 859 purchase of a company's own issuer call options, 860 traditional convertible bonds, shares, 880 treatment of gain or loss, 861 890 redeemable preference shares, UITF8,848 underwriting fees, 859 894 scrip dividends, 897 US comparison, 909 bonus share approach, additional paid-in capital, 911 Capital reserve 897,898 convertible bonds with a accounting for goodwill, 333 problems with scrip premium put, 914 capital instruments dividends, 897 debt, 912 imputed interest approach, reinvestment approach, debt issued with warrants, 913 853 897,899 dividends, 912 exchange difference on requirements of FRS 4, 868 employee shares, 916 retranslation, 524-7 1822 Generally Accepted Accounting Practice in the United Kingdom

Capital stock (Capitalisation of borrowing) (Capitalisation of borrowing) see also Capital Instruments - intra-group borrowings, 782 qualifying and non--qualifying US qualifying assets held by assets, 763 treasury stocks, 911, 913 equity accounted investments, 782-3 Capitaljsation of interest Capital structure see also equity accounted see Capitalisation of borrowing effect of post balance sheet investments; joint ventures costs change on EPS, 1333 lAS comparison, 765-9 Operating and Financial Review, borrowing costs eligible for Cash 215,876 capitalisation, 766-71 financial instruments, 590, 591 cessation of capitalisation, see Cash flow statements Capitalisation of borrowing 768 costs, 755-792 commencement of Cash equivalents accounting options, 758-60 capitalisation, 767-8 see Cash flow statements accrued costs, 781 development of standards, aerospace industry, 769 756 Cash Dow accounting amount to be capitalised, 774-82 disclosure, 768--9 FASB exposure draft ASB project on measurement of interruptions and delays future cash flows in tangible fIXed assets during development, 774 accounting measurement, capitalisation rate choice, 778 limitation on interest 47,60 development of accounting capitalised, 779-80 Sandilands Report, 74 practice, 755, 792 qualifying assets, 766, 770 proposals, 761 suspension of capitalisation, Cash Dow statements asset not previously held at cost, 768 acquisition of fixed assets, 1495 781-2, 784 imputed interest, 760 acquisition of subsidiaries, assets produced by others, 787-8 interruptions during 1507-8 borrowings and capitalisation development, 774, 784 changes in working capital, rate, 774- 779 joint ventures, 782, 783 1488-89 capitalisation rate, 774-779 land awaiting development, 771 deferred consideration, 1500 ASB project on measurement limitation on interest capitalised, acquisitions and disposals, 1497- of tangible fixed assets, 778 779-80 99 commencement of capitalisation long-term contracts, 761~2 cash flows included, 1497-99 period,771-2 methods of calculating interest, subsidiaries, 1497-99 compounding of capitalised 774-9 associated undertakings, 1496, interest, 780--81 notional interest, 762 1509 cost of assets, 810 period of production, 770--74 banks creative accounting technique, policy change, 784-6 international standard, 1524 788--9 property developments small companies exemption, current UK position, 76~2 see Property industry 1479 debate surrounding provisions for diminution in specific provisions, 1515-16 capitalisation, 756-8 value, 732, 784 building societies exemption, delays during development, qualifying assets, 769 1479 774,784 assets held by equity capital expenditure and financial depreciation, 788 accounted investments, 782-3 investment, 1493-97 disclosure requirements assets produced by others, cash flows included, 1495 accounting policy, 791 787-8 fixed asset note comparison, balance sheet and related retail industry, 755 1496-97 notes, 789 shipping industry, 769 fixed asset purchases on listed companies, 762 Stock Exchange requirements, credit, 1497 profit and loss account and 762 cash related notes, 789-90 tax treatment definition, 1480 distilling industry, 769 gross or net of tax relief, 780 definition per origina] FRS 1, end of capitalisation period, tobacco industry, 769-70 1473 772-4 US comparison 763-764 cash equivalents equity accounted investments, assets produced by others, definition, 1474 766, 770, 782 788 need for revision, 1475 exchange differences as a capitalisation period, 764 international standard borrowing cost, 786-7 capitalisation rate, 763-4 definition, 1524 first time capitalisation, 784 development of standards, US definition, 1519 fixed assets 763 cash flow accounting, 74 debate surrounding, 755 disclosure, 764 classification of cash flows, 1486 group financial statements 782-3 exchange differences asa acquisitions and disposals, borrowings in one company borrowing cost, 787 1497-99 and development in another, limitation on interest capital expenditure and 782 capitalised, 780 financial investment, 1493-97 Index 1823

(Cash flow statements) (Cash flow statements) (Cash flow statements) equity dividends paid, 1500 format, 1482-85 net presentation, 1484-85 exceptional and extraordinary forward contract notes to the cash flow statement, items, 1502-3 see foreign currency 1515 financing, 1501-2 free cash flow, 1493-95 general requirements, 1515 management of liquid FRS 1 material non-cash resources, 1499-1501 differences from SSAP 10, transactions, 1515 operating activities, 1487-90 1471 restriction on remitability, returns on investment and original, 1473 1515 servicing of finance, 1491-92 requirements, 1477, 1511 objectives, 1504, 1526 taxation, 1492-93 see also original FRS 1 open-ended investment funds commercial paper funds flow exemption, 1479 presentation, 1485 see Funds statement operating activities, 1487-90 comparative figures, 1507 groups, 1506--9 definition, 1487 development, 1467-76 associated undertakings, 1510 direct method, 1488, 1490 disposal of fixed assets, 1495 see also acquisitions of discontinued activities, 1489 disposal of subsidiaries, 1508 subsidiaries; disposal of indirect method, 1488-89 disposals subsidiaries reconciliation with balance see acquisitions and disposals equity accounted joint sheet figures, 1488-89 dividends ventures, 1510 reorganisation of business, appropriate category, 1491 foreign currency, 1510-13 1487 associated tax credit intra-group transactions, 1507 operating profit treatment, 1492 overseas subsidiaries, 1509- reconciliation with cash flow, cash dividends on accrued 13 1488,1489 profits, 1473 preparation, 1508-9 original FRS 1, 1473-74 equity dividends paid, 1500 proportional consolidation, definitions, 1473-74 exceptional items, 1502-3 1510 history, 1473 exemptions from preparing, hedging transactions, 1513-14 need for revision, 1474 1477-79 hire purchase contracts, 1497 standard headings, 1473 building societies, 1479 lAS comparison, 1523-25 overdrafts, 1480 mutual life assurance insurance companies pension funds exemption, 1478 companies, 1478 international standard, 1525 problem areas open-ended investment funds, small companies exemption, see FRS1 1479 1479 reconciliations, 1505 pension funds, 1478 specific provisions, 1516-17 net debt components, 1506 small companies, 1479 interest net debt movement, 1505 small entities, 1479 witholding tax treatment, see also operating profit; subsidiary undertakings, 1477 1492 operating activities extraordinary items, 1502-3 interest rate swaps, 1513 returns on investments and finance lease interim reporting servicing of finance, 1491-92 financing cash outflows, 1502 ASB draft Statement, Sandilands Report, 74 purchase of fixed assets, 1710,1712 scope, 1477 1471, 1497 US requirements, 1719 servicing of finance financial institutions investing activities see returns on investments international standard, 1525 see capital expenditure and and servicing of finance financial investment financial investment; short-term deposits, 1485 see capital expenditure and acquisitions and disposals small company exemption, 1479 financial investment joint ventures small entities exemption, 1479 financing, 1501-3 equity accounted, 1510 SSAP 10 funds statement, 1468- previous cash equivalents, proportional consolidation, 69 1503 1510 development, 1468 relevant cash flows, 1502 lease rentals, 1486 distinction from cash flow fixed assets liquid resources statement, 1471-72 acquisition and disposal, 1495 definition, 1500 form and content, 1468-69 foreign currency, 1509-13 see also management of liquid objectives, 1469 elimination of intra-group resources standard headings, 1482, 1486 cash flows, 1511-13 management of liquid resources, acquisitions and disposals, exchange differences, 1509- 1499-1501 1497-99 13 cash flows to be included, capital expenditure and forward contract, 1514 1500 financial investment, 1493-97 groups, 1510-11 gross or net presentation, equity dividends paid, 1500 hedging transactions, 1514 1502 exceptional and extraordinary individual entities, 1509-10 mutual life assurance company items, 1503 form and content of funds exemption, 1478 financing, 1501-2 statement, 1468-89 net debt, 1504-6 general principle, 1486 1824 Generally Accepted Accounting Practice in the United Kingdom

(Cash Dow statements) (Commission) (Comparability) management of liquid media and production, 162 FASH conceptual framework, resources, 1499-1501 54 operating activities, 1487-90 Commitment fees returns on investments and credit card fees, 160 Comparative figures servicing of finance, 1491-92 on loans, 159-60 reporting financial performance, sequence, 1482 1306--7 taxation, 1492-93 Commitments statements of source and acquisition of a subsidiary, 292, Comprehensive income application of funds 320,321 basic components, 58 see SSAP 10 funds statement expenditure commitments, 928, definition, 57-58, 59, 1253 subsidiary undertaking 931,969,973,1455 differences from earnings, 60 exemption, 1477 forward contracts, 506--507, 581 international developments, 1294 taxation hedging transactions, 501 US standard, 47, 60, 406, 1253- advance corporation tax, leases 4,1312-14 1492-93 disclosure requirements, 998, tax credits, 1492 1003 Computer software taxation heading, 1492-93 pension commitments revenue recognition, 163-8 advance corporation tax, 1492 Companies Act requirements, US standard, 752 certificates of tax deposit, 1176 1492 defined benefit schemes, 1115 Computer systems excluded taxes, 1492 disclosure, 1133 year 2000 costs, 1459 irrecoverable tax, 1493 exposure draft, 1107, 1109 property taxes, 1492 role of the actuary, 1151 Conceptual framework, 39-121 sales taxes, 1492 scopeofSSAP24,1110 accounting bases VAT,1492-93 recognition, 930 see Accounting bases US comparison recognition of items in the accounting policies cash equivalents, 1520 financial statements, 100 see Accounting policies development of SFAS 95, related parties, 1571 advantages of having, 39-41 1518 sale and repurchase agreements, A1CPA's early US initiatives direct or indirect methods, 953 Accounting Research Studies, 1523 sale or termination of an 43-4 fmancing activities, 1521 operation, 1275 APH Statement No.4, 44 focus of SFAS 95, 1519 Solomons Report, 90 Wheat and Trueblood form and content, 1520 stocks,823 Committees,4S gross presentation, 1522 take--or-pay contracts and ASH's Statement of Prlnclples investing activities, 1519-20 throughput agreements, 968 see Statement of Principles non-cash activities, 1523 US sales of real estate, 170, 973 cash flow accounting, 74 operating activities, 1522 see also Capital commitments CICA summary of principal financial statement concepts, differences, 1523 Commodities 117 fair value of commodity stocks Stamp Report, 80 Charities acquired, 305 conflicting interests of users, 40 cash flows to include marking to market, 725, 726, continuously contemporary irrecoverable VAT, 1493 826-7 accounting (CoCoA), 72-4 charitable donations, 1187 revenue recognition, 134-5 Corporate Report 66--69 charitable trust, 961, 1554 stock realised after the balance additional statements investment properties, 640 sheet date, 1399-1400 required, 68 bases of measurement, 68 City Group for Smaller Commodity contracts fundamental objective, 67 Companies financial instruments, 599-600 purpose of profit see Cadbury Code measurement, 68 Commodity dealing scope, 66--67 Closing rate see Commodities user groups, 67, 82 see Foreign currencies current cost accounting, 75-8 Companies Acts features, 69 Commen:ial paper see Index ofStatutes and Hyde Guidelines, 76--77 cash flow statements Standards Sandilands recommendations, presentation, 1485 75-8 see Capital instruments; Cash Comparability US comparison, 77-78 flow statements qualitative characteristic of current purchasing power (CPP) accounting accounting, 69-70 Commission ASH Statement of Principles, features, 70 issue of shares, 876 96 current value accounting leases, 1028 Index 1825

(Conceptual framework) (Conceptual framework) (Conceptual framework) ASB Draft Statement of user needs, 82-3 current purchasing power Principles, 10~9 valuation of assets and accounting, 69-70 Dearing Report, 19 liabilities, 83-4 value accounting, 71-4 definition, 39 measurement in financial Solomons Report, 87-91 disclosure of accounting policies statements 101-4 background, 87 see Accounting policies background, 101-2 deferred tax, 90 elements of financial statements, capital maintenance, 104 elements of financial 96-8 current value accounting, statements, 88 assets, 97 101-3 financial commitments, 90 contributions from owners, 98 historical cost accounting, goodwill, 90, 91 distributions to owners, 98 101-3 income determination, 87 gains, 98 relief value, 104 model for financial reporting, liabilities, 97 value to the business, 103 8~9 losses, 98 New Zealand framework project, pensions accounting, 90, 91 overall approach, 98, 275 117-20 qualitative characteristics of ownership interest, 97 differential reporting, 118, accounting information, 88 see also FASB conceptual 119 recognition criteria, 88 framework explanatory foreword, 120 time value of money, 90 FASB conceptual framework, statement of concepts, 117, Stamp Report, 80-1 4~3 11~19, 120 Statement of Principles (ASB), aims of conceptual objective of financial statements, 93-115 framework, 46-7 93-4 background, 93 conclusion, 63 financial adaptability, 93-4 discounting, 114-5 earnings or balance sheet user requirements, 94 historical cost replaced by approach, 49-50 other international framework current values, 1~ elements of financial projects, 115-20 overall assessment, 106-11 statements, 55-9 present value accounting, 71-2 purpose, 110-11 exposure draft on future cash presentation of financial reaction of respondents, flows in accounting information, 104-5 112-3 measurement, 47, 60 qualitative characteristics of recognition tests, 107-8 history, 46 fmancial information, 94-6 response to criticism, 113-4 investment objectives, 49 comparability, 96 Statement of total recognised objectives of financial materiality, 96 gains and losses reporting, 47-50 relevance, 9~ ASB Statement of Principles, prospective net cash inflows, reliability, 9~ 109-10 48 understandability, 96 UK initiatives, 64-92 qualitative characteristics of recognition of items in financial value accounting 71-74 accounting information, 50-5 statements continuously contemporary recognition and measurement, criteria for derecognition, accounting, 72-4 59-60 99-101,141 present value accounting, fundamental accounting concepts criteria for recognition, 71-2 64-6 99,100 replacement cost accounting, accruals concept, 64 gains and losses, 100, 142 71 consistency concept, 64 overall assessment, 107-8 see also elements of financial definition, 64 recognition rules, 100-1 statements; measurement in going concern concept, 64 reliability of measurement, financial statements; objective matching concept, 64 100 of financial statements;• no~gation,65 similarities to lCAS study, presentation of financial prudence concept, 65 101 information; qualitative recent ASB initiatives, 65 replacement cost accounting, 71 characteristics of financial Future Shape of Financial reporting entity, 10~ information; recognition of Reports, 91-2 associates and joint ventures, items in financial statements; IASC conceptual framework, 106 reporting entity 115-17 conditions, 10~ Maeve Report, 79-80 consolidated financial ConflIct of Interest Making Corporate Reports statements, 106 see Directors' and officers' loans Valuable, 81-7 control, 106 and transactions; Directors' additional information, 85 definition, 105 remuneration background, 81-2 differences between equity basic conclusions, 86-7 accounting and proportional Connected persons net realisable value, 83-4 consolidation, 106 definition, 1583-84, 1631 proposed new information Sandilands Report, 69-78 disclosure of directors' and package, 84-5 cash flow accounting, 74-5 officers' loans and transactions, replaceinent cost, 83 current cost accounting, 75-8 1587 1826 Generally Accepted Accounting Practice in the United Kingdom

(Connnected persons) (ConsoUdated accounts) (Consolidated accounts) legal requirements definition of a subsidiary, 227 Germany civil remedies, 1608-9 historical background, 240 control by contract, 229-30 inter-company transactions, concept of a group, 225-39 goodwill arising on acquisition, 1607 control 238 loans, 1605 see subsidiaries historical development, 239-40 minor credit transactions, convertible loan stock and horizontal groups, 226 1607 participating interest, 233, 239 lAS comparison, 264-5 money-lending companies, coterminous accounting periods inter-company transactions 1607-8 242-4 eliminating the effects, 235, quasi-loans, 1605 Companies Act requirements, 238 short-term quasi-loans, 1606, 242-3 see also elimination of 1629 disclosure, 244 profits/losses on inter• small loans, 1606 foreign subsidiaries, 244 company transactions substantial property interim accounts, 242-3 interim accounts transactions, 1610 definition, 241 . see coterminous accounting material interest transactions, development of UK accounting periods 1592 standards, 240 intermediate holding companies payments to connected persons, dominant influence conditions for exemption, 1631 Companies Act, 231 246-8 payments to consultancies, FRS 2 definition, 231 disclosure under FRS 2, 250 1631-32 EC Seventh Directive 226 disclosure under the payments to other connected de facto control over board Companies Act, 246 persons, 1632 appointment, 226 minority shareholder rights, scope of disclosure, 1587 horizontal groups, 226 246 section 330 transactions, 1589 UK legislation link, 226 requirements of other EC Stock Exchange requirements, elimination of profits/losses on states, 248 1601 inter-company transactions subsidiary of another EC 244--5 company, 248 Consignment stock equity accounted subsidiaries, timing problems, 248 off balance sheet finance, 947 245 joint venture agreements foreign currency rotation of chairman, 228 Consistency concept complications, 245 shared control, 234 comparability, 54 partly-owned subsidiaries, legislative background in the fundamental accounting 245 UK, 240 concepts, 64 rationale, 244 minority interests unconsolidated subsidiaries, acquisition of a subsidiary, ConsoUdated accounts, 225-65 245 238 accounting for subsidiaries - exclusion of subsidiaries from rights in intermediate holding FRS 2 group accounts 251-62 companies, 246 coterminous accounting background,251 unrealised profit/losses on periods, 243-4 different activities, 251-3 inter-company transactions, definition of a subsidiary, 226 disclosure, 261-2 245 definition of consolidation, foreign companies, 253 see also partly owned 241 held for subsequent resale, subsidiaries development, 240 258-60 objectives of group accounts, dominant influence, 231, 239 immateriality, 260-1 225 entity perspective. 237 insolvency proceedings, 253 off balance sheet financing, exclusion of particular loss of control by parent 225-6 subsidiaries, 251-8 company, 253 option to acquire shares in exemption from preparing operating under severe subsidiary, 239 group accounts, 250 restrictions, 253-8 participating interest with purpose of consolidated political unrest, 255 dominant influence, 230-4 accounts, 225 provision for permanent partly-owned subsidiaries, requirements, 237-9 impairment, 257 235-9 unified management, 231 sources of rules, 251 acquisition of a subsidiary, uniform accounting policies, unincorporated undertakings, 238-9 241-2 252 comparison between entity see also elimination of exemptions from preparing and proprietary concepts, unreaIised profits/losses on group accounts 245-50 235-7 inter-company transactions; FRS 2 exemptions, 250 control and ownership subsidiaries general, 245-6 divorced, 239 basic principles of consolidation, see also intermediate holding controVownership concept, 240-1 companies; small and 237 Companies Act medium-sized groups dealings in shares, 238 Index 1827

