Punch Taverns plc 2011 Annual Report

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54 Punch Taverns plc Annual Report and Financial Statements 2011 Notes to the financial statements for the 52 weeks ended 21 August 2011 1 Accounting policies Basis of preparation The consolidated financial statements presented in this document have been prepared in accordance with IFRS as adopted by the European Union. The Company’s financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under s408 of the Companies Act 2006 not to publish its individual income statement and related notes. On 1 August 2011, the Spirit business was demerged from the Group. The demerger was effected by the following steps: • A new holding company, Spirit Pub Company (Holdco) Limited was incorporated, into which the Spirit business was transferred • £61m of cash was transferred from Punch Taverns plc to Spirit Pub Company (Holdco) Limited • The entire share capital of Spirit Pub Company (Holdco) Limited was transferred to Spirit Pub Company plc, a non-group company. In return, Spirit Pub Company plc issued one ordinary share in itself to each Punch Taverns plc shareholder for each one ordinary share of Punch Taverns plc held on 1 August 2011. These transactions resulted in the demerger of the Spirit business from the Group. The Spirit business at the time of the demerger consisted of approximately 800 managed pubs and 550 leased pubs. Since the managed pub business represented a separate major line of business for the Group, the results of that segment are shown as discontinued in these financial statements. However the 550 leased pubs that were demerged do not represent a separate major line of business under the definitions within IFRS 5, so the results of these pubs have not been shown as discontinued, but instead are shown as non-underlying in these financial statements. Prior year comparatives have been restated as necessary. The financial statements are prepared under the historical cost convention, as modified by the revaluation of derivative financial instruments to fair value, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted by the European Union. New standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), becoming effective during the year, have not had a material impact on the Group’s financial statements. The financial statements have been prepared on a going concern basis. The Directors have considered this issue in light of the operating loss in the current period and the significant reduction in net assets following the demerger of the Spirit business. The continued pressure on the leisure sector and decline in wet-led pubs creates uncertainty over the future performance of the Group. Day-to-day working capital requirements are met through cash generated from operations, and the servicing of the long-term debt is met as it falls due. The Directors have prepared detailed operating and cash flow forecasts, which cover a period of more than 12 months from the date of approval of these financial statements. These show that the Group has adequate funds to be able to operate within its agreed facilities and covenants for the foreseeable future. Headroom is maintained over covenants through appropriate cash management, including the Group supply fee arrangement. Following the demerger of Spirit and in light of the changed strategy, size and focus of the Group, the Directors continue to review the nature and structure of the Group’s future long-term funding requirements. For these reasons, the Directors feel it appropriate to adopt the going concern basis in preparing this Annual Report and Financial Statements. Further information in relation to the Group’s business activities, together with the factors likely to affect its future development, performance and position is set out in the Operating review on pages 8 to 15 and Our risks and uncertainties on pages 16 to 19. The financial position of the Group, its cash flows, liquidity position and borrowings are described in the Financial review on pages 20 to 21 and in notes 19, 22 and 23, together with information on the Group’s strategies surrounding managing interest rate risk, liquidity risk, capital risk and credit risk. The Group and Company financial statements are presented in sterling and all values are rounded to the nearest hundred thousand pounds, except where indicated. New standards, interpretations and amendments to existing standards The IASB and IFRIC have issued and endorsed the following standards, interpretations and amendments: Effective for the Group and the Company in these financial statements: • Amendment to IFRS 2 ‘Group cash-settled share-based payment transactions’ • IFRIC 19 ‘Extinguishing financial liabilities with equity instruments’. The above new standards, interpretations and amendments to published standards have had no material impact on the results or the financial position of the Group or the Company for the 52 weeks ended 20 August 2011.
Punch Taverns plc Annual Report and Financial Statements 2011 55 1 Accounting policies continued Effective for the Group and the Company for future years: • Amendment to IFRIC 14 ‘Prepayment of a minimum funding requirement’ – effective from 1 January 2011 • IFRS 9 ‘Financial instruments’ – effective from 1 January 2013 • IFRS 10 ‘Consolidated financial statements’ – effective from 1 January 2013 • IFRS 11 ‘Joint arrangements’ – effective from 1 January 2013 • IFRS 12 ‘Disclosure of interests in other entities’ – effective from 1 January 2013 • IFRS 13 ‘Fair value measurement’ – effective from 1 January 2013. These standards have not yet been adopted by the European Union and therefore do not form part of IFRS as adopted by the European Union. Basis of consolidation Consolidated financial statements comprise the financial statements of the parent company (Punch Taverns plc) and all of its subsidiaries. The Group’s interests in its joint ventures are incorporated in the financial statements using the equity method of accounting. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Investments in subsidiaries are carried at cost less any impairment in value in the financial statements of the Company. Investments in joint ventures are carried at cost plus post-acquisition changes in the Group’s share of accumulated comprehensive income, less distributions received and less any impairment in value. Other investments in which the Group has an interest are reviewed dependent on how much control the Group has. If the Group maintains day-to-day control over the investment, the investment is treated as a subsidiary and the results and position are consolidated into the Group financial statements. All intra-group balances and transactions, including unrealised profits arising from intra-group transactions, are eliminated in full. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Goodwill Goodwill on acquisition is initially measured at cost, being the excess of the fair value of the consideration of the business combination over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Where assets are transferred between segments or disposed, the goodwill attributable to these assets is also transferred or charged to the income statement, respectively. Governance Business review Goodwill carried in the balance sheet is not amortised. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. If the cost of acquisition is less than the fair value of the net identifiable assets, liabilities and contingent liabilities of the subsidiary acquired, the gain is recognised immediately in the income statement. Operating leases and other intangible assets The fair values attached to operating head leasehold interests on acquisitions are deemed to represent lease premiums, and are carried as intangible assets. These operating leases together with other intangible assets are capitalised at cost. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. The estimated useful lives are as follows: Operating leases Over the term of the lease Financial statements Software 3 to 10 years Payments made on entering into or acquiring operating leases are accounted for as intangible assets and amortised over the lease term on a straight-line basis.
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