FSA Annual Report 2006/07 - Better Regulation Ltd

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Section five – Financial statements
FSA Annual Report 2006/07
a. Income statement
The format of the income statement on page 70 has been designed to show
net costs before fees levied to cover those costs. It is considered that this
format best represents the nature of the activities of the FSA, which involves
carrying out statutory functions and levying fees to meet the net cost of those
functions.
UKLA fees have been reclassified and presented in the income statement as
sundry income rather than fee income. The impact is an increase in sundry
income, and reduction in fee income, of £5.9m (2005/06: £5.5m).
b. Revenue recognition
All fee revenue is receivable under the Financial Services and Markets Act
2000 (FSMA), is measured at fair value, and represents the fees to which the
FSA was entitled in respect of the financial year.
Interest received on bank deposits is accrued on a time basis by reference to
the principal outstanding and the effective interest rate applicable.
c. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses.
Depreciation is calculated to write off the cost less estimated residual value
on a straight-line basis over the expected useful economic lives. The principal
useful economic lives used for this purpose are:
Leasehold improvements
Computer equipment (excluding software)
Furniture and equipment
Up to 10 years
Up to 3 years
Up to 10 years
If events or changes in circumstances indicate the carrying value may not be
recoverable then the carrying values of tangible fixed assets are reviewed for
impairment.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the income statement.
d. Recognition of enforcement expenses
All costs incurred to the end of the year are included in the accounts, but no
provision is made for the costs of completing current work unless there is a
present obligation.
In the course of its enforcement activities, the FSA gives indemnities to
certain provisional liquidators and trustees. Provision is made in the accounts
for costs incurred by such liquidators and trustees to the year end and
estimated to be recoverable from the FSA under such indemnities. The
amount provided is discounted to present value.