(Consolidated accounts) Construction industry (Contingencies) exposure draft, 237 Private Finance Initiative, 970 estimating the amount of a eliminating inter-company revenue recognition contingency, 1413--15 transactions, 235, 238 completed contract method, exposure draft on provisions and entity concept, 235 134 contingencies, 1428--29, 1437 accounting standard IASC position, 148,836-8 financial effect requirements, 237 long term contracts, 138--9 certain claims, 1419-20 goodwill, 238 US position, 150--1 claim for unspecified proprietary concept, 235 damages, 1419 subsidiary in overall deficit, Continental Vending case disclosure examples, 1415-21 237 auditors' obligations 11-12 disclosure of potential see also minority interest; amounts involved, 1416-18 elimination of unrealised Contingencies, 1407-1430 estimate not possible, profits/losses on inter• bad debts, 1408 1420--21 company transactions Companies Acts requirements non-disclosure of potenetial reporting entity historical background, 1407-8 amounts, 1416-19 ASB Draft Statement of remote contingencies, 1423-4 fixed assets, 1408 Principles, 106 conflicting interests, 1407 foreign currency balances, 1408 small and medium-sized groups contingent gains groups of transactions, 1411 249-50 accounting treatment, 1409 guarantees, 1424--5 Companies Act provisions, compensation for historical background, 1407-8 249-50 expropriation of property, lAS comparison, 1430 criteria for exemption, 249 1409 IASC Draft Statement, 1414, disclosure, 249 definition, 1409 1430 exemption from preparing disclosure, 1411, 1555 likelihood of event occurring, consolidated accounts, 249 summary of accounting and 1411-13 gross or net basis, 250 disclosure requirements, 1410 litigation, 1421-22 ineligible groups, 249 contingent losses accounting treatment, 1422 management accounts, 250 accounting treatment, breach of copyright, 1422 subsidiaries 1409-10 disclosure of potentially Companies Act definition, definition, 1409 prejudicial information, 1421 227 disclosure, 1411 infringement of patent rights, concept of a group, 225-39 estimating the amount, 1422 consolidation, 240-45 1413--15 inherent uncertainty, 1421 control by agreement, 230 expected value, 1414 Inland Revenue control by contract, 229-30 exposure draft, 1428--29 investigations, 1422 control of the board, 228--9 percentage probability, 1414 reluctance of legal profession, definition, 225-34 summary of accOunting and 1421 EC Seventh Directive, 226, disclosure requirements, 1410 sensitive information, 1421 347-8 definition, 1407, 1408 long-term contracts, 1408 joint ventures, 228 exposure draft, 1428 materiality, 1423 majority of voting rights, development of accounting for matrix of accounting and 227-8 contingencies, 1407-8 disclosure requirements, 1410 participating interest with disclosure offsets, 1410--11 dominant influence, 230-4 details to disclose, 1411 performance bonds, 1427-28 quasi subsidiaries, 234 discounted bills of exchange, advance payment bonds, 1427 subsidiary of more than one 1425-26 definition, 1427 parent, 234 exposure draft, 1428--9 performance of another group unified management, 230--34 financial effect, 1415-21 company, 1428 see also accounting for guarantees, 1424--25 tender bonds, 1427 subsidiaries - FRS 2 likelihood of event occurring, possible unified management 1411-13 probable, possible or remote, UK position, 230 potentially prejudicial 1411-13 application in US, 263 information, 1421-22 definitions, 1411 uniform accounting policies, remote contingencies, percentage levels, 1412 241-2 1423--24 prudence, 1413 US comparison, 262-4 requirements of SSAP 18, property valuation, 1408 voting rights 1408--11 provisions definition, 227 sample company disclosures, link with exposure draft, 1408 fiduciary interests, 228 1416-21 remote contingencies majority, 227-8 VAT groups, 1423, 1426-7 disclosure, 1423--24 see also Business combinations; discounted bills of exchange, see also probable, possible or Disposals; Foreign currencies; 1425-26 remote Group reorganisations off balance sheet SSAP 18 requirements, 1408--11 requirements, 1426 stock and work in progress, 1408 1828 Generally Accepted Accounting Practice in the United Kingdom

(Contingencies) (Corporate governance) Current purchasing power taxation, 1411 Cadbury Code of Best Practice (CPP) accounting US comparison, 1429-30 see Cadbury Code see Conceptual franlework accrual conditions, 1429 Cadbury Committee definition, 1429-30 see Cadbury Committee Current values differences from UK, 1430 Cadbury Report financial instruments, 593-5 VAT groups, 1423, 1426-27 see Cadbury Report corporate failures, 177 Customer support services Contingent consideration definition, 178 revenue recognition, 166-7 acquisition of a subsidiary, 285 format of directors' report, 207 Greenbury Report, 180 Customers Contingent Uabilities requirement for, 177--8 onerous contracts, 1442 provisions shareholders' role, 178 users of financial statements link with, 1433 see also Directors' and officers' ASB Statement of Principles, loans and transactions; 94 Contingent Dability Directors' remuneration; FASB conceptual framework, see Contingencies Operating and Financial 48 Review (OFR) Continuously contemporary D accounting (CoCoA) Corporate Report value accounting, 72-4 see Conceptual framework Dearing Report 18-22 history, 18-19 Contracts of significance Credit card companies implementation of proposals, disclosure requirements, 1601 credit card fees, 160 21-22 with directors, 1572 principal recommendations, with shareholders, 1572-3 Creditors 19-21 financial instruments, 591 Contributions statutory format, 879 Debentures capital trade creditors financial instruments, 591 see Capital contributions definition, 1434 see Capital instruments contributions from owners users of financial statements definition, 98 ASB Statement of Principles, Debt national insurance contributions, 94 see Capital instruments 1623,1653 cash flow information, 1470 see also Pension contributions FASB conceptual framework, Debt factoring 48 see Factoring of debt Control segmental information, 1061 exercised by directors Debtors see Corporate governance Currency options financial instruments, 591 of subsidiary see Foreign currency sale of see Consolidated accounts see Factoring of debt related parties Cnrrency swaps definition,264,153S-36 see Foreign currency Decommissioning costs provisions, 1452 Convertible bonds Cnrrent asset investments see Capital instruments accounting treatment, 724-6 Deemed disposals classification, 719-20 associates, 443 Convertible debt dermition, 719 subsidiaries, 386-7 see Capital instruments disclosure, 729-33 lAS treatment, 734 Deep discounted bonds Convertible loan stock proposed accounting treatment, see Capital instruments associated companies, 231, 427 725 earnings per share, 1352 readily marketable investments, Deferred consideration see also Capital instruments 72S-6 acquisition of a subsidiary, 285 cash flow statements, 1500 Convertible preference sQres Current assets deferred consideration earnings per share, 1352, 1356 definition, 624 agreements, 1351, 1359-62 see also Capital instruments properties transfers between fixed assets, Deferred expenditure Copyright 689-91 deferred development breach of, 1422 statutory format, 719 expenditure intangible assets, 631 transfers to fixed assets, 727 accounting, 744 disclosure, 744 Corporate governance Current cost accounting see also Research and board responsibilities, 178 see Conceptual framework development Index 1829

Deferred income (Deferred tax) (Deferred tax) advance royalty!licence receipts, permanent differences, 1187 unprovided,1207,1219,1220 156-8 timing differences, 1188 US deferred tax, 1190 development of accounting accounting, 1245 government grants treatment, 1204 UK comparison, 1247 disclosure, 1050 disclosure, 1219 non-depreciating assets, 1056 earnings of overseas subsidiary, Defined benefit scheme negative goodwill, 347 1208, 1243 see Pension costs warrants, 867 alternative treatments, 1208 exceptional items, 1219 Defined contribution scheme Deferred payment terms extraordinary items, 1219 see Pensions costs consignment stock, 947 foreign currencies, 578 foreign earnings, 1224 Demergen Deferred tax future projections, 1217 see Group reorganisations accelerated capital allowances, general approach, 1215 1188 government grants, 1054 Dep~tion,639-661 acquisitions group planning, 1233 accounting bases, 66 fair value, 293 group relief, 1223, 1231 accounting policies, 66 ACf lAS comparison, 1249 aircraft industry, 656 carried forward as an asset, interim reporting, 1715 allocation objective, 639 1235 liability method with full ASB position in current recoverable provision, 1193 discussion paper, 646 ASB Discussion Paper, 1239 liability method with partial assets not currently in use, 647 recoverable ACf, 1205, 1211, provision, 1194 banks,642 1219,1235,1238 advantages, 1199 capitalisation of borrowing costs, set against deferred tax calculation, 1194 788 liability, 1236 criticism of, 1199 change of method, 66, 652, 656 allocation between periods, 1186 definition, 1216 Companies Act 1985, 648 background,l186 inconsistency with accounting consumption versus valuation, deferral method, 1190 practice, 1199 639,640 discounting the liability, 1202 summary, 1215 Current Cost Accounting, 76, 77 flow-through method, 1203 marginal relief, 1240, 1241 definition, 639, 640, 649 hybrid method, 1201 method of computation, 1216 disadvantages of depreciation, liability method with full offsetting consolidated tax 640-48 provision, 1194 balances, 1232 disclosure liability method with partial overseas subsidiaries earnings accounting policies, 694-5 provision,1194 required treatment, 1243 assets carried at valuation, net of tax method, 1203 tax treaties, 1244 698-702 permanent differences, 1187 pension costs, 1172 notes to the accounts, 695-8 tax rules versus accounting provisions on acquisition, 312 profit and loss, 694 rules,1186 reserve movements, 1223 distributable profits, 691-3 timing differences, 1187 revaluations of fIXed assets estimated life, 657-59 allocation within periods, 1204 accounting treatment, 1241 extractive industries, 656 analysis of major components, revaluations above original frequency,651 1220 cost, 1242 fully depreciated assets, 650, 659 assets rollover relief, 1242 hotels, 642 comparison with the US, small companies rate, 1240, 1241 IASC comparison, 707 1099,1248 statement of total recognised ICAS discussion document post retirement health care, gains and losses, 1295 Operations Statement, 84 1199 tax losses intangible assets capital allowances, 1188, 1203 already incurred, 1218, 1228 non-depreciation, 631 changes in tax allowances, 1220 yet to be incurred, 1229 trading potential, 67S-ti changes in tax rates, 1220 tax rate changes, 1240 unlimited life, 647-8 changes in the tax system, 1220 timing differences, 1187 investment properties, 640-42 combining different categories of combining different investments timing difference, 1227 categories, 1227 fixed asset investments, 722 Companies Act requirements, common characteristic, 1188 leasehold properties, 645,1440 1226 definition, 1216 licensed premises, 642 consolidation adjustments, 1234 negative timing differences, methods of depreciation, 652-6 debit balances, 1218, 1219 1198 annuity,655 deferred tax assets/liabilities reasons for,1187 change of method, 656, 698 acquired, 318 see also capital allowances choice of method, 656 defmitions short-term, 1188 double declining balance, 654 deferred tax, 1216 transfers to and from the balance, reducing balance, 653-4 depreciation 1223 reducing percentage, 655 1830 Generally Accepted Accounting Practice in the United Kingdom

(Depreciation) (Depredation) (Directors) straight line, 653 useful economic life, 649, as fiduciaries, 1581 sum of digits, 654 650-51 board of unit of production, 647, 656 value objective see Cadbury Code mineral deposits, 645, 646 versus allocation, 639 definition, 1582 minor items, 659-61 versus consumption, 639, 640 executive motorway service areas, 646 see Cadbury Code negative goodwill, 346 Derivatives former directors' non-

(Directors' and officers' loans (Directors' and officers' loans (Directors' and officers' loans and transactions) and transactions) and transactions) minor or business credit listed companies, 1601-2 sanctions, 1608-9 transactions, 1606-7 loans civil remedies, 1608-9 inter-company transactions, definition, 1584 criminal penalties, 1609 1607 disclosure, 1590, 1591 section 330 transactions, directors' business legal requirements, 1605 1589-92,1598 expenditure, 1607 section 330 transactions, 1589 banking companies, money-lending companies, small amounts, 1606 1599-1600 1607--8 see also quasi-loans credit transactions, 1590, companies registered material interest transactions, 1592, 1598 overseas, 1608 1592-97 disclosure requirements, exemptions from disclosure, definition, 1593-94 1590-92 1598 directors' consideration, 1592 exemptions, 1598-99 general, 1598 disclosure requirements, guarantees and security, 1589, material interest transactions, 1594-97 1591, 1598 1598 exemptions from disclosure, loans, 1589, 1590,1598 Section 330 transactions, 1598-99 principal terms, 1590 1598 other transactions, 1594 quasi-loans, 1589, 1590, 1598 expense advance, 1584, 1585 overlap with credit shadow directors, 1582 groups of companies transactions, 1586 Stock Exchange requirements, directors scope, 1587--88 professional services, 1594 1601-2 officers scope, 1602 purchase/disposal of AIM companies,1601-2 guarantees and security property/investments, 1594 disclosable transaction, 1589 relocation arrangements, 1594 Directors' emoluments disclosure requirements, 1590 residential property see Directors' remuneration sample disclosure, 1591 arrangements, 1594 historical development, 1581--82 money-lending companies Directors' experience inter-company transactions legal requirements, 1607--8 recommendation of leAs legal requirements, 1607 officer discussion document, 82 interests in contracts definition, 1584 legal requirements, 1609-10 officers' transactions Directors' loans legal requirements banking companies, 1603 see Directors' and officers' loans arrangements, 1606 disclosure requirements, 1602 and transactions; Related assignment/assumption of financial statements, 1602 parties rights, obligations or legal requirements, 1602 liabilities, 1605-6 overseas companies, 1608 Directors' remuneration, civil remedies, 1608-9 prohibited transactions, 1605-6 1615-1701 companies registered loans, 1605 accommodation, 1625 overseas,l608 quasi-loans and credit aggregate emoluments criminal penalties, 1609 transactions, 1605 computation, 1627-33 directors' business assignment/assumption of disclosure, 1620-22 expenditure, 1607 rights, obligations or separate disclosure, 1623 exempted transactions, liabilities, 1605-6 amounts repayable by directors, 1606--8 arrangements, 1606 1629-30 inter-company transactions, property transactions benefits-in-kind, 1624-27 1607 substantial transactions, cheap accommodation, 1625 interests in contracts, 1610-11 cheap loans, 1625 1609-10 proposed legislative cost to the company, 1624 legal sanctions, 1608-9 amendments,1603-4 disclosure in practice, loans, 1605 quasi-loans 1626-27 loans of small amount, 1606 definition, 1585 indemnity insurance, 1626 minor credit transactions, disclosure, 1590 market value, 1624, 1625 1606-7 exempted transactions, 1606 motor cars, 1625 money-lending companies, prohibited transactions, 1605 other benefits, 1626 1607--8 sample disclosure, 1592 perceived benefit, 46, 63, prohibited transactions, section 330 transactions, 1624-25 1605-6 1589, 1590 subsidised mortgage, 1625 quasi-loans and credit short-term, 1606 taxable values, 1624 transactions, 1605 see also Directors' remuneration; valuation, 1624 short-term quasi-loans, 1606 Related parties bonuses substantial property related party link, 1581 legal requirements, 1627-29 transactions, 1610-11 definition of material interest, Stock Exchange requirements, transactions involving 1594 1629 officers, 1611 salary advances, 1584 1832 Generally Accepted Accounting Practice in the United Kingdom

