Financial Statements - Chemring Group PLC

C H E M R I N GG R O U P P L CNotes to the Financial Statements- continued1. ACCOUNTING POLICIES - continuedTangible fixed assetsNo depreciation is provided on freehold land. On other assets depreciation is provided at rates calculated to write down theircost or valuation to their estimated residual values by equal instalments over their estimated useful economic lives, which areconsidered to be:Freehold buildings - up to 50 yearsLeasehold buildings - the period of the leasePlant and equipment - up to 10 yearsFixed asset investmentsExcept as stated below, investments held as fixed assets are stated at cost less provision for impairment.In the consolidated financial statements, shares in the associated undertaking are accounted for using the equity method ofaccounting. The consolidated profit and loss account includes the Group’s share of the profit and attributable taxation of theassociated undertaking. In the consolidated balance sheet, the shares in the associated undertaking are shown as the Group’sshare of net assets.StockStock is stated at the lower of cost and net realisable value. Raw materials are stated at their purchase price, while work inprogress and finished goods comprise the cost of materials, labour and overheads applicable to the stage of production.Deferred taxationDeferred taxation is provided in full at the anticipated tax rates on differences arising from the inclusion of items of incomeand expenditure in taxation computations in periods different from those in which they are included in the financialstatements. Deferred taxation is not provided on timing differences arising from the revaluation of fixed assets where there isno commitment to sell the asset. Deferred tax assets and liabilities are discounted.Special capital reserveThe special capital reserve was created as part of a capital reduction scheme involving the cancellation of the share premiumaccount which was approved by the Court in 1986 and is in accordance with the requirements of the Companies Act 1985.Foreign currencyTransactions of the UK companies denominated in foreign currencies are translated into sterling at the rates ruling at the dateof the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated atthe rates ruling at that date. These translation differences are dealt with in the profit and loss account.Trading results of overseas subsidiary undertakings are translated into sterling at an average rate for the period and net assetsare translated at the rate ruling at the balance sheet date. Exchange differences arising between average rate and closing rateand from the translation of the opening net investment in overseas companies and matched long term foreign currencyborrowings are taken directly to reserves.P 32