Punch Taverns plc 2011 Annual Report

86
Punch Taverns plc
Annual Report and Financial Statements 2011
Notes to the financial statements continued
for the 52 weeks ended 21 August 2011
23 Financial instruments continued
Fair value hierarchy
Financial instruments carried at fair value are required to be measured by reference to the following levels:
Level 1 – quoted prices in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The value of the Spirit shares held as a financial asset and the value of the Punch and Spirit shares held as a financial liability have
been measured by a level 1 valuation method.
All other financial instruments carried at fair value have been measured by a level 2 valuation method.
24 Provisions
Group
Onerous
contracts
£m
Property
leases
£m
Insurance
£m
Share
schemes
£m
At 22 August 2009 7.4 50.9 5.7 – 64.0
Reclassification 1 – 6.7 – – 6.7
Unwinding of discount effect of provisions 0.4 4.8 – – 5.2
Charged to income statement – 49.9 1.1 – 51.0
Utilised during the period (4.0) (14.8) (1.4) – (20.2)
Released during the period – (17.2) – – (17.2)
At 21 August 2010 3.8 80.3 5.4 – 89.5
Unwinding of discount effect of provisions 1.0 6.1 – – 7.1
Charged to income statement – 56.9 4.3 5.9 67.1
Utilised during the period (4.4) (15.7) (4.3) – (24.4)
Released during the period – (40.5) – – (40.5)
Demerger of the Spirit business (0.4) (78.2) (5.4) – (84.0)
At 20 August 2011 – 8.9 – 5.9 14.8
1
Reclassification of £6.7m from trade and other payables during the prior period to more accurately reflect the nature of the balance.
Total
£m
Provisions have been analysed between current and non-current as follows:
20 August
2011
£m
21 August
2010
£m
Current 1.8 23.5
Non-current 13.0 66.0
14.8 89.5
Onerous contracts
The onerous contracts provision relates to the termination costs for supply contracts, acquired on the acquisition of the Spirit Group in
January 2006, that have expired in August 2011. The onerous cost element of these contracts was provided for based on anticipated
future volumes and the difference between contract prices and market prices.
Property leases
The provision for property leases has been set up to cover operating costs of vacant or loss-making premises. The provision covers
the expected shortfall between operating income and rents payable. Payments are expected to be ongoing on these properties for
a number of years.
Insurance
The provision for insurance relates to an estimate of monies that may become payable on claims not yet made to the Group.
The insurance provision was wholly related to the managed business, and has been derecognised on the demerger of that business.
Share schemes
The provision for share schemes represents the liability that will be due to Spirit employees should the share schemes for which they
are eligible employees vest. The Group currently holds Punch and Spirit shares in order to satisfy these share schemes, which are held
at fair value, and remeasured at each balance sheet date, with any movement being taken to the income statement.
The Company has no provisions.