(Directors' remuneration) (Directors' remuneration) (Directors' remuneration) see also performance related definition of emoluments, disclosure of excess benefits, pay 1622 1642-43 Cadbury Code, 1654 paid by the company, 1625 see Greenbury Code Cadbury Code of Best repayable by directors, see also Greenbury Code Practice, 1654 1629-30 service contracts full and clear disclosure, form of remuneration, 1617-18 Companies Act provisions, 1654, 1655 former directors 1618-19 Cadbury Committee payments to, 1674-77 entitlement, 1618 link with Greenbury, 1616, golden hellos, 1622 exemption from disclosure, 1654 Greenbury 1598 cars, 1625 see Greenbury Code Greenbury Code, 1656, cheap loans, 1625 highest paid director, 1649-52 1699-1700 compensation for loss of office, Cadbury requirements, 1654 listed companies, 1598, 1619 1643-47 disclosure, 1649-52 services to holding company, augmentation of pension information required, 1650 1632-33 rights, 1646-47 see also Cadbury Report share options, 1633-36 consultancy agreements, 1647 unlisted companies, 1652 calculation, 1634 ex gratia payments, 1645-46 indemnity insurance, 1626 definition, 1634 Greenbury Code, 1656 individual information disclosure, 1620, 1634 legal requirements, 1643-45 original legislation, 1615 excluded from definition of non-monetary, 1645 long-term incentive schemes, emoluments, 1623, 1633 paid by subsidiaries and other 1636 exemption for unlisted persons, 1644 Companies Act requirements, companies, 1635-36 pension, 1644 1636 Greenbury Code, 1683 summary, 1618 definition, 1636--37 UITF Abstract conclusions, conflict of interest, 1615 disclosure, 1637 1633 consultancy agreements with excluded from definition of UITF Abstract detailed ex--{jirectors,1647 emoluments, 1623 requirements, 1683-89 consultancy fees, 1621 UITF Abstract on Employee UITF Abstract summary, definition of a listed company, share schemes, 906,1640, 1616 1635 1698 valuation of benefit, 1633 disclosure, 1619-52 mortgage subsidies, 1625 Statutory Instrument on aggregate emoluments, non-executive directors Disclosure of Directors' 162~22 as employees, 1653 Emoluments, 1617 director as employee, 1653 payments by other persons, 1630 Stock Exchange requirements, dispensation from aggregate payments to connected 1562,1636,1639,1652, disclosures, 1620 consultancy 1654-1700,1704,1705 group financial statements, companies/partnerships, 1631 subsidiary undertakings 1619 payments to connected persons compensation for loss of highest paid director, 1649 definition, 1631 office, 1644 payments to third parties, other connected persons, 1632 legal requirements, 1620 1647 payments to third parties, payments, 1630 pension contributions, 1640 1647-49 services to holding company, summary, 1619 pension contributions 1632 summary of main changes, distinction between defined taxation 1617 benefit and money purchase income tax, 1618 see also bandings; benefits-in• schemes, 1636, 1641 taxable values, 1624 kind; Cadbury Report; excluded from definition of compensation for loss of emoluments, 1623 Directors' report office; subsidiary money purchase schemes, indemnity insurance, 1626 undertakings; pensions; 1640-42 post balance sheet events, 1396, pension contributions; pension costs, 1177 1397 voluntary disclosures; waived pensions purchases of shares, 884 emoluments augmentation of pension research and development emoluments rights, 1646-47 activities, 747 definition, 1622-24 provision of, 1618 segmental reporting, 1061 see also aggregate performance related pay share capital, 878 emoluments bonuses, 1627-29 summary financial statements, 30 unrelated services, 1621 Greenbury Code, 1655 employee disclosures, 1653 public concern, 1616 Directors' transactions employer's national insurance qualifying services, 1620 see Directors' and officers' loans contributions, 1623 recent controversy, 1615-16 and transactions; Related expenses related parties, 1571 parties retirement benefits Index 1833

Disclosure of accounting (Discounts) (Disposals) policies debt factoring, 958 disclosures, 728 SSAP2,64-6 deep discounted bonds partial disposals, 727 see Capital instruments readily marketable Discontinuance method discounted bills of exchange, investments, 726 see Pensions costs - actuarial 1425-6 sale of revalued investments, valuation forward contracts 721-2 accounting treatment, 568 land and buildings Discontinued operations, contract rate, 505 revenue recognition, 169-71 1266-1274 definition, 469 post balance sheet application in practice, 1271-4 US treatment, 507, 580 ICAEW recommendations, cash flow statement, 1489 on purchase of associate, 430, 1378 clearly distinguishable, 1270-71 451 non-adjusting events, 1380, comparative figures, 1307 rights issue 1381,1401 definition, 1266-8 earnings per share, 1329-32 sale and leaseback transactions EPS calculation, 1349-51 settlement discounts profit on disposal, 171 exceptional items, 1281-2 net realisable value, 823 subsidiaries lASC treatment, 1314 shares issued exchange differences, 527 interim reporting, 1711 discount allowed, 876 see also Business material effect on the nature and EPS calculation, 1333 combinations focus, 1268-70, 1284 legal treatment, 274 US treatment non-operating exceptional items, US treatment, 912 discontinued operations, 1282-5 trade discounts 1309-11 OFR cost of stock, 798 extraordinary items, 1309 operating review, 214-5 measurement under lAS 18, permanent cessation, 1268 146 DistiIling industry principal features of FRS 3, net realisable value, 823 capitalisation of borrowing costs, 1259-65 volume discounts 769 provisions, 1276 interim reporting, 1717, 1720 stock valuation, 824 segmental reporting, 1092 US treatment, 1309 Discrete approach to interim Distributable profits reporting capital contributions, 405 Discounted bills of exchange accounting policy, 1713 cash flow implications, 1473 contingent liability, 1425--6 asset values, 1718 foreign currencies, 573-7 contrast with integral approach, realised profits, 130-1 Discounting 1713 research and development costs, ASB Draft Statement of debate surrounding, 1706 748 Principles, 114-15 non-recurring items, 1718 revaluation of fixed assets 691-3 capital instruments seasonal businesses, 1714 writing off goodwill to reserves, perpetual debt, 892 taxation, 1715 333-41 split accounting, 854 US treatment, 1719 effect on realised profits, contingent consideration on the 339-341 acquisition of a subsidiary, 286 Disposals merger reserve, 334-36 deferred tax, 1202 associates profit and loss account, 333 ASB Discussion Paper, 1202 disclosures, 453-4 share premium account, 337 FRS 7 requirements financelease~ 1015-17 businesses held for resale, fixed assets Distribution costs 259,325 lASC treatment, 707 valuation of stock, 342, 821, 822 monetary assets, 311-13 profit or loss on disposal, non-monetary assets, 295 1260,1261,1282,1283 Distribution view leases provision disclosure, 696, 728 of taxation, 1185 finance lease obligation, 992 revalued assets, 683-5 pensions foreign currency investments Distributions interest, 1152 disclosure, 578 right to participate unfunded schemes, 1171 lASC treatment, 584 definition of relevant shares, US requirements, 1179 US treatment, 582 275 present value accounting, 72 FRS 3 provisions, 1439, 1456 goodwill, 1292-3, 1297 Distributions statement renegotiated debt, 848 non-operating exceptional lCAS proposals, 85 revenue measurement under lAS items, 1283 18,146 note of historical cost profits Distributions to owners and losses, 1289, 1290 ASB definition, 98 Discounts profit or loss on disposal, ASB Draft Statement of convertible debt 1288 Principles, 141 US treatment, 914 investments FASB definition, 57 1834 Generally Accepted Accounting Practice in the United Kingdom

Dividends (Earnings per share) (Earnings per share) acquirer's shares ranking for ASB Discussion Paper, 1322, post balance sheet changes in dividend, 281 1362 capital, 1333-34 ACf bases of EPS calculation, US treatment, 1369-72 see taxation 1339-42 discontinued operations, capital contributions, 405 basic EPS, 1323 1349-50 cash flow statements exposure draft proposals, equity shares with future equity dividends paid, 1500 1362--63 dividend entitlement, 1353-54 non-equity dividends paid, US comparison, 1370-71 exceptional items, 1343, 1491 bonus issues 1346--49 relationship with profit, 1473 EPS calculation, 1325-29 exposure draft, 1322, 1362--69 equity accounting, 430 EPS post balance sheet, basic EPS, 1362 foreign currencies 1333-34 diluted EPS, 1363--69 distributable profits, 573 rights issue, 1329-32 presentation and disclosure, dual or suspended rates, 519 calculation of EPS, 1336-51 1369 payable by a foreign different classes of equity scope, 1362 subsidiary to a UK parent, share, 1337-39 FRS 3 565--6 earnings, 1336 IIMR headline earnings, foreign income dividends losses, 1337 1295--6 taxation, 1213 preference dividends, 1323, redefinition of EPS, 1295 franked investment income, 1213 1336-37, 1366 fully diluted EPS, 1352--62 group reorganisations prior year adjustments, 1337 calculation of, 1353--62 dividends in specie, 394, 398, changes in equity share capital, convertible securities, 1352, 404,1271 1324-36 1354-56 income from investments, 728 continuing and discontinued disclosure requirements, 1352 mergers operations, 1349-50 equity shares with future dividends of the subsidiary, convertible loan stock, 1351, dividend entitlement, 359--60 1352,1354 1353-54 OFR convertible preference shares, exposure draft proposals, operating review, 215--6 1351,1352,1354 1363 pre--acquisition dividends debentures, 1351, 1354 need for fully diluted EPS, received from acquired deferred consideration 1351-52 subsidiary, 289-91 agreements, 1359-62 options, 1357-58 preference dividends conditions involving both see also deferred EPS calculation, 1336--37 earnings and share prices, consideration agreements revenue recognition 1361--62 several potentially dilutive lAS 18, 145, 149 earnings conditions, 1360 securities, 1358-59 scrip dividends fully diluted EPS requirement, US comparison, 1371 see Scrip dividends 1351-52 warrants, 1357-58 subsidiaries share price conditions, 1361 group reconstructions, 376, excluded subsidiaries, 262 US comparison, 1359 1335--6 taxation definition, 1323 history, 1321-22 ACf different classes of equity shares, lAS comparison, 1372-73 debit balances, 1219 1337-39 differences from UK exposure recoverable ACf, 1211 participating preference draft, 1372 see also Deferred tax shares, 1338 international exposure draft, exposure draft, 1205 partly-paid shares, 1324, 1322,1362 incoming dividends, 1213 1337-39 IIMR headline earnings, outgoing dividends and ACf, disclosure 1343-46 1210 additional EPS figure, goodwill charged in profit and removal of tax credit, 1213 1295--6,1342--62 loss account, 1343 waived dividends, 1573 adjusted EPS, 1336 permanent diminutions in see also Capital instruments; basic EPS, 1324 fixed assets, 1343 Distributable profits comparative amounts, 1332 profit or loss on disposal of continuing operations EPS, fixed assets, 1343 DondnantUUBuence 1349 profit or loss on see Consolidated accounts deferred consideration sale/termination of an agreements, 1359-62 operation, 1343 E exposure draft proposals, see also FRS 3 1369 irrecoverable ACf, 1356 Earnings per share (EPS), fully diluted EPS, 1352-53 maintainable earnings, 1343 1321-1377 IIMR headline earnings market sensitivity, 1322 adjustments to EPS in five-year 1343-46 net and nil bases, 1339-42 summaries, 1336 nil basis, 1339-41 nil basis EPS calculation, AIM companies, 1322-23 1339-42 Index 1835

(Earnings per share) Employee share schemes (Exceptional items) net assets per ordinary share, capital instruments, 901 requirements, 1281-2 1350 non-operating exceptional items, options Employees 1282-4 exercised during the year, directors, 1653 segmental reporting, 1090 1332-33 disclosure of remuneration, 1653 taxation, 1294-5 fully diluted EPS, 1357-58 see also Pensions see also Profit and loss account post-balance sheet changes in small and medium sized groups, capital, 1333-34 249 Exchange difference preference shares users of financial statements, 48, see Foreign currency see Preference shares 94 purchase and redemption of own Exchange rate shares, 1333 Enhanced interest see Foreign currency reconciliation between additional on convertible bonds, 891 EPS and FRS 3 EPS, 1344 Executive direc:tors reorganisation provisions, 1343 Environmental costs see Corporate governance rights issues operating review, 214 effect on EPS, 1329-32 see Decommissioning costs Expenses five year summaries, 1336 acquisition of a subsidiary, 289 post balance sheet, 1333-34 Equity acquisition of fixed assets, 633 scrip dividend alternatives, 1326 see also Ownership interest advance, 1584 see also Profit and loss account US definition, 57 capitalisation of borrowing cost share consolidation, 1326-27 interest, 759 special dividends, 1327 Equity elimination factoring of debt, 959 share issue mergers, 35Cr7 FASB definition, 58 acquisition of another merger expenses. 357-8 business, 1334-35 Equity instrument personal expenses. 1585 share issue for cash see Financial instruments purchase of fixed asset full market price, 1325 investments, 720 less than full market price, Equity shares research and development, 737-8 1333 accounting treatment, 857 share options disclosure, 868 Extraordinary items see options above fmancial instruments abolition, 128Cr88 share splits, 1325, 1333 excluded from scope, 593 cash flow statements, 1502-3 SSAP 3, 1322-23 see also Earnings per share; FRS 3 requirements, 1279-81 scope of SSAP 3, 1322-23 share capital see also Profit and loss account US comparison, 1369 deferred consideration Errors F agreements, 1359-62 correction of fundamental errors, differences from lASC 1301 Factoring 01 debts standard, 1371-72 off balance sheet transactions, FASB exposure draft, 1322, ESOPs 929,958 1362 capital instruments, 906, 1640, warrants, 1357-58 1698 Fair presentation weighted average number of see Employee share ownersbip Continental Vending case, 11 shares arrangements US equivalent of 'true and fair', calculation, 1331 10 fully diluted EPS, 1353 Estimates new share issue, 1325 actuarial assumptions, 1150 Fairvalne contingencies, 1413-15 acquisition accounting Elements 01 financial see Business combinations statements Events oc:c:urring after the associates and joint ventures, ASB Draft Statement of balance sheet date 430-31 Principles, 96-8 see Post balance sheet events capital instruments US framework, 55-9 IASC comparison, 918 Exceptional items treatment of debt, 856 Emoluments abolition of extraordinary items. treatment of share capital, 857 see Directors' remuneration 128Cr8 disclosure of related party cash flow statements, 1502-3 transactions, 1555-56 Employee share option categories, 1281-2 fair measurement of revenue schemes definition, 1281 lAS 18, 146 financial instruments disclosure, 1281, 1285 US treatment, 172 excluded from scope, 593 earnings per share, 134Cr49 fair value accounting, 54 FRS 3 financial instruments principal features, 1261 numerical disclosure, 610-12 1836 Generally Accepted Accounting Practice in the United Kingdom

(Fair value) Finance leases (Financial instruments) US treatment, 733, 916 see Leases IAse view, 619 leases measurement, 597-9 90 per cent test, 985-8 Financial Accounting numerical disclosure, 612-13 capitalised fixed assets, 991 Foundation history, 589-90 leaseback under an operating US accounting bodies, 45 IAse comparison, 617-18 lease, 1027-8 IASe discussion paper Financial asset recognition and derecognition F ASH conceptual framework, see Financial instruments tests, 975 46-63 recognition criteria, 931 aims of conceptual framework, Financial capital maintenance interest rate and currency profile, 46-7 see Capital maintenance 605-609 conclusion, 63 link with capital instruments, 612 earnings or balance sheet Financial iustruments, 845 link with SSAP 2 - accounting approach, 50 Canada,617 policies, 603 elements of financial statements, cash, 590, 591 liquidity, 609-10 55-7 commodity contracts, 599-600 market price risk, 613-14 history, 46 current values, 593-5 measurement, 593-9 investment objectives, 49 dererrnination, 594-5 current values, 593-5 objectives of financial reporting, half way house options, disposition of gains and 47-50 593-4 losses, 595-7 prospective net cash inflows, 48 quoted,594 hedging, 597-9 qualitative characteristics of short-term, 311, 594 US, 616 accounting information, 50-5 valuation techniques, 295, narrative disclosures, 600-604 conservatism, 55 594 financial risks, 600-601 comparability,55 definition hedge accounting, 604 cost/benefit constraint, 55 ASB,590 link with SSAP 2 - decision makers, 51 US,614 accounting policies, 603 materiality, 54-5 derivatives objectives and policies, 601 relevance and reliability, 52-4 disclosure, 605 offsetting policies, 603 understandability, 52 example, 591 post balance sheet recognition and measurement, purpose, 589 information, 601 59-60 development of accounting provisions for losses, 603 practice, 589-90 non-equity shares, 612 Fees disclosure requirements, numerical disclosure, 604-14 acquisition expenses, 289 599-614 fair values, 610-12 commitment, 159-60 differences between exposure functional currencies, 608 consultancy fees, 1589, 1621, draft and discussion paper, hedging, 612-13 1647 600 interest rate and currency credit card, 160 narrative disclosure, 599, 600 profile, 605-608 data services 167-8 numerical disclosure, 599, liquidity, 609-10 data storage, 167 604-14 market price risk, 613-14 subscription, 167 US, 615-16 non-equity shares, 612 usage, 167,168 disposition of gains and losses, trading instruments, 612 film exhibition rights, 168-9 595-7 objectives and policies, 601 franchise fees, 154-6 fixed rare debt, 595-6 offsetting policies, 603 initial fees, 154-60 interest rate derivatives, 596 post balance sheet information, issue costs, 859 long term strategic 601 license fee, 158 investments, 597 provisions for losses, 603 loan arrangement, 158-9 match fund borrowings, 597 trading instruments, 612 music industry, 157-8 profit and loss account, 595 US comparison, 614-16 non-executive directors, 185 retranslation of foreign definition, 614-15 software investment, 597 disclosure, 615-16 licensing, 163, 164 statement of total gains and recognition and measurement, support, 166-7 losses, 595 616 equity instruments, 591, 917 FIFO examples, 591 Financial liability see Stocks fair values, 610-12 see Financial instruments financial asset, 590 FUm and TV Industry financial liability, 590-91, 917 Financial Reporting Review film exhibition rights, 168-9 financial risks, 600-601 Panel receipt of initial fees, 158 functional currencies, 608 analysis of shareholders funds, gold,599 869 Finance costs hedging Dearing proposals, 21, 23· see Capital instruments disclosure, 604 development, 23 Index 1837

