NIG Prospectus - London Stock Exchange

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bDepreciation on the re-valued properties is charged to the consolidated statement of income overtheir remaining estimated useful lives and an amount equivalent to the excess depreciation chargerelating to the increase in carrying amount is transferred each year from the revaluation reserve toretained earnings.No depreciation is provided on freehold land. Properties in the course of construction forproduction or administrative purposes, are carried at cost, less any recognised impairment loss.Depreciation of these assets, on the same basis as other property assets, commences when theassets are ready for their intended use.Investment in associatesAn associate is a company over which the group has significant influence usually evidenced byholding of 20% to 50% of the voting power of the investee company. The consolidated financialstatements include the group’s share of the associates results using the equity method ofaccounting.Under the equity method, investment in an associate is initially recognised at cost and adjustedthereafter for the post-acquisition change in the group’s share of net assets of the investee. Thegroup recognises in the consolidated statement of income its share of the total recognised profitor loss of the associate from the date the influence or ownership effectively commenced until thedate that it effectively ceases. Distributions received from an associate reduce the carryingamount of the investment. Adjustments to the carrying amount may also be necessary forchanges in the group’s share in the associate, arising from changes in the associates equity thathave not been recognised in the associate’s statement of income. The group’s share of thosechanges is recognised directly in equity. The financial statements of the associates are preparedeither to the reporting date of the parent company or to a date not earlier than three months ofthe parent company’s reporting date, using consistent accounting policies.Unrealised gains on transactions with associates are eliminated to the extent of the group’s sharein the associate. Unrealised losses are also eliminated unless the transaction provides evidenceof impairment in the asset transferred. An assessment for impairment of investments inassociates is performed when there is an indication that the asset has been impaired, or thatimpairment losses recognised in prior years no longer exist.Investment in joint venturesInvestment in joint ventures are accounted for under the equity method of accounting. A jointventure is an undertaking in which the group has a long-term interest and over which it exercisesjoint control. Under the equity method of accounting, the initial investment is recorded at cost andthe carrying amount is increased or decreased to recognise the group’s share of profits or lossesand other changes in equity of the joint venture. Distributions received from joint ventures reducethe carrying amount of the investment.Investment propertiesInvestment properties are initially recorded at cost, being the purchase price and any directlyattributable expenditure for a purchased investment property, or at fair value at the date of transferif the property was transferred from another category of assets. Subsequent to initial recognition,investment properties are re-measured to fair value on an individual basis based on an externalvaluation by an independent valuer. Changes in fair value are taken to the consolidated statementof income.Investment properties are derecognised when either they have been disposed of or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal. Any gains or losses on the retirement or disposal of an investmentproperty are recognised in the statement of income in the year of retirement or disposal.F-24