Annual Report and Accounts 2006 - Optos

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Notes to the Consolidated Financial Statements continued 23(c) Effect on Group balance sheet as at 30 September 2005 The effect of the changes to the Group’s accounting policies on the equity of the Group at 30 September 2005 was as follows: Impact of Transition to IFRS Under UK Accounting Development Computer Significant Inventory Government Currency Share Holiday IFRS Standards Expenditure Software Parts Reclass. Grant Translation Option NI Pay Accrual GAAP $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Total non-current assets Property, plant and equipment 62,508 – (615) 4,584 (122) – – – – 66,355 Intangible assets – 5,120 615 – – – – – – 5,735 Total non-current assetts 62,508 5,120 – 4,584 (122) – – – – 72,090 Current assets Inventories 7,202 – – (4,584) 90 – – – – 2,708 Trade and other receivables 4,887 – – – – – – – – 4,887 Cash and cash equivalents 2,163 – – – – – – – – 2,163 Total current assets 14,252 – – (4,584) 90 – – – – 9,758 Current liabilities Trade and other payables (7,654) – – – – – – – (152) (7,806) Government grants – – – – – – – – – – Provisions – – – – – – – (281) – (281) Financial liabilities (38,440) – – – – – – – – (38,440) Total current liabilities (46,094) – – – – – – (281) (152) (46,527) Total assets less current liabilities 30,666 5,120 – – (32) – – (281) (152) 35,321 Non-current liabilities Financial liabilities (55,073) – – – – – – – – (55,073) Provisions – – – – – – – (562) – (562) Government grants – – – – – (714) – – – (714) Total non-current liabilities (55,073) – – – – (714) – (562) – (56,349) Net liabilities (24,407) 5,120 – – (32) (714) – (843) (152) (21,028) Equity and liabilities Equity attributable to equity holders of the parent Issued capital 1,665 – – – – – – – – 1,665 Share premium 52,472 – – – – – – – – 52,472 Retained earnings (78,544) 5,120 – – (32) (714) 29 (843) (152) (75,136) Other reserves – – – – – – (29) – – (29) (24,407) 5,120 – – (32) (714) – (843) (152) (21,028) 23(d) Principal adjustments The principal effects of the changes arising from adoption of IFRS are explained below: Computer software Under UK accounting standards, all capitalised computer software was included within tangible fixed assets. Under IAS 38 “Intangible Assets”, capitalised computer software must be presented as an intangible asset unless it is integral to an item of property, plant and equipment. Under IFRS, non-integral computer software with a carrying value of $615,000 has been reclassified from property, plant and equipment to intangible assets at 30 September 2005 (2004: $764,000). Development costs Under UK accounting standards, research and development costs were written off in the period in which they were incurred. Under IAS 38 “Intangible Assets”, development costs associated with new products must be capitalised from the time at which the development project satisfies the conditions specified within IAS 38 “Intangible Assets”. These conditions can be summarised as technical feasibility, intention to complete, ability to use or sell, probable future economic benefits, availability of adequate resources and the ability to measure reliably the expenditure. 62 Optos plc Annual Report & Accounts 2006
Notes to the Consolidated Financial Statements continued The resulting asset will be amortised over the number of production units expected to be obtained from the asset by the entity. The carrying value of development costs will be reviewed for impairment annually when the asset is not yet in use or, more frequently, when an indication of impairment arises during the reporting year. Under IFRS, an intangible asset of $5,120,000 has been recognised at 30 September 2005 (2004: $2,485,000). Research and development costs expensed through the income statement in the year ended 30 September 2005 decreased by $2,635,000. Amortisation of the intangible asset will commence when the asset is available for use. Government grant Under UK accounting standards, when the grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the costs that it was intended to compensate. Where the grant related to an asset, the fair value was credited to a deferred income account and was released to the income statement over the expected useful life of the relevant asset by equal annual instalments. Under IAS 20 “Government Grants”, the $714,000 government grant associated with the development costs which was credited to the income statement in line with the expenditure in the 2005 and 2004 financial statements has been reversed. Share-based payments Under UK accounting standards, the cost of awards made under the Group’s employee share schemes was based on the intrinsic value of the awards. Under IFRS 2 “Share-based Payment”, the cost of employee share schemes is based on the fair value of the awards that must be assessed using an option pricing model. Generally, the fair value of the award is expensed on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to failure to satisfy either service conditions or non-market performance conditions. As a result of these changes, the cost of employee share schemes recognised during the year ended 30 September 2005 increased by $1,170,000, including related social security costs. An employer’s National Insurance liability of $285,000 was recorded in respect of the options in the year ended 30 September 2005. Foreign currency translation differences Under UK accounting standards, cumulative foreign currency translation differences arising on the retranslation into sterling of the Group’s net investment in foreign operations were recognised within reserves. Under IAS 21 “The Effects of Changes in Foreign Exchange Rates”, cumulative foreign currency translation differences must be recognised as a separate component of equity and should be taken into account in calculating the gain or loss on the disposal of a foreign operation. As permitted under IFRS 1, Optos has elected to deem cumulative translation differences to be $nil on 1 October 2004. Property, plant and equipment – significant parts Under UK accounting standards, significant parts are classified within inventory. Under IAS 16, “Property, Plant and Equipment”, significant parts must be included within Property, Plant and Equipment. Parts are amortised from the point when the assets are available for use. It has been assessed that available for use is the point in time when the assets are installed at customer premises. The scan heads and component parts have been assessed as the significant parts. Significant parts with a carrying value of $4,584,000 (2004: $2,324,000) were reclassified from Inventory to Property, Plant and Equipment as at 30 September 2005. Holiday pay accrual As required by IAS 19, “Employee benefits”, an accrual of $152,000 has been included in the balance sheet at 30 September 2005, representing the holiday pay accrual as at that date and a charge of $23,000 included in the profit and loss for the year ended 30 September 2005. No such accrual was made under UK accounting standards. Taxation While the above changes may require an adjustment for the effect of taxation, these would impact the unrecognised deferred tax asset and, as such, have not been disclosed within this statement Financial instruments Upon adoption of IAS32/39, on 1 October 2005, the carrying value of the secured loan stock 2006 and unsecured loan stock 2007 was reduced by $1,439,000, of which $2,744,000 reflects the removal of the original value of the conversion options (which was taken to equity) and the balance of $1,305,000 represents the imputed interest calculated on an amortised costs basis from date of issue to 1 October 2005 (which was taken to retained earnings). Both the secured loan stock 2006 and unsecured loan stock 2007 were converted into ordinary shares upon flotation; the carrying value at date of conversion was $9,229,000. Optos plc Annual Report & Accounts 2006 63
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Annual Report and Accounts 2006 - Optos

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