(Financial Reporting Review (Fixed assets) (Fixed assets) Panel) accounting treatment, 1047 lAS comparison, 707-9 leases on non-depreciating assets, impairment, 661-5 sale and leaseback, 1026 1055 ASB Discussion Paper, 663-5 rental inventory, 660--61 capitalisation of borrowing costs lAse treatment, 707 review of accounts debate surrounding, 755-8 provision, 685-8 business combinations, 363 see Capitalisation of US treatment, 706 cash flow statements, 1477 borrowing costs income generating units, 664 investment properties, 691, cash flow statements goodwill, 664 1090 purchase of fixed assets, 1495 link with segmental reporting, leases, 995 sale of fixed assets, 1495 664 segmental reporting, 691, cost of assets, 633-9 interim reporting 1090 abnormal costs and cost asset write-downs, 1718 success, 23-24 inefficiencies, 636-7 depreciation, 1706 capital grants, 633 investments, 625 Financial Reporting Standard directly and indirectly land and buildings for Smaller Entities (FRSSE) attributable costs, 634-5 directors' report, 693 application of accounting distinguishing capital and notes to the accounts, 697 standards to smaller entities, revenue expenditure, 637 replacement cost, 677-8 27-28 improvements and repairs, valuation, 673 637-9 measurement Financial Reporting Standards incidental expenses, 633 valuation approach, 669 (FRSs) inefficiencies, 636-7 minor items, 659-61 see Index ofStatutes and interest, 633, 762, 842 overheads, 634-5 Standards overheads, 634-5 period of production, 635-6 period of production, 635-6 cessation date, 636 Financial Sector production cost, 500, 633 commencement date, 635 SORPs,25 professional fees, 633, 634 permanent diminutions in value purchase price, 633 see Diminutions in value Financing activities repairs, 637-9 post balance sheet transactions, see Cash flow statement defmitions 1400-1401 ASB proposals, 625 profit or loss on disposal of fixed Fixed asset investments balance sheet formats, 624 assets accounting treatment, 72!}-24 Companies Act, 624 calculation, 1288-9 classification, 719 depreciation non-operating exceptional definition, 719 see Depreciation items, 1282-3 disclosure, 728-30 diminutions in value summary of FRS 3 loss of associate status, 444 see permanent diminutions in requirements, 1260, 1261 value property industry Fixed assets, 623-710 disclosure, 693-705 capitalisation of interest, 635 accounting treatment accounting policies, 694-5 recognition criteria, 625--32 accounting standards, 623 balance sheet and profit and intangible assets, 626-32 broad principles, 623 loss account, 694 link with Statement of company law, 623 directors' report, 693 Principles, 625 acquisitions items carried at valuation, tangible fIXed assets, 625 fair value of tangible fixed 698-702 research and development, 742-3 assets acquired, 296-303 notes to the accounts, 696-8 see also Depreciation; Intangible purchase price, 633 estimated life, 657-9 assets; Investment properties; ASB Discussion Paper on the expenses of acquisition Investments; Revaluation of measurement of tangible fixed delivery and handling fixed assets, Fixed asset assets,667-70,673,681 charges, 633 investments ASB Discussion Paper on installation costs, 635 revaluations valuations, 668 site preparation, 633 see Revaluation of fixed ASB project on measurement of finance leases assets tangible fixed assets capitalised fIXed assets, 991 tangible fixed assets and capitalisation of borrowing financial instruments investment properties, 702-3 costs, 755, 761, 792 excluded from definition, 592 transfers of properties between brands fixed asset investments current and fixed assets, 689-91 see Intangible assets see Fixed asset investments US comparison, 705-6 capital allowances and foreign currency valuation depreciation, 1188 deposits and progress ASB Discussion Paper, see also Deferred taxation payments, 496-7 668-70 capital contributions movements, 578 conceptual basis, 672-3 see Capital contributions goodwill land and buildings, 673-7 capital grants see Intangible assets write down 1838 Generally Accepted Accounting Practice in the United Kingdom

(Fixed assets) (Foreign currencies) (Foreign currencies) provisions, 1442 subsidiaries with non• date of transaction, 493-4 coterminous year ends, 517-19 definitions FIxed interest rate bonds Companies Act 1985, 570-79 terms used in SSAP 20, 469 see Capital instruments alternative accounting rules, translation methods, 46~ 579 derivatives Fixed price contracts disclosure, 577-8 disclosure per FRED 13, 468, long term contracts distributable profits, 573-7, 493 IASC standard, 836-37 691, 748 development of an accounting realised profits, 570-3 standard, 465 Forecasts consolidated accounts disclosure requirements Operating and Financial Review, choice of method, 474-5 FRED 13 - Derivatives and 213 foreign equity investments other financial instruments, US management forecasts, 47, 49 financed by foreign currency 468,493 variances in cash flow, 85 borrowings, 484-8 disclosure requirements preparation, 474-90 lAS comparison, 583 Foreign currencies, 465-484 scope, 474 US comparison, 581 alternative accounting rules, 579 use of closing rate/net disclosure requirements of associated companies, 488-9 investment method, 517-38 accounting standard average rate contracted rate example disclosures of application,495 forward contract, 510 accounting standard, 491 calculation of average rate, individual company, 470 main disclosures of 520-22 cover method 538-558 accounting standard, 490 change from closing rate to cash generation of disclosure requirements of the average rate, 523--4 investments, 553-5 Companies Act, 577-8 estimate, 494 consolidated accounts, 484 basis of translation, 577 length of period, 494 criticisms of SSAP 20, exchange differences in profit profit and loss account 569-70 and loss account, 577 translation, 475 definition of 'foreign currency movements on fixed assets, cash flow statements borrowings', 538 578 forward contracts, 500,1514 different currencies, 547-51 movements on provisions for groups, 1510-13 distributable profits, 574-5 liabilities and charges, 578 hedging transactions, 1514 goodwill on consolidation, reserve movements, 578 individual entity, 1509-10 352,356,544 distributable profits, 573-7, 691, closing rate pooled basis, 551-3 748 definition, 469 problem area, 538-58 branch accounting, 575-7 closing rate/net investment repayment of borrowings, cover method, 574-5 method 542-4 dividend payment, 573 associated companies, 488-9 timing of borrowings, 539-42 exchange gains on long-term average rate calculation, which monetary items, 571-3 520-23 investments!borrowings? exchange losses, 573-4 balance sheet, 475 546-7 timing of the cash flows, change from closing rate to year of change, 555-8 574-5 average rate, 523--4 criticisms of accounting dividends payable change from closing rate to standard, 568-70 foreign subsidiary to UK temporal method, 529-30 ASB proposals on financial parent,56~ consolidated accounts, instruments, 568 dual rates 517-38 cover method, 569-70 consolidated accounts, 519 development of a standard, forward contracts and similar individual companies, 495 467-8 hedging contracts, 568-9 exchange differences disclosure, 490-91 currency options as a borrowing cost, 78~7 dual rates, 519 accounting treatment, 514-17 branches, 537 exchange differences ASB financial instruments capitalisation of exchange treatment, 475-8 proposals, 504, 517 differences, 500 foreign branches, 489-90 criticisms of SSAP 20, 568 category of reserve to take foreign equity investments, hedge accounting, 516 differences to, 524 484-9 currency swaps cover method, 538 hyperinflationary economies, accounting options, 513 disclosure, 491 530-33 ASB financial instruments disposal of a subsidiary, preparation of consolidated proposaIs, 504 527-9 accounts, 475-9 criticisms of SSAP 20, 568 distributable profits, 573-7, profit and loss account, 475 current rate method 691, 748 quasi-independent entities, definition, 465 fixed asset note, 696 475 current/non-current method definition, 465 Index 1839

(Foreign currencies) (Foreign currencies) (Foreign currencies) foreign equity investments hedging transactions, holding company provides and borrowings, 472-3, 500--502, 1514 loan instead of share capital, 484-8 lAS comparison, 583 559 hedging transactions, illustration, 504-5 meaning of 'permanent' inter• 500--502,1514 individual company, 473-4 company account, 559-60 individual companies, 470-74 reasons for taking out forward parent company financial inter-company accounts, contracts, 505 statements, 563 558-64 speculative forward contracts, rate at which loans should be inter-company dividends, 512-13 translated, 563-4 565-6 US comparison, 580-81 SSAP 20 position, 559 investments note, 728 goodwill on consolidation UK subsidiary with loan from new tax regime, 538, 542 consolidated accounts, 533-4 overseas parent, 564 repayment of borrowings, cover method, 544-6 intra-group transactions 542-4 hedging dividends, 565 exchange gains ASB financial instrument other than long-term loans, current portion of long term proposals, 502 565-7 item,503 hedging contracts unrealised profits, 566--7 doubts as to convertibility or criticisms of SSAP 20, 568--9 local currency marketability, 472, 502-3 see also forward contracts definition, 469 long-term monetary items, history of accounting standards, monetary items 502-4 465-8 definition, 469 past exchange losses, 472, hyperinflationary economies determination, 4% 502,503 lAS comparison, 583 monetary or non-monetary item, realised profits, 130, 570-73 problem with closing rate/net 496-9 restriction of gain, 503-4 investment method, 530-33 debt securities held as settled or unsettled UITF Abstract, 581 investments, 497 transactions, 503, 572-3 US comparison, 581 deposits/progress payments exchange gains/losses on foreign lAS comparison, 582~ paid against fixed currency borrowings, 490 individual companies, 470-74, assets/stock, 496-7 exchange rate 493-502 foreign currency loans definition, 469 accounting policy examples, convertible into equity shares, exempt companies, 469 471,473,478,483 497-9 financial instruments calculation of exchange monetary/non-monetary method, functional currencies, 608 difference, 471 465 interest rate and currency date of transaction, 493-494 net investment, 469 profile, 6O~ dual rates, 495 non-monetary items, 4% foreign branches 489-90 exchange differences, 470- post-acquisition capital reserve, capitalisation of exchange 71,499-502 524-7 differences, 500 exchange gains, 472 problem areas, 493-567 consolidated accounts, 537-8 foreign equity investments, realised profits, 130, 570-73 definition, 469 472-3 long-term monetary items, incorporation of results, 489 forward contracts, 473-4 571-3 possible situations, 489 monetary or non-monetary, problem areas with long-term treatment, 489-90 496-9 monetary items, 572-3 foreign enterprises preparation of accounts, settled transactions, 571 definition, 469 470-74 short-term monetary items, foreign equity investments problem areas, 470, 493 571 consolidated accounts, 484-8 recording of transactions, 470 revaluation reserve, 524-7 cover method, 538 retranslation of monetary suspension of rates individual companies, 472-3 assets/liabilities at balance consolidated accounts, 519 forward contracts sheet date, 470 individual companies, 495 ASB financial instruments retranslation of non-monetary taxation proposals, 504, 513 assets/liabilities at balance new regime for exchange conclusion, 513 sheet date, 470 differences, 538, 542 criticisms of SSAP 20, 568--9 use of average rate, 494-5 temporal method, 479-83 definition, 469,504-5 interim reporting, 1712 appropriate situations, 480 hedging a foreign currency inter-period comparison of change from temporal to investment, 509-10 results of foreign enterprises, closing rate method, 529-30 hedging existing foreign 534-7 consolidated accOunts, currency monetary intra-group long-term loans and 479-83 asset/liability, 508--9 deferred trading balances, definition, 465 hedging future 558-64 determination of dominant commitments/transactions, accounting treatment in year currency, 479-80 506-507 of change, 560--63 ED 21,467 1840 Generally Accepted Accounting Practice in the United Kingdom

(Foreign currencies) (Futures) (Goodwill) foreign branches, 490 definition of an investment, 717 period of amortisation, 342-3 foreign equity investments exclusion from FRS 5, 927 ASB Discussion Paper, 33~31, financed by borrowings, financial instruments, 591 663 484-8 revenue recognition, 135--6 ASB exposure draft - Goodwill method,480 US treatment in statement of and intangible assets, 331 translation cash flows, 1520 ASB exposure draft - Impairment definition, 469 valuation of stock, 827 of fixed assets and goodwill, objectives of translation, 332 468-9 G associates and joint ventures translation methods, 465, disclosure, 45~51 474-5 Gains equity accounting, 430 unrealised profits from inter• capital gains change of policy, 329 company transactions, 566-7 see Taxation choice of accounting treatment, US comparison, 579-82 contingent gain, 1409 327-328 definition demergers, 400 Foreign income dividends ASB Draft Statement of disclosure taxation, 1213 Principles, 98 acquisitions, 368-9 FASB,58 Companies Act, 375-7 Forward contracts exchange gains disposal of subsidiaries, 3~ cash flow statement, 1514 see Foreign currency disposals financial instruments, 591 principal features of FRS 3, 1261 disclosure re accounting see also Financial instruments profit on the sale of an asset, standard, 388 marking to market, 725, 726, 1288-9 disclosure re UITF Abstract, .826-27 recognition, 142-3 382-4 see also Revaluation of fixed disposal of business per UITF France assets; Statement of total Abstract, 38~2 use of lASC standards, 16 recognised gains and losses requirements of accounting standard, 384 Franchise fees Geographical segments economic life, 327 revenue recognition, 154-6 see Segmental reporting fixed asset investments, 723 fixed assets Free cash Dow Germany assignment to other cash flow statements, 1493-95 accounting standards, 15-16 intangibles, 630 control of a subsidiary by flexibility of accounting FRSs contract, 229--30 standard, 329 see Index ofStatutes and foreign currencies, 533-4 Stll1llitJrds Gifts IASC comparison, 413 between related parties, 1550 IIMR headline earnings, Fundamental accounting 1343-46 concepts, 64-66 Gilts immediate write-<>ff to reserves, accruals concept, 64 readily marketable investments, 333-9 consistency concept, 64 725 capital redemption reserve, going concern concept, 64 338 matching concept, 64 Going concern capital reserve, 333-4 non..-aggregation,65 going concern concept, 64 goodwill write-<>ff reserve, prudence concept, 65 post balance sheet adjusting 338 recent ASB initiatives, 65 event, 1381 merger reserve, 334-6 see also Conceptual framework see also Cadbury Code profit and loss account, 333 revaluation reserve, 336 Fundamental errors GoldenheUo share premium account, 337 correction, 1301 directors' remuneration income generating units, 664 disclosure, 1622 minority interest, 238 Funds statements negative goodwill, 344-8 building societies, 1479 Goodwill accounting treatment, 344-8 distinction between funds flow accounting standard ASB exposure draft, 331-2, and cash flows, 1471 development, 328 347 form and content, 1468-69 proposed amendment, 329--33 perception, 327-8 history, 1467 acquisition of a business retrospective adjustments, 295, link with cash flows, 1470 separate recognition, 626 326 objectives, 1469 acquisitions, 327-48 revaluation of fixed assets, 675 see also Cash flow statements, disclosure, 368-9 Solomons Report, 90, 91 amortisation, 342-4 statement of total recognised Futures method of amortisation, gains and losses, 1292-3 cash flow statements, 1514 343-4 step-by-step acquisitions, 353-5 Index 1841

(Goodwill) Greenbury Code, 1655-1700 Group reorganisations, treatment on disposal of a annual bonuses 388-402 business see bonuses capital contributions, 401-2 reconciliation of movements bonuses definition, 401 in shareholders funds, 1297 caps, 166~9 financial statements of paying UITF 3, 1292-3 deferred bonuses, 1670-74 company, 401 US comparison, 410 incentives to take shares, financial statements of writ~ff 1669--70 receiving company, 402 effect on distributable pensionable bonuses, 1670 changing direct ownership of reserves, 341 performance criteria, 1667-68 company within group, 391-5 effect on realised profits, compensation for loss of office, dividend in specie, 391 339-41 1656,1660-62,1674 share for share exchange, see also Intangible assets compliance with Best Practice 39~ Provisions, 1660 subsidiary moved along, 395 Goodwill and intangibles directors' service contracts, subsidiary moved down, exposure draft 1683,1699--1700 39~ research and development, disclosure and approval subsidiary moved up, 391-3 741 provisions, 1655 definition, 388-9 former directors demergers, 396-401, 1271 Government grants, 1045 payments to, 1674-77 definition, 396 accounting issue, 1045 history, 1616, 1654-55 goodwill, 400 accounting treatment implementation, 1616, 1654, merger accounting, 398 capital grants, 1047 1655 merger relief, 398 deferred credit approach, individual directors' method of achievement, 1047 emoluments, 1663-67 396-8 netting approach, 1047 Companies Act information, share premium relief, 398 revenue grants, 1048 1667 divisionalisation of existing capital grants comparative figures, 1664-67 group, 395-6 accounting treatment, 1047 link with Cadbury, 1616, 1654 group reconstructions non-depreciating assets, 1055 long-term incentive schemes, definition, 389 original standard, 1046 1689--99 use of merger accounting, 390 conflict with company law, 1047 pension benefits, 1677 introduction, 270 definition, 1045 actuaries' joint consultation setting up a new top holding depreciation papers, 1678 company 389--91 netting approach, 1047, 1048 issue, 1640, 1677-78 acquisition accounting, 390 disclosure, 1050 Stock Exchange requirements, reasons, 389 distinguishing capital and 1678-83 US comparison, 391 revenue grants, 1055 related parties, 1552, 1571 see also group reconstructions German practice, 1048 removal of banding information, lAS comparison, 1056 1617 Groups leased assets remuneration committee, 1655 capitalisation of borrowing costs, fair value, 985 Remuneration Committee Report 255, 782-3 gross earnings, 1004 and Disclosures, 1660 cash flow statements, 1506-9 matching grant against related remuneration policy, 1655, concept of a group, 225-39 expenditure 1662-67 directors' and officers' loans and methods, 1053 service contracts, 1656 transactions problems, 1053 share options and other long term disclosure for directors, 1587 SSAP 4 requirements, 1049 schemes, 1683-99 disclosure for officers, 1602 non-depreciating assets, 1055 long-term incentive schemes, inter-company transactions, period to be benefited by grant, 1689--98 1607 1055 policy, 1698-99 directors' remuneration public utility companies, 1056 UITF on share options, disclosure of remuneration, purpose of grant, 1055 1683-89 1619 receipt of grant, 1049 Stock Exchange Listing Rules payments by subsidiaries, recognition of grant, 1049 impact, 1616, 1654 1630 Regional Development Grants, Stock Exchange requirements, foreign currencies 1045 1656-1700 consolidated accounts, repayment of grant 474-90,517-38 accounting treatment, 1049 Greenbury Report exchange differences on assets ceasing to be used for corporate governance, 180 disposal of subsidiaries, qualifying purpose,1055 527-9 revenue grants Group accounts intra-group loans and accounting treatment, 1048 see Consolidated accounts transactions, 55~7 splitting up grant, 1055 taxation of grant, 1054 1842 Generally Accepted Accounting Practice in the United Kingdom

