Annual Report and Accounts 2006 - Optos

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Notes to the Company Financial Statements For the year ended 30 September 2006 1 ACCOUNTING POLICIES Basis of preparation The Company financial statements have been prepared in accordance with UK GAAP and applicable accounting standards. In preparing the financial statements for the year ended 30 September 2006, the Company has adopted FRS20 “Share-based Payment”; FRS21 “Events After the Balance Sheet Date”; FRS23 “The Effects of Changes in Foreign Exchange Rates”; FRS25 “Financial Instruments: Disclosure and Presentation”; FRS26 “ Financial Instruments: Measurement”; and, FRS28 “Corresponding Amounts”. Further information is provided in Note 14 to the financial statements. No profit and loss account is presented for Optos plc, as permitted by Section 230 of the Companies Act 1985. Depreciation Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost or valuation, less estimated residual value, of each asset evenly over its expected useful life, as follows: Leasehold improvements Other equipment P200 equipment 10 years 3-5 years 5 years P200 equipment refers to retinal examination devices located at healthcare practitioner sites and being utilised on a pay-per-examination basis. Government grants in respect of capital expenditure are credited to a deferred income account and are released to profit over the expected useful lives of the relevant assets by equal annual instalments. Grants of a revenue nature are credited to income so as to match them with the expenditure to which they relate. Leasing and hire-purchase commitments Assets held under finance leases and hire-purchase contracts are capitalised in the balance sheet and are depreciated over the lease term or useful life as appropriate. 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 leases are charged to income as they occur over the term of the lease. Stock Stock primarily comprises spares components relating to P200 equipment. Stocks are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: • Raw materials spares & consumables – purchase cost on a first-in, first-out basis; • Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Foreign currencies The Company’s reporting currency is the US dollar. Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The Company’s share capital and share premium account are denominated in £sterling and are translated at the historical rates of exchange Deferred taxation Deferred tax is recognised in respect of all timing differences that have originated, but not reversed, at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions: • provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued as receivable; • deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date. Pension schemes The Company operates a defined contribution pension scheme. The assets of the scheme are invested and managed independently of the finances of the Company. The contributions payable to the scheme in respect of the accounting period are charged directly to the profit and loss account. Research and development Research and development expenditure is written off as incurred. 66 Optos plc Annual Report & Accounts 2006
Notes to the Company Financial Statements continued Share-based payments Employees (including senior executives) of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity-settled transactions”). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (“market conditions”), if applicable. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. Where the terms of an equity-settled award are modified, or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of modification. No reduction is recognised if this difference is negative. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement. The Company has taken advantage of the transitional provisions of FRS 20 in respect of equity-settled awards and has applied FRS 20 only to equity-settled awards granted after 7 November 2002 that had not vested on 1 January 2005. Trade and other debtors Trade debtors, which generally have 30-90 days’ terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. Provision is made when there is objective evidence that the Company will not be able to collect the debts. Balances are written off when the probability of recovery is assessed as being remote. Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less. Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Financial instruments Prospective adoption of FRS25 and FRS26 As permitted by FRS26, the Group has elected to apply FRS25 “Financial Instruments: Disclosure and Presentation” and FRS26 “Financial Instruments: Recognition and Measurement” prospectively from 1 October 2005. As a result, the relevant comparative information for the year ended 30 September 2005 and as at 30 September 2005 does not reflect the impact of these standards and is accounted for in accordance with previous UK GAAP. Derivative financial instruments In 2005, Optos used derivative financial instruments, principally forward currency contracts, to reduce its exposure to exchange rate movements. Under previous UK GAAP, such derivative contracts are not recognised as assets and liabilities on the balance sheet, and gains or losses arising on them are not recognised until the hedged item has itself been recognised in the financial statements. From 1 October 2005, derivative financial instruments are recognised as assets and liabilities measured at their fair value at the balance sheet date. Changes in fair values will be recognised in the income statement and this is likely to cause volatility in situations where the carrying value of the hedged item is either not adjusted to reflect fair value changes arising from the hedged risk or is so adjusted but that adjustment is not recognised in the income statement. However, under certain conditions specified within IAS39, hedge accounting may be used to mitigate income statement volatility. The Company had no such financial instruments outstanding at 1 October 2005 or in use during the year ended 30 September 2006. Optos plc Annual Report & Accounts 2006 67
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Revolutionising eye care helping sa
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Highlights Year ended Year ended
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2004 > Germany - commercial launch
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3.4m optomap® Retinal Exams in 200
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Image of a healthy eye taken by the
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$3.3 million to $4.3 million. Losse
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“When Ann came to see me, we carr
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Operational and Financial Review co
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Annual Report and Accounts 2006 - Optos

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