(Groups) (Hedging) Hyde GuideUnes subsidiaries with non• deferment of exchange current cost accounting, 76, 77 coterminous year-ends, differences, 500-502 517-19 options, 516 Hyperinftation group reconstructions rationale for forward see Foreign currencies earnings per share, 376, contracts, 505 1335-36 investments I see Group reorganisations ED 55 propos~s, 728 horizont~groups,226 reasons for holding, 718 IASC related parties, 1535 Operating and Financi~ Review conceptu~ framework, 115-7 pension costs treasury policies, 215 actuarial assumptions, 1142 Impairment group schemes, 1174 Hire purchase contracts consolidated accounts segmen~ reporting ~location of gross earnings, subsidiaries operating under associated undertakings, 1067 1010 severe restrictions, 257 changes in group actuari~ before tax method, dispow of assets after the composition, 1092, 1278 1010 balance sheet date, 1401 taxation methodology, 1010 fixed assets, 661-5 group relief, 1231 net investment method, 1010 ASB Discussion Paper, 663, surrender of ACf, 1240 required method, 1010 686-7,689 see also Associates and joint sum of digits method, 1010 company law, 665 ventures; Business asset not yet in use, 1003 differentiating from combinations; Consolidated cash flow statement, 1497 downward v~uations, 687 accounts; DispoWs; Group credit transactions, 1585 discount rate, 664 reorganisations; Related parties definition, 980 IASC comparison, 707-8 depreciation, 982 indicators, 663-4 Guarantees lessee disclosure requirements link with provisions, 664-5 financi~ instruments, 591 Companies Act, 998 oil and gas industry, 662 SSAP 21, 997-8 portfolio or individual basis, Guarantees and security lessor disclosure requirements 665 contingencies Companies Act, 1011 provisions for impairment, disclosure amount, 1424-5 SSAP 21, 1011 685 related parties, 1550 see also Leases re~ued assets, 689, 707 remote contingencies SSAP 21 application, 981 reve~ of impairment write disclosure, 1423-4 tax position, 980 downs, 687-8 section 330 transactions testing, 662 disclosure requirements, HIstorical cost accountiDg US comparison, 706 1590-92 ASB Statement of Principles, goodwill example disclosures, 1591 101-3 annual review, 329 problems with approach, development of accounting H 108-9 standard, 328 FASB conceptu~ framework, 56 group reorganisation Half year see also Concep~ framework; divisionalisation, 396 see Interim reporting Fixed assets; Stocks; Note of investments historiw cost profits and losses exposure draft, 723 Hampel Committee group reconstructions. 723 successor to Cadbury Holding companies see also Diminutions in v~ue Committee, 211-2 see Associates and joint ventures; Consolidated Impairment of assets Health and safety accounts segmen~ reporting Operating and Fmancial Review, apportionment of common 214 Hotel Industry costs, 1089 definition of operating profit, Health care 1266 Import duties see Post retirement benefits discontinued operations, 1269 cost of stock, 626, 798 fixed assets Hedging depreciation of buildings, 642 Imputed Interest cash flow statements, 1513 v~uations, 675, 676 capi~tion of borrowing costs, financi~ instruments we and leaseback transactions, 760 disclosure, 604 1018 measurement, 597-9 Imputed interest approach foreign currency Hybrid Instnunents capi~ instruments, 852 ASB financi~ instrument see Capi~ instruments proposals, 502 criticisms of SSAP 20, 568-9 Index 1843

Income (Insurance companies) (Intangible assets) leases excluded from scope, 593, 600 Operating and Financial recognition by lessors, Review,214 1028-9 Insurance industry publication titles, 626 measurement, 1253-6 cash flow statements recognition criteria, 626-9 see also Comprehensive income; specific provisions, 1517 revaluation Deferred income consolidated accounts see also brands exclusion of subsidiaries from separability, 629-31 Indemnity insurance groupaccounts,251,252 Solomons Report, 89, 91 directors' emoluments, 1626 small and medium-sized source groups,249 developed internally, 626 Index-linked bonds foreign currency obtained acquiring a business, capital instruments, 889 definition of monetary items, 626 469 obtained seperately, 626 Indirect method insurance contracts uncertainty of cost of creation, Cash flow statements, 1488-89 provisions, 1437 631-2 investments, 718 unlimited life, 647-8 Industrial disputes pensions production cost of fixed assets, actuarial valuation, 1145 Integral approach to interim 636 profit or losses on disposal of reporting assets, 1288-9 annual items, 1717 InDation related parties appropriateness, 1706 high rates applicability of standard, contrast with discrete approach, see Hyperinflation 1553 1713 ICAS Discussion Document research and development costs, definition, 1706 proposed new information 745 non-recurring items, 1718 package, 85 segmental reporting, 1063, 1067 seasonal businesses, 1714 Operating and Financial Review, statement of total recognised similarity of approaches, 1713 214 gains and losses, 1293 taxation, 1716 pensions summary financial statements, 31 salary inflation, 1116, 1118, Interest 1139,1144 Intangible assets cash flow statements Sandilands Report, 69 amortisation, 647-8 returns on investments and ASB treatment, 626 servicing of finance, 1491-2 Infrastnacture brands commitment fees, 159-60 government grants, 1056 assets to be recognised, 629- debt factoring, 959 non-depreciation, 644 32 deferred tax cost of creation, 631-2 short-term timing differences, Installation costs debate, 629-32 1188 purchase price of rlXed assets, fair value, 303 foreign currencies 633 homegrown, 629 capitalisation of exchange separability,629-31 differences, 500 Institute of Investment cable television operating forward contracts Management and Research licenses, 626 interest differential, 504 (llMR) copyright, 631 FRS 3 headline earnings, 1343-46 customer lists, 300, 630, 631 analysis of operations, dermition, 625, 629, 709 1260-61 Insurance disclosure, 694 interest rate swaps, 896 leases, 988-9 discrete assets, 630-31 interest strip from debt mortgage defaults, 962 financial instruments instrument, 933 provisions for self insurance, excluded from definition, 303, leases 1460 592,631 implicit interest rate, 985-6, goodwill 991 Insurance broking industry see Goodwill loan arrangement fees, 158-9 offsetting of assets and liabilities, homegrown intangibles long term contracts 942 brands,629 inclusion of interest on recognition criteria, 626 capital, 842 Insurance claims IASC comparison, 709 notional interest post balance sheet event, 324, import quotas, 626 annuity method of 1380 intemaIly developed, 626 depreciation, 655 maintenance or substitution, 631 capitalisation of borrowing Insurance companies meaning, 624 costs, 762 fmancial instruments milk quotas, 626 leases, 1010 disclosure, 599 patented drugs, 626 pensions, 1152 patents 1844 Generally Accepted Accounting Practice in the United Kingdom

(Interest) (Interim reporting) International Organisation of Operating and Financial Review, foreign currency differences, Securities Commissions 215 1712 (lOSCO) pension costs frequency of reports, 1707 agreement with lASC, 8 interest on the balance sheet lAS comparison, 1720 influence on UK, 9 figure, 1152 lCAEW Consultative paper, influence on US, 9 interest on unfunded schemes, 1709 1171 income recognition, 1713 Inventories revenue recognition integral approach see Stocks lAS 18, 145, 149 see Integral approach securitised assets, 961 investment companies, 1712 Investing activities segmental reporting, 1089 revaluation of investments, see Cash flow statements stocks 1719 capitalisation of interest, 810 investments Investment companies see also Capitalisation of valuation, 1719 capital instruments borrowing costs; Capital items determined on an annual disclosure, 875 instruments basis, 1717 exemption, 849 legal requirements, 1707 Companies Act requirements, Interest rate swaps management commentary 718 cash flow statements, 1513 ASB draft Statement, 1710, interim reporting treatment, 896 1711 revaluation of investments, see also Financial instruments relationship with balance 1712,1719 sheet, 1711 sale of revalued investment, 721 Interim reporting, 1705-1722 seasonal businesses, 1715 accounting policy change, 1713 non-recurring items, 1718 Investment funds acquisition of subsidiaries, 1711 pension costs exemptions from preparing cash ASB draft Statement actuarial valuation, 1719 flow statements, 1479 accounting policies and profit and loss account measurement principles, 1713 ASB draft Statement, 1710 Investment objectives discussion, 1721 Cadbury Committee, 185, of users of accounts, 49 statements to be included in 194,1709 interim reports, 1710 detailed requirements, 1710 Investment properties assetwri~0~,1718 information required by the balance sheet classification, associates and joint ventures, Stock Exchange, 1707 702-3 1708,1711 profit sharing schemes, 1717 charities, 640 balance sheets seasonal business,l714 definition, 640 ASB draft Statement, 1710 segmental analysis, 1076, 1092, depreciation Cadbury Committee, 1709 1711 arguments against, 641 detailed requirements, 1711 statements of total recognised exemption history, 640 US treatment, 1719 gains and losses development of UK accounting bonuses, 1717 ASB draft Statement, 1710 standard, 640-42 Cadbury Report, 1709 items to be included, 1712 diminutions in value, 688 cash flow statements Stock Exchange Listing Rules, disclosure ASB draft Statement, 1710 1707 SSAP 19 requirements, 702 Cadbury Committee, 1709 stocks true and fair override, 703-5 detailed requirements, 1712 fall in value, 1718 UITF7,703 US treatment, 1719 taxation, 1715 exclusion from ED 55, 718 Companies Act 1985,1707 US comparison frequency of independent discontinued operations, 1711 measurement principles, 1719 valuation, 670-71 discrete approach SEC requirements, 1719 lAS comparison, 708-9 asset values, 1718 property companies contrast with integral International Ac:connting diminution in value, 688 approach, 1713 Standards Committee (lASC) frequency of valuation, debate, 1706 agreement with IOSCO, 8-9 670-71 measurement principles, 1713 comparability/improvements reclassification of properties, non-recurring items, 1718 project, 8 689-91 seasonal business, 1714 France, 16 reclassification as trading taxation, 1715 Germany, 16 properties, 689-90 US comparison, 1719 influence on ASB, 8 reclassification from trading expense recognition, 1713 role of international accounting properties,690-91 explanatory statement, 1709 standards, 7-9 revaluation extended accounting period, diminutions in value, 688 1709 valuation exercise, 670-71 fixed assets, 1706 revaluation reserve SSAP 19 requirements, 688 Index 1845

(Investment properties) (Investments) Joint ventures tangible fixed assets, 702 ED 55, 718, 719 accounting considerations, trading properties reclassified as Financial Services Act, 717 439-442 investment properties, 690-69 international accounting appropriate form of presentation, true and fair override standard, 720 439 disclosure, 703-5 disclosure 728-33 ASB Discussion Paper history, 641 current asset investments, additional disclosures, 455 US comparison, 706 729-33 associated undertaking, 428 valuation, 670--71 fixed asset investments, definition, 441 728-33 ASB Draft Statement of Investments, 717-735 group accounts, 730 Principles, 106 accounting requirements disposals capitalisation of borrowing costs, proposed by ED 55, 721 see Disposals 782-3 all investments, 727 FASB definition cash flow statements current asset investments, 725 investments by owners, 57 equity accounting, 1510 fixed asset investments, 721 fixed asset investments proportional consolidation, hedging investments, 728 accounting rules, 720--24 1510 income recognition, 728 asset write down, 722 consolidated accounts readily marketable definition, 719 deadlock 50--50 joint investments, 725 ED 55, 721 ventures, 228 recognition and measurement, group reconstruction, 723 joint venture agreement, 234 727 hedging investments, 728 contingent liability, 440 transfers between fixed and lAS comparison, 734-5 deadlock 50--50 joint ventures current assets, 727 definition, 720 consolidated accounts, 228 accounting rules diminutions in value, 721 off balance sheet finance, 945 current asset investments, impairment definition, 441 724-7 exposure draft, 723 exposure draft, 441 fixed asset investments, group reconstructions, 723 disclosures, 454 720--24 income recognition, 169, 728, proportionally consolidated group reconstruction, 723 1028 joint ventures, 456 investments built up over a interim reporting elimination of unrealised profits, period, 727 valuation, 1719 444-50 investments in subsidiaries, investment companies equity accounting 723 see Investment companies exposure draft proposals, 441 purchase price assignation, see also Business expanded equity method of 727 combinations; Financial accounting, 441-1 transfer of subsidiary trade instruments; Investment exposure draft and assets to another properties disclosure requirements, 455 company, 723 net investment in a foreign proposals, 441-2 valuation, 720--27 enterprise, 469 group accounts, 440 ASB project on financial purchase price assignation, 727 IASC comparison, 458-60 instruments, 719, 724, 728 purposes of holding investments, incorporated joint ventures, 439 associated and subsidiary 718 individual company, 440 undertakings readily marketable investments, joint and several liability , 440 see Consolidated accounts 725-6 joint venture agreement, 234 banks, 726 recognition and measurement, oil and gas industry, 439 built up over a period, 727 727 Private Finance Initiative, 970 business combinations subsidiary undertakings' proportional consolidation measuring the fair value of losses, 723 Companies Act requirements, the net assets, 309-12 transfer of subsidiary trade and 439-40 cash flow statements assets to another company, 723 disclosure requirements, 454 returns on investments and transfers between fixed and exposure draft proposals, servicing of finance, 1491-2 current assets, 727 441-2 capital expenditure and US comparison, 733, 916 exPosure draft proposed financial investment, 1495 valuation, 720--27 disclosure, 456 classification valuation movements, 724 segmental reporting, 1069 Companies Act, 719 subsidiary with more than one ED 55 proposals, 719-20 J parent, 234 Companies Act 1985, 719, 724, unincorporated bodies, 439 728-33 Joint activities see also Associates and joint current asset investments distinct from joint ventures, 441 ventures accounting rules, 724-6 IASC definitions, 459, 460 definition, 719 ED 55, 725 definition 1846 Generally Accepted Accounting Practice in the United Kingdom

L (Leases) (Leases) minimum lease payments, 986 income recognition by lessors, Land and buildings definitions 1028-9 see Fixed assets assets and liabilities, 983 initial direct costs, lO28 finance lease, 979,985 residual values, 651, 1029 Lease obUgatioDS initial direct costs, 1028 investment period method financial instruments, 591 leases, 980 aUocation of gross earnings to liabilities per FRS 5, 990 finance leases, 1~9 Leasehold properties operating leases, 985 land and buildings leases, depreciation depreciation 1002-3 arguments against, 640 different carrying values, 994 lease and leaseback investment properties, 670-71 Inland Revenue relief, 980 definition, 1018-28 SSAP 19 rule, 645, 1440 period of depreciation, 991 see also sale and leaseback long leasehold investment sale and leaseback, 1020-28 lessee accounting for finance properties, 1002 SSAP 21 lessee disclosures, leases, 991-7 997-8 capitalised fixed asset, 991 Leases, 979-1040 determining the lease type, 985- carrying values, 994 actuarial after tax method 91 depreciation, 991 allocation of gross earnings to 90 per cent test, 985-8, lO14 finance lease obligation, 310, finance leases, 1~9 example, 987-8 992 allocation of gross earnings to fair value, 985 leaseback, 1020 finance leases, 1~9 impact of FRS 5, 990-91 methods of allocating finance actuarial after tax method, implicit interest rate, 985-6 charges, 992-4 1~9 lease term, 986-7 SSAP 21 requirements, 982 assumptions, 1008 minimum lease payments, 986 tax variation clauses, 1017-18 investment period method, passing of risks and rewards termination oflease, 1015-16 1~9 of ownership, 988 lessor accounting for finance manufacturer/dealer, 1030-31 qualitative tests, 989 leases, 1003-10 methodology,l()()4....8 responsibility for insurance allocation of gross earnings net investment or net cash and maintenance, 988-9 hire purchase contracts, 10lO investment, 1009 unguaranteed residual value, allocation of gross earnings other methods, 1008 986 for finance leases, 1004-9 allocation of gross earnings to disclosure calculation of gross earnings, hire purchase contracts lessees, 997-1003 1003-4 see Hire purchase contracts lessors, 1011-13 income recognition, 1028-9 back-to-back leases. 1031 exclusion from FRS 4, 849 SSAP 21 requirements, 982 balloon payment, 1003 fair value tax variation clauses, 1018 capital allowances capitalising fixed asset, 991 termination of lease, 1016-17 assumption in allocation of definition, 985 leveraged leases gross earnings, 1008 leaseback under an operating lASe treatment, 1038 difference between finance lease, 1027-8 US treatment, 1038 leases and hire purchase, 1009 finance lease manufacturers and dealers, summary of tax position, 980 definitions, 985 1030-31 capital leases lessee disclosure, 997-1003 allocating the total profit, see Capital leases lessor disclosure 1030-31 cash flow statements residual values, 1029 operating or finance lease, capital expenditure and SSAP 21, 1011-1013 1030 financial investment, 1497 tax-free grants, 1004 profit recognition by distinction with funds flow, Financial Reporting Review manufacturer/dealer lessors, 1471 Panel 140 financing, 1502 incentives, 995 non-cancellable operating leases lease rentals, 1486 FRS 5 impact capitalisation, 984 see fixed assets classification, 1014-15 FRS 5 impact, 990 classification of leases, 1014-15 conflict with SSAP 21, 928 useful disclosure, 1001-2 current practice, 1014 determining the lease type, off balance sheet finance, leasing as an off balance sheet 990-91 1014-5 transaction,1014-15 hire purchase contracts see also FRS 5 impact Companies Act 1985 see Hire purchase contracts off balance sheet transaction, lessee disclosures, 998 lAS comparison, 1038-1040 1014-15 lessor disclosures, 1011 exposure draft, 1039-1040 operating leases conceptual frameworks, 982-4 proposed fundamental definition, 985 international working party, revision, 984, 1009, 1274 different treatment for lessor 983 ICAEW review of SSAP 21, 982, and lessee, 987 contingent rentals 1040 mutually exclusive of finance disclosure, 998 lease, 981 Index 1847

(Leases) (Leases) Loan arrangement fees, 158-9 see also non-cancellable allocation of gross earnings, operating leases; operating 1004 Loan capital leases (lessees); operating assumption in allocation of see capital instruments leases (lessors) gross earnings, 1008 SSAP 21 treatment, 982 rental adjustments, 1017 Loan transfen summary of treatment, 979 summary, 980 off balance sheet transactions, termination, 1015 tax variation clauses, 1017-18 929,965 operating leases (lessees), 995-7 termination of leases, 1015-17 see also Off balance sheet disclosure, 997-1003 finance leases (lessee), 1015- transactions lease rentals, 995 16 reverse premiums and similar finance leases (lessor), 1016- Loans incentives, 995-7 17 financial instruments, 591 termination payment, 1015 lease classification, 1015 operating leases (lessors), 1003 operating leases, 1015 Long term investments disclosure, 1011-3, 1029 US comparison, 1037 see Investments income recognition, 1028 90 per cent test, 1037 lease rentals, 1003 capital leases, 979 Long-term contracts, 827-842 peppercorn rent, 987 committed payments under amounts recoverable on present value basis of operating leases, 998, 1002 contracts,830 measurement, 979 differences from UK, 1037-8 approved variations and claims, present value of minimum lease vacant leasehold properties 841 payments provisions, 1443 attributable profit capitalised fixed assets, 991 accounting policies, 829 finance lease obligation, 310, Lenden computation, 838-39 992 users of financial statements, 94 original SSAP 9, 808 Private Finance Initiative, 971 software revenue recognition, reverse premiums and similar Leveraged leases 165 incentives. 995-7 see Leases SSAP 9 requirements, 165, UITF Abstract, 996 828-29 rights to exploit natural LiabUities capitalisation of interest, 810, resources, 981 definition 842 sale and leaseback, 1018-28 Draft Statement of Principles, claims for additional sums, 841 definition, 1018 97 contingencies, 1408 finance lease, 1020 . FASB Conceptual cost of long-term contracts finance or operating lease? Framework, 56-7 capitalisation of interest, 842 1018-20 off balance sheet finance, 930 Companies Act requirements, Financial Reporting Review 810 Panel,1026 licensed premises presentation in accounts, 830 operating lease, 1026-8 depreciation, 642 definition, 164, 796, 827 option involvement, 1021-6 disclosure of accounting policies, revenue recognition, 171 life assurance companies 829 sale and leasebacks involving exemptions from preparing cash fair value of work in progress options, 1021-6 flow statements, 1478 acquired, 305 buyer holds put and seller provisions for cash flow financial statement presentation holds call option, 1021 statements, 1516 examples. 831-35 buyer holds put option, 955, SSAP 9 requirements, 827-30 1022 LIFO lAS comparison, 836-8 see also off balance sheet see Stocks cost-plUs contract, 837 transactions disclosure, 837 seller holds call option, 955, Unked presentation fixed price contract, 836-837 1022 see Off balance sheet stage of completion of SSAP21 transactions contract activity, 836 accounting requirements, 982 payments on account history, 980-81 liquidity fmancial statement scope,981 definition, 1470 presentation, 830 sub-leases and back-to-back financial instruments post balance sheet events, 1400 leases, 1031-6 numerical disclosure, 609 Private Finance initiative, 970 intermediate party, 1031, Operating and Financial Review, provision for foreseeable losses 1032-6 215,216,876 financial statement original lessor and ultimate presentation, 830 lessee, 1031-2 litigation original SSAP 9, 808 substance over form approach, see Contingencies provisions, 1443 979,981 related costs, 828-29 tax position relationship to stocks, 797 1848 Generally Accepted Accounting Practice in the United Kingdom

(Long-term contracts) (Marking to market) (Mining industry) revenue recognition investments US treatment, 134 accretion approach, 138--9 disclosure, 733 US treatment, 133 readily marketable, 725-6 Minority interests short-term contracts note of historical cost profits and financial instruments accrual of profits, 841-42 losses, 1290 excluded from definition, 592 original SSAP 9, 827 stocks, 725, 726, 826-27 see also Consolidated accounts software services industry, 164--5 turnover Matching concept Monetary amounts computing the amount, customer support contracts, 166 fair value measurement 839-41 deferred tax acquisition of a subsidiary, cost-plus contracts, 840 approach, 1186 311-13 determination, 828 deferral method, 1191 disclosure of accounting liability method, 1200 Monetary items policies, 839 definition, 64 foreign currency US comparison, 836 financial instruments, 589 definition, 469 work in progress, 807 operating leases, 1003 distinction with non• see also Stocks pensions, 1140 monetary, 496-9 post balance sheet events, 1377 long-term, 571-3 Losses reporting financial performance short-term, 571 definition need for a standard, 1254 ASB draft Statement of revenue recognition, 130 Money-lending companies . Principles, 98 stocks directors' loans and transactions, FASB Conceptual importance, 795 1607--8 Framework, 58 objectives of measurement, 797 Mortgage securitisation M selling costs, 820 off balance sheet transactions, US treatment, 816 961 Maeve Report conceptual framework, 78, Materiality Mortgages 79--80 ASB Statement of Principles, 96 subsidised for directors, 1625 FASB Conceptual Framework, Making Corporate Reports 54-5,1283,1550 Motorcars Valuable consignment stocks, 949 ICAS discussion document, 81-7 McKinnon Report directors' remuneration, 1624, additional information, 85--6 ASC review, 18 1625 background, 81-2 leases, 1030-31 basic conclusions, 86-7 Measurement in financial influence on ASB current statements Music industry agenda, 87 see Conceptual framework advance royalty!licence receipts, influence on ASB Draft 157--8 Statement of Principles, 101 Medium sized companies net realisable value, 83-4 see Consolidated accounts N proposed new information package, 84--5 Medium sized gronps Napier interim report replacement cost, 83 see Consolidated accounts pension costs, 1106 users and their needs, 82-3 valuation of assets and Merger relief Negative goodwill liabilities, 83-4 see Business combinations; see Goodwill Group reorganisations Management Net investment relationship with directors, 181 Mergers see Foreign currencies selection of accounting policies, see Business combinations; 66 Group reorganisations Net realisable value users of accounts, 48 lCAS discussion document, 83-4 Mining industry see also Stocks Market value depreciation of mineral deposits, see Revaluation 645,646 New Zealand investments in mining associates, framework project Marketable securities 770, 783 see Conceptual framework marking to market, 725, 826-27 leases and hire purchase negative goodwill, 345 contracts, 981 Non-canceUable leases research and development, 742 see Leases Marking to market revenue recognition currency options, 515 UK treatment, 133 Index 1849

Non-equity shares (Off balance sheet (Off balance sheet numerical disclosure, 612 transactions) transactions) see also Capital instruments continued recognition, 933 conditions of use, 936 definition, 931 detailed qualifying criteria, Non-executive directors item sold for less than useful 937 see Corporate governance life, 935 disclosure requirements, 937, partial derecognition, 933 939 Non-monetary assets risk or benefit retained, 935 non-qualifying forms of fair value acquisition, 295 summary of tests, 932 recourse, 938 consideration for purchase of disclosure requirements problems with linked subsidiary, 282-4 consignment stock, 952 presentation, 941 debt factoring, 959 treatment of revenues and Non-monetary items FRS 5 general, 947 costs in profit and loss foreign currency, 496-9 linked presentation, 937, 939 account, 940 loan transfers, 968 loan transfers, 929, 965 Non-monetary/barter quasi subsidiaries, 945 motor vehicle dealerships, 947 transactions sale and repurchase novation of loans, 966 revenue recognition, 171-2 agreements, 956 offsetting of assets and liabilities, securitised assets, 964 941,975,1440 Note of historical cost profit or specific disclosures in insurance broking industry, loss Application Notes, 929 942 FRS 3 proposals, 1261 factoring of debts, 929, 958 provisions, 1440 items to be included, 1289, 1290 derecognition, 958 partial derecognition, 933 disclosure requirements, 959 practical effect, 923 o linked presentation, 958 Private Finance Initiative (PFI), separate presentation, 959 970 Objective of financial fmancial instruments profit and loss account impact, statements IASC discussion paper, 931, 923 ASB Statement of Principles, 93 975 quasi subsidiaries, 943 Trueblood Report, 45 general requirements of FRS 5, company with no subsidiary FASB conceptual framework, 927 undertakings, 947 47-50 economic substance of consolidated accounts, 234 transactions, 929 definition, 943 Obsolescence excluded transactions, 928 disclosure requirements, 945 fixed assets forerunners, 924-7 exclusion from consolidation, depreciation definition, 639, interaction with other 947 640,649 standards, 928 identifying the controlling permanent diminution, 650 scope, 927 party, 943 replacement cost, 678 lAS comparison, 975 securitised assets, 962, 965 residual value, 652 lASC discussion paper true and fair override, 945 revenue recognition, 138 financial instruments, 931, recognition stocks,823 975 assets, 930 interest rate swaps contractual commitments, 931 Off balance sheet transactions, exclusion from FRS 5, 928 liabilities, 930 923-978 securitised assets, 962, 964 risks and rewards, 930 assets see also Capital instruments sale and repurchase agreements, definition, 930 interest strip from debt 928,953 derecognition instrument, 933 binding commitment to see derecognition lease receivables repurchase, 954 recognition, 930 securitised assets, 961 buyer holds put and seller assignment of loans, 966, 967 leases holds call option, 954, 1021 consignment stocks, 947 FRS 5 or SSAP 21'1, 928 buyer holds put option, 955, deposits paid by finance leasing as an off balance sheet 1022 company, 950 transaction, 1014-15 disclosure requirements, 956 disclosure requirements, 952 option to purchase asset, 958 sale or financing transaction?, passing of the risks and partial derecognition, 935 954 rewards of ownership, 947 see also Leases see also Leases consolidation of other entities, take-or-pay contracts and seller holds call option, 955, 943 throughput agreements, 969 1022 deadlock 5(}-50 joint ventures, liabilities securitised assets, 929, 960 945 definition, 930 derecognition, 963 derecognition, 931 derecognition disclosure requirements, 964 asset has been subdivided, see derecognition issuer consolidated by 933 recognition, 930 originator, 965 complete derecognition, 932 linked presentation, 936 issuer's accounts, 965 1850 Generally Accepted Accounting Practice in the United Kingdom

(Olrbalance sheet (Operating and FInancial (Overheads) transactions) Review) research and development,743 linked presentation, 958, 963 disclosures in practice, 216-7 segmental reporting mortgage loans, 961 essential features, 213 common costs, 1069, 1088 separate presentation, 965 financial instruments stock special purpose transactions, 925 disclosure, 109,599 allocation of overheads, Statement of Principles, 923 financial review, 215-6 821-23 sub-participation in loans, 966 lCAS Research Committee costs of conversion, 798 derecognition, 967 survey, 217 direct costing v full disclosure requirements, 968 interim reporting absorption costing, 799 linked presentation, 967 similarities with management distribution costs, 810, 820 separate presentation, 968 commentary,l712 general/administrative subsidiary undertaking, 926 operating review, 214-5 overheads, 821 substance over form related parties, 1549 original SSAP 9, 807 IASC,975 statement of Compliance, 216, selling costs, 820 scope of FRS 5, 928 1660 storage costs, 820-21 take-or-pay contracts, 968 see also Index ofStatutes and throughput agreements, 968 Standards Ownership interest US comparison, 972 definition long term obligations, 973 Operating leases ASB Draft Statement of offset, 975 . financial instruments Principles, 97 sale of assets, 973 excluded from scope, 592 sales of real estate, 973 see Leases P subsidiaries and quasi subsidiaries, 972 Operating losses Parent undertaking transfers of receivables with provisions, 1442 see Consolidated accounts; recourse, 974 Business combinations; Related Options parties OfBcers currency options, 514-17 see Directors' and officers' loans definition of an investment, 717 Partial derec:ognition and transactions earnings per share see Off balance sheet options exercised during the transactions 00 and gas Industry year, 1332-33 barter transactions, 171 options or warrants to Participating Interest cost of sales, 813 subscribe for equity shares, see Consolidated accounts current cost accounting, 758 1357-58 depreciation of productive financial instruments Partnerships facilities, 656 definition, 591 connected persons, 1584 impairment, 662 disclosure, 605 excluded subsidiaries, 253 leases and hire purchase leases joint ventures, 439 contracts,981 sale and leaseback involving participating interest in associate, profit and loss on disposal of options, 1021-6 427 fixed assets, 1283 off balance sheet transactions payments to directors' proportional consolidation of sale and repurchase partnership, 1631 jointventures,439 agreements, 928, 953 quasi subsidiaries, 943 provisions,l442 scope of FRS 5, 929 research and development, 742 securitised assets, 964 Patents residual value of a field, 662 put options which can be see Intangible assets Statement of Recommended transferred back to the entity, Practice,1455 938 PenAonconhibutions valuation of refineries, 677 see also Financial instruments; directors' remuneration Capital instruments; Put options compensation for loss of Onerous contracts subsidiary company shares, 239 office, 1644 acquired, 322 valuation at market value, 135 distinction between defined provisions,l442 benefit and money purchase definition,l442 Ordinary activities schemes, 1641 definition, 1280 money purchase schemes, Operating activities 1640-42 see Cash flow statements Overdrafts see Cash flow statements Pension costs, 1105-1184 Operating and FInancial accounting treatment Review (OFR), 212-217 Overheads problem areas, 1152-1176 Cadbury Code, 189 fixed assets SSAP 24,1110 confidential information, 213 indirectly attributable costs, acquisitions of subsidiaries' contents, 212-3 634-5 pension schemes, 316,1110 Index 1851

(pension costs) (pension costs) (pension costs) actuarial assumptions and best discretionary and ex gratia unfunded schemes, 1170 estimates, 1150 pension increases, 1126 variations from regular cost, actuarial valuation regular pension cost, 1115 1116,1158 effect of tax credit removal, variations from regular cost, unfunded schemes, 1170 1149 1116 US comparison, 1177 actuarial valuation methods, defined contribution schemes, variations from regular cost 1140 1114 accounting requirements, accrued benefits approach, accounting, 1114 1116 1140,1142 disclosure, 1114 allocation, 1117 accrued benefits methods, definitions, 1111 allocation of experience 1142 directors' remuneration differences to funding aggregate method, 1145 augmentation of pension consequences, 1163 attained age method, 1146 rights,l646-47 balance sheet assets eroded by choice of method, 1149 authorisation, 1618 subsequent valuation, 1166 current unirmethod, 1144 disclosure calculation of remaining discontinuance method, 1144 actuarial assumptions, 1151 service lives, 1158 discontinuance target method, defined benefit schemes, categories, 1116 1145 1132-34 definition of significant entry age method, 1148 defined contribution schemes, reduction in employees, 1163 groups, 1142 1114 examples of variations, 1116 projected benefits approach, pension commitments, 1176 group schemes, 1174 1141 post-retirement benefits, 1174 material deficits recognition projected benefits methods, discretionary and ex-gratia, 1126 period, 1125 1145 financial instruments method of amortisation, 1158 projected unit method, 1142 excluded from scope, 592 problems, 1158 SSAP 24 approach, 1141 foreign schemes, 1170 reduction in employees due to valuation of assets, 1149 group schemes, 1174 sale or termination, 1119 actuary's role, 1151 hybrid schemes,1169 reduction in employees for compliance with SSAP 24, lAS comparison, 1180 other reasons, 1121 1151 interest, 1152 refunds out of the scheme, annual valuation proposals, 1110 on the balance sheet figure, 1123 ASB Discussion Paper 1152 transitional provisions, 1125 actuarial method,l116 unfunded schemes, 1171 unamortised difference amortisation methods, 1162 interim reporting remaining in year of next market value approach,l110 actuarial valuation, 1719 actuarial valuation, 1164 negative pension cost, 1169 market value approach proposals, pension prepayments, 1130 1110 Pension funds recoverability of pension multi-employer schemes, 1175 exemptions from preparing cash asset,1167 Napier interim report, 1106 flow statements, 1478 Statement of Principles negative pension cost, 1168 related parties approach, 1106 pension schemes of an acquired administration of scheme, treatment of interest, 1158 company, 315-8 1550 variations from regular cost, post-retirement benefits other deemed related parties, 1478, 1118 than pensions, 1172 1540-41 balance sheet approach see also Post-retirement disclosure of contributions, ASB discussion paper, 1106 benefits 1563 IASC exposure draft, 1181 proposed changes to SSAP 24, balance sheet figure, 1127 1181 Pension Ombndsmaa accounting objective, 1111 regular pension cost, 1115 determining entitlement to deferred tax, 1172 Solomons Report, 90, 91 pension surplus, 1106 eroded by subsequent SSAP24,l110 valuation, 1166 accounting objective, 1111 Performuce fJoads interest, 1152 actuarial aspects, 1140 contingencies, 1427-28 make-up of figure, 1127 dermed benefit schemes, 1115 presentation, 1130 defined contribution schemes, Performance related pay Companies Act 1985, 1176 1114 see Directors' remuneration directors' emoluments, 1177 definitions of terms, 1111 pension commitments, 1176 disclosure, 1114, 1132 Perpetual debt pension costs, 1177 foreign schemes, 1111 see Capital instruments deferred tax, 1172 hybrid schemes, 1169 defined benefit schemes, 1115 post-retirement benefits other Petroleum revenue tax balance sheet, 1127 than pensions, 1172 ASC pronouncements, 1209 disclosure, 1132 scope, 1110 permanent diminutions in fixed treatment of interest, 1152 assets, 662 1852 Generally Accepted Accounting Practice in the United Kingdom

Physical capital maintenance (post balance sheet events) (Prepayments) see Capital maintenance reclassification from non• defined contribution schemes adjusting to adjusting event, disclosure, 1114 Post balance sheet events, 1398-99 figure in balance sheet, 1127 1377-1404 reorganisation provisions, 1450 refunds, 1124 adjusting events SSAP 17 transitional provisions, 1125 debtor insolvency, 1402-3 history, 1379 taxation definition, 1379 requirements, 1379-97 ACf offset against deferred disclosure, 1396-97 stock realised after balance sheet tax, 1236 examples, 1379-80 date, 1399-1400 recoverable ACf, 1212 exposure draft, 1378-79 transactions involving directors, fixed asset transactions, 1598 Present value accounting 1400--1401 US comparison Sandilands Report, 71-2 reclassification from non• accounting standards, 1403 adjusting, 1398-99 reclassification of non• Presentation of financial SSAP 17 requirements, 1381 adjusting to adjusting, information changes in capital post balance 1398-99 ASB Statement of Principles sheet, 1333-34 window dressing 1401-2 see Conceptual framework changes in rate for deferred tax, events requiring disclosure 1241 but not adjustment, 1381 Price-earnings ratio Companies Act 1985, 1396-97 opinion of authors, 1404 IIMR headline earnings, comparison of SSAP 17 and SSAP 17 history, 1379 1343-46 Companies Act 1985, 1397 SSAP 17 requirements, definition, 1377,1379 1401-2 Prior period adjustments, disclosure trading patterns, 1378 1299-1306 events requiring disclosure accounting treatment, 1301-5 but not adjustment, 1381-96 Post balance sheet information changes in accounting policy, disclosure requirements financial instrmnents 666, 1300--301 Companies Act 1985 narrative disclosures, 601 correction of fundamental errors, requirements, 1396-97 1301 SSAP 17 requirements, 1396 Post-retirement benefits, 1172 definition, 1299-1300 example extracts, 1381-96 accounting treatment, 1172 . disclosure of effect, 1305-6 fIXed asset transactions, deferred tax, 1217 identification, 1300 1400--1401 scope of SSAP 24,1111 revision of estimates of future going concern concept, 1381 UITF Abstract, 1110 events, 1300 lAS comparison, 1403-4 unfunded schemes, 1171 summary of FRS 3 requirements, dividends, 1404 US treatment, 1180 1262 ICAUEVVRecommendation,1378 impairment PnHtcquisition dividends, Production overheads disposal of assets, 1401 289-291 fixed assets, 634-5 insolvency of a debtor, 1402 stock long term contracts, 1400 Preference shares, 894 conversion cost definition, non-adjusting events earnings per share 798 Companies Act disclosure, calculation of earnings, 1336- direct versus full absorption 1396-97 37 costing, 799 definition, 1380 convertible shares, 1356 storage costs, 820 disclosure, 1396-97 definition, 1323 the original SSAP 9, 807 events requiring disclosure, fully diluted BPS, 1351-62 see also Overheads 1381-96 participating shares, 1338-39 examples, 1380--81 see also Capital instruments Profit exposure draft, 1378-79 attnbutable profit fixed asset transactions, 1401 Preminm on issue see Long term contracts going concern concept, 1379 see Capital instruments see also Profit and loss acount lASe, 1403 insolvency of debtor, 1402-3 Premium on redemption Profit and loss account, reclassification as adjusting, see Capital instruments 1253-1317 1398-99 acquisitions SSAP 17 disclosure, 1397 Prepayments analysis between continuing property valuations, 1402 fmancial instruments and discontinued operations, prudence concept excluded from definition, 592 1266-74 reclassification of non- pensions comparative figures, 1306-7 adjusting to adjusting, deferred tax, 1172 costs of aborted acquisition, 1398-99 defined contribution schemes 1282,1285 variation in accounting accounting, 1114 interim repOrting, 1711 treatment, 1377 Index 1853

(Profit and loss account) (Profit and loss account) (Profit and loss account) principal features of FRS 3, non-operating exceptional continuing and discontinued 1260-62 items, 1282-5 operations, 1266-74 separate presentation, 1277-9 provisions for non-operating establishment of provisions, allocation of income, 1254-6 items, 1283 1274, 1283 associated undertakings SSAP 6 comparison, 1267 material effect on the nature goodwill, 1292-3 summary of FRS 3 and focus, 1284 inclusion in operating profit, requirements, 1261 non-operating exceptional 1266 US comparison, 1308--9 items, 1261, 1282-4 previously a subsidiary, 1274 FRS 3 principal features of FRS 3, change in accounting policy, international comparisons, 1260, 1261 1305-6 1308--16 see also Interim reporting ASB Abstract, 1306 principal features, 1259-1265 share issue costs, 857 comparative figures, 1306-7 requirements of FRS 3, Stock Exchange Listing Rules, comprehensive income, 57, 1253 1259-1307 1307 international developments, scope,1266,1536 taxation, 1294-5 1294 fundamental reorganisation or non-operating exceptional US standard 47,60,406, 1253 restructuring items, 1283 continuing and discontinued exceptional items, 1282-4 principal features of FRS 3, operations, 1266-74 principal features of FRS 3, 1260-61 abolition of extraordinary 1261 requirements of FRS 3, items, 1286--8 goodwill on the disposal of a 1294-5 distinction between operating business US comparison, 1308--14 and non-operating profit, reconciliation of movements comprehensive income, 1253, 1266 in shareholders funds, 1297 1294, 1308, 1312 disclosure of exceptional UITF 3, 1292-3 discontinued operations, items, 1285 half-yearly reports, 1307 1309--11 exceptional items, 1281--8 historical summaries, 1307 extraordinary items, 1308--9 FRS 3 requirements, 1266 lAS comparison, 1314-16 prior year adjustments, non-operating exceptional income concepts 1311-12 items, 1282--4 all-inclusive concept, 1254 warrants principal features of FRS 3, all-inclusive versus current realised profits, 867 1260 operating concepts, 1255-6 see also discontinued current operating performance Profit sharing schemes operations concept, 1255 see Interim reporting discontinued operations, income measurement, 1253-6 1266-74 operating profit Progress payments application of definition in definition, 1266, 1285 foreign currency, 496-7 practice, 1271-4 disposal of fixed assets, 1283 stocks,808 cash flow aspect, 1271 ordinary activities, 1280 ceased permanently, 1268 preliminary profit statements, Property clearly distinguishable, 1307 see Fixed assets; Investment 1270-71 prior period adjustments properties; Property industry defurition,1266-67 see Prior period adjustments earnings per share, 1349-51 profit and loss account format Property industry lASe comparison, 1273-4 illustrative example, 1262-5 arguments against depreciation, interim reporting, 1711 important components, 1260 640-42 material effect on the nature profit or loss on disposal of fixed business combinations and focus, 126S-70 assets, 1288--9 different accounting policies, non-operating exceptional balance sheet approach, 161, 293-4 items, 1284 1288 capitalisation of borrowing costs segmental disclosure, 1271 goodwill change of policy, 785 US comparison, 1309--11 see goodwill end of capitalisation period, downsized operations, 1268, non-operating exceptional 774 1269,1270 items, 1282--4 qualifying assets, 769 el'traordinary and exceptional note of historical cost profits fixed assets cost items, 1279-88 and losses, 1289-1290 capitalisation of interest, aborted acquisition costs, principal features of FRS 3, 635-6 1282,1285 1260,1261 see also Investment properties; bid defence costs, 1282 provisions in respect of future Revaluation of fixed assets; disclosure of exceptional trading losses Land and buildings items in practice, 1285 ASB exposure draft, 1277 post balance sheet valuations, exceptional items, 1281-2 sale or termination of an 1402 extraordinary items, 1279-81 operation, 1274-7 property leases, 1002 accounting treatment, 1274-7 1854 Generally Accepted Accounting Practice in the United Kingdom

Proportional consoUdation (Provisions) (Provisions for Uabilities and see Joint ventures offset, 1440 charges) link with long-term contracts, depreciation Provisions 1440 see Depreciation ASB Discussion Paper, 1436 link with off balance sheet diminutions in value ASB Statement of Principles finance, 1440 see Diminutions in value link with, 1433, 1436, 1448 sale or termination of an disposals balance sheet approach, 1440, operation, 1440 anticipated loss on sale, 379 1455 vacant leasehold properties, foreign currency big bath provisions, 1436 1440 movement on provision, 578 board decisions, 1450 oil industry, 1455 future claims, 1268 Companies Act onerous contracts, 1442 long term contracts definition, 1433 definition, 1442 foreseeable losses, 830 constructive obligation, 1438 operating losses, 1442 non-operating exceptional items, contingencies other liabilities 1283 exposure draft on provisions link with, 1434 permanent impairment and contingencies, 1428-29, pension costs, 1437 see Impairment 1437 post balance sheet events sale or termination of an link with exposure draft, 1408 reorganisation provisions, operation, 1274-7 contingent liabilities 1450 taxation link with, 1433 problem with accounting Companies Act requirements, cyclical repairs, 1456 treatment, 1435 1226 decommissioning costs, 1452 recognition, 1437 deferred tax, 1241 US comparison, 1463 release of unnecessary warranty costs, 140 deferred tax, 1437 provisions, 1441 definition reorganisation provisions, 1343, Prudence concept accruals, 1434 1445 conflict with FRS 3, 1276 ASB,1433 definition, 1343, 1445 contingencies Companies Act, 1433 post balance sheet events, estimating the amount, 1414 trade creditors, 1434 1450 treatment, 1413 depreciation recognition, 1446 deferred taxation, 1199 scope of provisions, 1433 US comparison, 1270, 1461 definition, 65 development of an accounting self insurance, 1460 income allocation, 1254 standard, 1436 transparency of disclosure, 1435 leases diminution in value of assets treatment of tax, 1439 rentals receivable less than scope of provisions, 691, US comparison, 1461 asset cost, 1030 1433 decommissioning costs, 1463 partial derecognition under FRS disclosure, 1440 environmentaI costs, 1462 5,936 exemptions, 1441 restructuring costs, 1270, pensions costs general, 1434 1461 actuarial assumptions, 1150 release of unnecessary vacant leasehold property, development of an accounting provisions, 1441 1463 standard, 1109 specific to provisions, 1434 year 2000 costs, 1463 material deficits, 1125 transparency, 1435 vacant leasehold property, 1443 post balance sheet events discounting, 1439, 1456 UITF Abstract, 1443 financial statement environmental costs, 1452 US comparison, 1463 adjustment, 1377 US comparison, 1462 warranties, 1439, 1460 post retirement benefits, 1173 examples in practice, 1442 year 2000 costs, 1459 research and development, 739 exposure draft, 1436 US comparison, 1463 revaluation of fixed assets, 686 measurement, 1438 revenue recognition objective, 1436 Provisions for Uabilities and conflict with matching, 130 recognition, 1437 charges realised profits, 132 scope, 1437 acquisitions stock valuation, 797 frequency of revision, 1439 deferred tax, 318-9 IASC comparison, 1463 environmental liabilities, 313, PubUc sector bodies leasehold properties, 1443 1462 Dearing Report, 19 legal obligations, 1437 future operating losses, 293, Private Finance Initiative, 971 link with long-term contracts, 321 SORPs,25 1440 negative goodwill, 346 link with off balance sheet other provisions, 321 PubUc utilities finance, 1440 reorganisation or depreciation of infrastructure long-term contracts, 1443 rationalisation provisions, assets, 644 measurement, 1438 319-21 expected value, 1438 contingent liabilities PubUcations reliefvalue, 1438 see Contingencies revaluation of titles, 626 Index 1855

(Publications) Record and music industry (Related parties) subscriptions, 161-2 advance royalty!licence receipts, groups 157-8 consolidation adjustments, Push-down accounting 1559 business combinations, 326--7 Recoverable amount exemptions from disclosure, see Fixed assets 1558-59, 1598 PutOptiODS major investees, 1560 linked presentation, 938 Redeemable preference shares parent companies preparing sale and leaseback involving see Capital instruments group accounts, 1560 options,954,1021-6 guarantees, 1550 sale and repurchase agreements, Redundancy costs horizontal groups, 1535 954,1021-6 non-operating exceptional items, lAS comparison, 1575 see also Capital instruments 1283 identification of related parties, 1534-49 Q Regional Development Grants impact of related party accounting standard, 1045 relationship, 1532 Qualitative characteristics of individuals ftnanciallnformation Related parties, 1531-1578 close family, 1546-1547 ASB Statement of Principles, abnormal transactions, 1534 controlled entities, 1547-48 94-6 accounting standards (other than rebutting the presumption, comparability, % FRS 8), 1571 1548 materiality, 96 aggregation,1556-58 influence, 1535,1536 relevance, 95-6 AIM companies, 1575 key management reliability, 95-6 asset swaps, 1550 presumed related parties, understandability, 96 associates and joint ventures, 1541,1542-43 FASB Conceptual Framework, 1539-40,1569 salaries, 1563 50-5 close family, 1546-1547 management contracts, 1541, Solomons Report, 88 confidentiality, 1563 1545-46 Wheat and Trueblood control non related parties, 1548-49 Committees, 45 definitions,1535-36 non-director officers, 1567 disclosure, 1563--65 objective of standard, 1533--34 Quasi subsidiaries identification of related pension funds, 1478, 1540-41 see Off balance sheet finance parties, 1534 administration of scheme, deemed related parties, 1538-41 1550 R definitions, 1535-38 SORP on accounting for based on control, 1535-36 pension schemes, 1541 Real estate based on influence, 1536-38 persons acting in concert, sales, 973 transactions, 1549 1544-45 development of accounting presumed related parties, Realisable value standard, 1531-33 1541-46 see Stocks; Conceptual directors problem, 1531-32 framework contracts of significance, reciprocity 1572 associates and joint ventures, Realised proDts disclosure requirements, 1566 1539 foreign currency, 570-73 interests in share capital, pension funds, 1541 goodwill write-

(Related parties) Research and development (Research and development) shareholders, 1572-73 (R&D),737-753 definition, 742 contracts of significance, accounting standard elimination of uncertainty, 1572 development, 739--41 750 major shareholders, 1543-44 accounting treatment per immediate write-off, 750-51 purchase by the company of Companies Act, 746 new surveying methods, 742 its own shares, 1573 accounting treatment per SSAP disclosure substantial holdings, 1572 13, 742 Companies Act 1985, 747-8 waived dividends, 1573 Companies Act 1985, 746-7 current reporting practice, small companies development expenditure, 745-6 exemptions from disclosure, 743-4 directors' report, 747-8 156~6 fixed assets, 742-3 financial statements, 747 smaller transactions, 1573-75 pure and applied research SSAP 13, 744-5 Stock Exchange requirements, costs, 743 distributable profits, 748 1565 accounting treatments possible, expenditure reimbursed by a taxation 737-9 third party, 742 group relief, 1550 accumulation of costs in a expensing costs true and fair concept, 1533, 1562 special category, 739 FASB position, 752,1463 US comparison,1576-77 capitalise costs when when incurred, 737 incurred, 738--9 exposure draft on goodwill and Relevance capitalise costs when incurred intangibles see Conceptual framework - if certain conditions met, 739 link with, 741 qualitative characteristics; choice of method, 739 lAS comparison, 752-3 FASB conceptual framework costs to expense when oil, gas and mineral industries, incurred, 737-8 742 . Reliability activities included in R&D, prudence concept, 739 see Conceptu

(Revaluation or fixed assets) (Revaluation or fixed assets) (Revenue recognition) depreciation of revalued trading potential excluding advance fees, 158 assets, 682-3 goodwill, 675-6 film exhibition rights, 168-9 disposal of revalued assets, valuations including trading financial service fees 683-5 potential, 675-6 lAS position, 159 distributable profits and reversal of impairment write franchise fees, 154-6 revaluation reserve, 691-3 downs, 687--S lAse comparison; 156 downward valuations, 685-8 US comparison, 706 mixed revenue, 155 other uses for the revaluation US comparison, 155-6 reserve, 688-9 Revaluation reserve FRS 5 provisions for permanent deferred tax on revaluation, 1295 recognition and derecognition impairment, 685-8 disclosure, 702 of assets and liabilities, 144-5 revaluation reserve treatment goodwill write-off, 336 fundamental recognition criteria, on disposal, 683-5 investment properties 140-53 revaluation surpluses, 681-2 accounting treatment, 688 summary of approaches, split depreciation, 682-3 Companies Act requirements, 152-3 transfers from revaluation 702 lAS comparison, 145-50 reserve for depreciation, 681 diminutions in value, 688 completed contract method, ASB discussion paper, 668 disclosure, 702 148,836-37 assets other than property, 679 reclassification to trading construction contracts, 148, bases of valuation, 671--S0 property, 689-90 836-37 comparability of valuations, loss of associate status, 444 disclosure, 149-50 679--S0 profit or loss on disposal of an exchange of non-monetary current cost, 671-2 asset, 1288-9 assets, 146 depreciated replacement cost sale and leaseback transactions, lAS definition of revenue, of land and buildings, 677--S 1020 145 directors' valuation, 671 see also Revaluation of fixed interest, royalties and directors' valuation of fixed assets - accounting treatment dividends,149 asset investments, 720 measurement of revenue, 146 general principles, 671-3 Revenue recognition, 129-173 percentage of completion market value, 671 accruals concept, 130, 131 method,l48 open market value of land and advance royalty/licence receipts rendering of services, 148-9 buildings, 673-4 156--S risks and rewards of other assets, 679 advertising revenue, 162 ownership, 147 reliability of valuations, media commissions, 162 sale of goods, 146--S 679-80 production commissions, 162 increase in net assets, 142 disclosure, 698-702 agriculture increase in ownership interest, Companies Act requirements, lASe project, 139 142 698-701 ASB proposaIs, 141-3 initial recognition SSAP 12 requirements, 701 balance sheet approach, 144 transactions, 142 distributable profits, 691-3 definition of gain, 141 events other than transactions, ED 51 proposaIs, 667--S definition of loss, 141 142 see also Depreciation; Fixed draft Statement of Principles, interim reporting assets 141,161 income and expense history, 665-7 recognition process, 141-2 recognition, 1713 lASe comparison, 707 recognition of gains, 142-3 loan arrangement fees, 158-9 investment properties asset recognition and matching concept, 130 diminutions in value, 688 derecognition mining industry: US recogntion, frequency of valuation, 670- FRS 5,132,144-5 133 71 barter transactions 171-2 non-monetary transactions, revaluation reserve, 702 consignment sales, 160-1 171-2 investments credit card fees, 160 lAS position, 171-2 ED 55 proposaIs, 721 data service fees, 167--S US position, 172 land and buildings, 673-8 definition of elements of passing of title, 136 depreciated replacement cost, financial statements, 141 Private Finance Initiative, 971 677--S definition of realised profits, 131 prudence concept, 130, 131, 140 , estimated realisation price, definitions of revenue real estate sales 676-7 lAse, 145 US GAAP position, 170-1 estimated restricted realisation US, 129 realised losses, 131 price, 677 derecognition,99,141-2 realised profits, 130-2 existing use value, 674-5 disposal of land and buildings, accrual of investment income, fIXtures and fittings, 676 169-71 132 hotels, 675 critical event, 169 barter transactions, 132 open market value, 673-4 US practice, 170-1,973 Companies Acts, 130-1 specialised buildings, 677--S film/TV industry definition, 131, 140 1858 Generally Accepted Accounting Practice in the United Kingdom

(Revenue recognition) (Revenue recognition) Securities and Exchange distribution of profits, 131 mining of precious metals, Commission (SEC) EC Fourth Directive, 131 134-5 seeUSGAAP intra-group transactions, 131 natural growth, 13~0 prudence concept, 132, 140 readily realisable assets, 135 Securitised assets, 929, 960 reliability of measurement, realisation principle, 133 derecognition, 963 132 recognition at time of sale, disclosure requirements, 964 true and fair view, 131 135-6 issuer consolidated by originator, receipt of initial fees, 154-60 recognition on completion of 965 advance royalty/licence production, 134-5 issuer's accounts, 965 receipts, 156-8 recognition subsequent to linked presentation, 958, 963 commitment fees, 159-60 delivery, 136-8 mortgage loans, 961 credit card fees, 160 revenue allocation approach, separate presentation, 965 filmtrV rights, 158 140 franchise fees, 154-6 right to return goods, 137-8 Segmental reporting, loan arrangement fees, 158-9 sales of goods, 135-6 1059--1103 record and music industry, software revenue, 162-8 acquisitions of subsidiaries, 367, 157-8 transactions 1278 recognition of gains, 142-3 definition, 142 ASB Discussion Paper, 1062 two statements of financial US comparison associated undertakings, 1067 performance, 143 SFAC No.5, 151 associated undertaking's recognition process, 141-2 Statements of Position, 152 accounts, 1069 recognition criteria, 141 the general rule, 150--1 exemption, 1069 record and music industry, 157-8 materiality, 1067 US GAAP position, 157-8 Royalties proportional consolidation, reservation of title, 160--1 revenue recognition 1069 revenue advance royalty receipts, 156 banks IASC definition, 145 lAS 18, 149 scope of SSAP 25, 1063 Romalpa case, 160 SORPs,1066 sale and leaseback transactions, S class of business 171 definition of reportable software services industry, 163-8 Sale and leasebacks segment, 1064 data services, 167-8 revenue recognition, 171 legislative requirements, 1062 licences with no significant see also Leases non requirement to disclose, vendor obligations, 163-4 1062 licences with significant Sale and repurchase reporting requirements, 1065 vendor obligations, 164-6 agreements see also industry segments long-term contracts, 164-5 off balance sheet transactions, classes of fixed asset, 668 post-delivery customer 928,953 common costs support services, 166--7 problems in practice, 1088 subscriptions to publications, Sandilands Report, 69--78 SSAP 25 requirements, 1069 161-2 cash flow accounting, 74-5 Companies Act requirements, subsequent remeasurement of current cost accounting, 75-8 1061 assets and liabilities, 142 current purchasing power comparative figures, 1063 summary table of reporting accounting, 69-70 consolidated accounts, 1063 practice, 112, 152-3 essential features, 69 defining the segments, 1079 timing of revenue recognition, terms of reference, 69 depreciation, 1076 133-40 value accounting, 71-4 disclosure accounting practice, 133 associated undertakings, 1067 accretion approach, 138-40 Scrip dividends, 879--901 changes in group agricultural commodities, earnings per share, 1326 composition, 1092 134-5 see also Capital instruments Companies Act requirements, construction contracts, 134, 1061 138-9 Seasonal business in practice, 1069 critical event approach, foreign subsidiaries inter--segment sales, 1088 134-8,140,146,147 use of average rate, 520 redefinition of segments, futures and options, 135 interim reporting, 1714 1080 income from use by others of mergers scope of SSAP 25, 1063 enterprise resources, 138 non-coterminous accounting SSAP 25 requirements, 1065 long-term contracts, 138-9 periods, 358 discontinued operations magazine subscriptions, subsidiaries link with FRS 3, 1267 161-2 coterminous accounting treatment as a segmental mail order, 137 periods, 242 issue, 1271 manufacturer/dealer lessors, treatment in practice, 1092 140 exceptional items, 1090 Index 1859

(Segmental reporting) (Segmental reporting) SmaU companies exportinfonnation, 1061 investment analyst group, Cadbury Report, 208-10 geographical segments 1060 Dearing report defining reportable segments, lender/creditor group, 1061 application of standards, 19 1064 shareholder group, 1060 exemption from preparing cash definition, 1059 voluntary segmental disclosures, flow statement, 1479 government interest, 1061 1076 exemption from related party infonnation required, 1065 disclosure, 156~ matrix approach, 1075, 1076 SeUing costs generaUy accepted accounting source versus destination, see Stocks practice, 25-30 1066 ASC initiative, 26-27 global market companies, 1082 Service contracts Big GAAPlLittie GAAP debate, groups directors' remuneration 25-26 associated undertakings, 1067 Companies Act requirements, def"mition, 26 changes in composition, 1092 1618-19 exemptions, 26 historical background, 1059 entitlement, 1618 Financial Reporting Standard for IAS comparison, 1100 Greenbury Code, 1683, Smaller Entities, 27-28 income generating units, 664 1699-1700 proposed solution, 29-30 industry segments software support contracts, defining reportable segments, 166-167 smaU companies tax rate 1079 deferred tax, 1240, 1241 definition, 1059 Setoff see also class of business off balance sheet transactions SmaU entities infonnation to be reported offset,941,975,1440 exemption from preparing cash companies outside scope of flow statement, 1479 SSAP 25, 1067 Share options inclusion of interest in results, directors' remuneration, 1623 SocIaI security costs 1089 see Options national insurance contributions results, 1066 wages and salaries note, 1623 turnover, 1065 Share preminm insurance companies, 1063 see Capital instruments Software development interest income and expense, company 1089 Shareholders acquisition of intangibles, 303-4 interim reporting, 1076, 1092, related parties, 1572-73 1711 contracts of significance, Software services Industry inter-segment sales, 1087 1572 revenue recognition, 162-8 legislative requirements, 1061 major shareholders, see also' Revenue recognition matrix fonnat, 1075 1543--1544 net assets purchase by the company of Solomons Report, 87 def"mition, 1092 its own shares, 1573 see also Conceptual framework reporting requirements, 1066 substantial holdings, 1572 objectives, 1060 waived dividends, 1573 Special purpose transactions possible revisions to the role in corporate governance, definition, 925 standard, 1062 178 presentation, 1075 scrip dividends, 897 SSAPs private companies, 1063 segmental reporting, 1060 see Index ofStatutes and public limited companies, 1063 Standards reportable segments Shares defining the segments, 1079 financial instruments, 591 Stamp Report factors to be considered, 1064 see Capital instruments; Earnings see also Conceptual framework significant segments, 1065 per share users infonnation requirements, SSAP25 80 exemption,27,1063 Shipping industry general approach, 1062 capitalisation of borrowing costs, Statement of Principles origins, 1062 769 see Conceptual framework requirements, 1062-9 depreciation of ships not scope, 1063 currently in use, 647 Statement of total recognised Standard Industrial Classification gains and losses, 1291-1294 system, 1079 SigDilicant inOuence ASB Statement of Principles transfer pricing, 1088 see Associates and joint ventures presentation of information, US comparison, 1094 104 existing standard, 1095 SmaU and medium sized problems with proposals, new standard, 1098 groups 109-10 user groups exemptions from preparing FRS 3 principal features, 1260, government, 1061 group accounts, 249-50 1261 1860 Generally Accepted Accounting Practice in the United Kingdom

(Statement oftotaI recognised (Stocks) (Stocks) gains and losses) allocation of overheads, 821-23 general and administrative goodwill,1292 normal level of activity, overheads, 821 insurance businesses, 1293--4 821-22 lAS comparison, 836-38 interim reporting, 1712 practical considerations, 819 allocation of overheads, 823 international developments, 1294 analysis of stocks, 814-15 cost of sales, 803 loss on revaluation, 687 base stock method, 803 cost of stock, 817-18 primary financial statement, example disclosure, 805 definition of costs of 1291-2 stock at fixed amount, 810 conversion, 799 prior period adjustments, 1262, capitalisation of interest increase in stock, 796 1301-2 Companies Act requirement, interim reporting recognition of items, 1256, 1288 842 fall in value, 1718 revenue recognition, 143 determination of production LIFO share issue costs, 335, 1293 price, 810 Companies Act requirement, taxation, 1295 Companies Act 1985, 809-813 810-11 treatment of warrants, 867, 893 cost flow assumptions, 800-801 determining cost of sales, based on physical flow of 802-3 Statements of recommended goods,800-1 illustration of practical effect, practice (SORPs), 24-25 disregarding physical flow of 804-7 development of accounting goods, 801-7 lower of cost and net realisable standards, 24-25 illustration of effect, 804-7 value McKinnon Report, 18 cost of conversion analysis, 814-15 determination, 798 basic rule, 797 Statements of source and direct versus full absorption Companies Act, 810 application of fonds, 1467-72 costing, 799 defmition of net realisable see also Cash flow statements cost of purchase value,823 Companies Act requirements, original SSAP 9, 807 Stepped interest bonds 810 marking to market, 725, 726, capital instruments, 887 definition,798,818-19 826-27 see also Capital instruments cost of sales matching concept determination, 799-807 determining cost of sales, Stock Exchange requirements see cost flow assumptions 799-800 amendments affecting corporate cost of stock objectives of stock governance, 179-80 Companies Act requirements, measurement, 797 associates and joint ventures, 454 810-13 selling costs, 820 auditors' review of compliance constituents of cost, 818 most recent actual purchase with Cadbury, 207-8 determination, 798 price, 813 Cadbury and smaller quoted costing method and replacement net realisable value, 823-25 companies, 210 cost, 810 definition, 823 compliance with Cadbury current cost, 813 raw materials and work in Report, 179, 180,207-8 definition, 796-97 progress, 825 debt maturities, 863 direct costing versus full see also lower of cost and net directors' loans and transactions, absorption costing, 799 realisable value 1601-2 disclosure of accounting policies, US comparison, 824 directors' pension disclosures, 815-16 overheads 1616,1654 distribution costs see Overheads directors' service contracts, constituents of cost, 820 prime cost, 798 1619-20 determination of production prudence concept, 797 earnings per share, 1322-23 costs, 810 realised after balance sheet date, foreign currency indebtedness, elimination of unrealised profit 1399-1400 538 on inter-company transactions, replacement cost FRS 3 changes to reporting, 1307 244-5 alternative to net realisable Greenbury Code amendment, fair value of stocks and work in value, 825 1616,1654 progress acquired, 305-9 costing method, 810-13 interim reporting FIFO retail method, 825-826 Cadbury Report, 1656, 1709 Companies Act requirement, see also Long-term contracts requirements, 1707 810-811 selling costs, 820 interest capitalisation, 762 determining cost of sales, specific identification method, segmental reporting, 1060 800-801 800 share capital, 878 illustration of practical effect, storage costs, 820, 821 small related party transactions, 804-7 US comparison, 816-17 1573-74 fixed amount, 810 accounting treatment, 816 fixed overheads, 799 base stock method, 803 Stocks, 795-842 full absorption costing, 799 cost of stock, 799 actual cost method, 800 definition of stock, 796 Index 1861

(Stocks) Suppliers (Taxation) LIFO,802-3 onerous contracts, 1442 see also Deferred tax lower of cost and net Operating and financial review capital losses, 1218 realisable value, 799 dependence on suppliers, 214, capitalisation of borrowing costs weighted average method 1549 gross or net of tax relief, 780 Companies Act, 810 take-or-pay contracts and cash flow statements, 1492-93 determining cost of sales, throughput agreements, 968 changes in tax rate, 1240 801-2 users of financial statements corporation tax, 1240 illustration of practical effect, ASB Statement of Principles, see also Deferred tax 804-7 94 debit balances, 1218 write down FASB Conceptual ACT,1219 high volumes, 825-26 Framework, 48 general, 1218 net realisable value, 824 Stamp Report, 80 tax losses, 1218 provisions, 1442 deferred tax Swaps assets and liabilities acquired, Storage costs financial instruments 318 see Stocks definition, 591 development of accounting for disclosure, 605 tax,1204 Strategic alliance ASC pronouncements, 1209 see Associates and joint ventures T see also Deferred tax tax payable, 1204 Subordinated debt Take-or-pay contracts directors' remuneration see Capital instruments off balance sheet transactions, income tax, 1618 968 disclosure, 1213 Subscription fees Companies Act 1985 data services, 167 Tangable assets requirements, 1225 see Fixed assets irrecoverable ACT, 1213, SUbsc:rlptiODS 1214 to publications, 161-2 Taxation, 118S-1252 overseas taxation, 1214, 1215 accounting standards in force, profit and loss account Subsidiaries 1185 charge, 1213 definition, 225-34 accounting treatment of ACT SSAP 8 requirements, 1213 exemptions from preparing cash carried forward as an asset, tax rate, 1214 flow statements, 1477-78 1235 distribution view of taxation, financial instruments debit balances, 1219 1185 excluded from scope, 593, development, 1204, 1213 dividends 600,724 franked investment income, foreign income dividends, see also Business combinations; 1213 1213 Consolidated accounts; Groups; incoming dividends, 1213 removal of tax credit, 1213 Group reorganisations; Quasi outgoing dividends and ACT, exceptional items subsidiaries 1210 FRS 3 requirements, 1294-5 recoverable ACT, 1211, 1235 tax and minority interests, Subsidiary undertakings. set against deferred tax 1283 see Subsidiaries liability, 1236 fixed assets see also Deferred tax revaluation and taxation, 1241 Substance over form allocation between periods, 1186 foreign exchange differences leases see also Deferred tax new tax regime, 538, 542 new approach, 979 allocation within periods, 1204 general principles, 1185 SSAP21,981 ASB Discussion Paper nature of taxation, 1185 off balance sheet transactions allocation of tax within government grants, 1054 lASe, 975 periods, 1204 group relief, 1231 scope of FRS 5, 928 discounting, 1202 accounts of the loss-making flow through method for company, 1232 Summary financial statements, deferred tax, 1204 accounts of the profitable 30-34 full provision for deferred tax, company, 1231 banking indusUy, 31 1194 background,1231 ICd\EVVsurvey,32-33 main proposals, 1209 group tax balances, 1232 insurance companies, 31 net of tax method for deferred ACT set against deferred tax, link with OFR, 33 tax, 1203 1240 required form, 30-32 partial provision for deferred effects of consolidation tax, 1201 adjustments, 1234 Superannuation schemes balance sheet perspective offsetting consolidating tax see Pension costs IASC,1187 balances, 1232 US, 1187 lAS comparison, 1249 capital allowances, 1188, 1203 1862 Generally Accepted Accounting Practice in the United Kingdom

(Taxation) Trade discount U balance sheet perspective, cost of stock, 798 1187 UKGAAP interim reporting, 1715 Trade loans definition, 1-3 leases allocation to segments, 1089, development, 1-35 see Leases - tax position 1090 non standard tax rate~, 1210 Uncertainty pensions costs Trade unions cost of brand creation, 631-2 removal of tax credit, 1149 salary assumptions in pension research and development provisions valuation, 1138 development expenditure, gross or net, 1439 users of financial statements, 48 750-51 recoverable ACf future benefits, 737, 738 interim reporting, 1716 Trading properties related parties reclassification from investment Understandability group relief, 1550 property, 689-90 ASB Statement of Principles, 96 reporting financial performance reclassification to investment FASB Conceptual Framework, FRS 3 requirements, 1294-5 property, 690-91 52 non-operating exceptional items, 1283 Transfer pricing Unreaflsed proftts/losses tax losses, 1228 related parties, 1555 elimination on consolidation, accounting requirements of 244-5 SSAP 15, 1218 Transport costs elimination on foreign group relief, 1231 cost of stock, 442, 798, 820 consolidation, 566-7 interim reporting, 1716 elimination on transactions with losses incurred, 1228 True and fair concept associates, 444-50 losses yet to be incurred, 1229 Dearing Report, 19 loss-making company's German equivalent, 15 Urgent Issnes Task Force accounts, 1232 history, 3-4 (UITF) of an acquired entity, 319 international standards, 4, 284, established by ASB, 22 profitable company's 785,1025,1436,1683 accounts, 1231 link to accounting standards, USGAAP tax losses and deferred tax, 3-16 content of fmancial statements, 1228 related party transactions, 1533, 12-13 timing differences 1562 Continental Vending case, 11-12 see Deferred tax relationship with accounting development, 9-14 UITF Abstract on non standard standards, 5 foreign private issuers, 13 tax rates, 1210 relationship with GAAP, 2 link with lASs, 9 US comparison, 1245 small company exemption, 26 regulation, 9-10 balance sheet perspective, The Big GAAP/Little GAAP scope of company law, 13 1187 debate, 25 Securities and Exchange windfall tax, 1204 true and fair override Commission, 9-13 see also Deferred tax; Value fixed asset investments, history, 9-10 added tax; Petroleum revenue 723-4 influence on accounting, 12 tax government grants, 1056 statutory powers, 11 investment becomes a users of accounts, 12 Tender bonds subsidiary, 354 contingencies, 1427 investment properties, 703-5 Users of financial statements marking to market, 733 ASB Statement of Principles, 94 Throughput agreements quasi-subsidiaries, 945 Corporate Report, 67 off balance sheet transactions, readily marketable FASB conceptual framework, 48 968 investments, 726 Making Corporate Reports realised profits on foreign Valuable, 82-3 TImber Indnstry currency items, 572 Sandilands Report, 69 leases, 981 stocks and long-term Stamp Report, 80 revenue recognition, 139 contracts, 808, 820 use in demerger, 402 Utilities Timeliness US equivalent, 10 windfall tax on public utilities, relevant accounting information, 1204 53 Trustees definition of connected person, Utility companies Tobacco Industry 1583-4 related parties, 1548 capitalisation of borrowing costs, 769-70 Turnover see Long term contracts; Segmental reporting Index 1863 v Window dressing Vacant leasehold property post balance sheet events, see Provisions 1401-2

Valuation bases Work in progress see Revaluations fair value on acquisition, 305-9 long-term contracts, 795, 807 Value accounting net realisable values, 825 Sandilands Report, 71-4 Working capital Value added tax funds flow statement, 1471 accounting requirements, 1209 irrecoverable VAT, 1209 Write down of stock turnover, 1209 see Stocks cash flow statements, 1492-93 contingent liability in VAT Y groups, 1423, 1426 Year 2000 costs Variable interest rate bonds provisions, 1459 see Capital instruments US comparison, 1463

Vendor obligations software revenue recognition with no significant obligations, 163-4 with significant obligations, 164-6

Vendor placings merger accounting, 273

W

Warranties off balance sheet transactions loan transfers, 967 partial derecognition, 935 securitised assets, 963 provisions, 1439, 1460 revenue recognition revenue allocation, 140 time of sale, 135

Warrants definition of an investment, 717 financial instruments, 591 see Capital instruments; Earnings per share

Warranty obligations fmancial instruments excluded from definition, 592

Watts Report development of accounting standards, 18

Weighted average cost see Stocks

Windfall tax taxation of public utilities, 1204