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Basis of preparation
The accounts have been prepared under the historical cost
convention and in accordance with applicable accounting
standards.
Changes in accounting policies
The accounts reflect the adoption in the year of two new
accounting standards: FRS18 Accounting policies and FRS19
Deferred tax. The adoption of FRS18 did not require any
change in accounting policies. The adoption of FRS19 required
a change in accounting policy and subsequent restatement
of prior year figures, as detailed in note
34.
FRS17 Retirement benefits has not been adopted in this
accounting period, but the disclosures required under
the transitional arrangements can be found in note 7.
Basis of consolidation
All subsidiary accounts are made up to 31 March and are
included in the consolidated accounts. The Group accounts
comprise the consolidated accounts of the Company and
its subsidiaries. A separate profit and loss account is
not presented in respect of the Company, as provided by
section 230 of the Companies Act 1985.
Goodwill
Goodwill arising on acquisitions prior to 31 March 1998
has been written off against reserves. On disposal of
a business, the gain or loss on disposal includes that
goodwill previously written off on acquisition. Following
the introduction of FRS10 in the year ended 31 March 1999,
the Group chose not to restate goodwill that had been
eliminated against reserves.
Goodwill arising on acquisitions after 1 April 1998 is
capitalised and amortised on a straight line basis over
its estimated useful life, with a maximum of 20 years.
Investments in subsidiary undertakings
Investments in subsidiary undertakings including long
term loans are included in the balance sheet of the Company
at the lower of cost and the expected recoverable amount.
Any impairment is recognised in the profit and loss account.
Investments in associated undertakings
Investments in undertakings, other than subsidiary undertakings,
in which the Group has a substantial interest (20% or
more) and over which it exerts significant influence are
treated as associated undertakings.
Translation of foreign currencies
Overseas companies’ profits, losses and cash flows are
translated at average exchange rates for the year, and
assets and liabilities at rates ruling at the balance
sheet date. Exchange differences arising on foreign currency
net investments are taken to reserves. Transactions in
foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction or, if hedged forward,
at the rate of exchange under the related forward currency
contract. Monetary assets and liabilities denominated
in foreign currencies are translated using the rate of
exchange ruling at the balance sheet date and the gains
or losses on translation are included in the profit and
loss account.
Financial instruments
Gains and losses on hedging instruments are not recognised
in the performance statements until the exchange movement
on the item being hedged is recognised.
Turnover
Turnover represents the sale of goods and services and
is stated net of sales taxes.
Operating expense classification
Cost of sales comprises the cost of goods delivered to
customers.
Distribution and marketing expenses include all operating
company expenses, together with Supply Chain, Product
Management, Media Publishing, Facilities, Information
Systems and e-Commerce process expenses.
Administration expenses comprise Business Development,
Strategic Planning, Finance, Legal and Human Resources
process expenses, together with the expenses of the Group
Board and the former Group Executive Committee.
Pension costs
The Group operates a pension scheme providing benefits
based on final pensionable pay for all eligible employees
in the United Kingdom. The scheme is administered by a
corporate trustee and the funds are independent of the
Group’s finances. Contributions to the scheme are charged
to the profit and loss account so as to spread the cost
of pensions over the working lives with the Group of those
employees who are in the scheme. There are no significant
prepayments or provisions included in the balance sheet.
In addition to the UK scheme, pension benefits are provided
elsewhere in the Group through defined contribution, defined
benefit and government schemes. Transitional disclosures
under FRS17 can be found in note 7.
Long Term Incentive Plan
The consolidated profit and loss account includes the
income and administration expenses of the Long Term Incentive
Plan, and the consolidated and Company balance sheets
include the assets and liabilities of the Plan. Shares
in the Company, held by the trust established to administer
the Plan, are shown as fixed asset investments. Where
options over shares are awarded to executives the value
of the expected award is amortised on a straight line
basis over the period of service of the executives in
respect of which the awards are made.
Government grants
Government grants related to expenditure on tangible fixed
assets are credited to the profit and loss account at
the same rate as the depreciation on the asset to which
the grants relate. The amortised balance of capital grants
is included within creditors.
Depreciation
No depreciation has been charged on freehold land. Other
assets have been depreciated to residual value, on a straight
line basis at the following annual rates:
| Freehold buildings |
2% |
| Leasehold premises |
term of lease, not exceeding 50
years |
| Warehouse systems |
10-20% |
| Motor vehicles |
25% |
| Mainframe computer
equipment |
20% |
| Network computer equipment |
33% |
| Portable computers |
50% |
| Computer software costs |
20-33% |
| Other office equipment |
20% |
Stocks
Stocks are valued at the lower of cost and net realisable
value. Work in progress and goods for resale include attributable
overheads.
Catalogue costs
Prior to the issue of a catalogue, all related costs incurred
are accrued and carried as a prepayment. On the issue
of a catalogue, these costs are written off over the life
of the catalogue, which mainly varies between 6 and 12
months. Major investments in new catalogue production
systems are written off over the period during which the
benefits of those investments are anticipated, such period
not to exceed three years.
Net debt
Net debt comprises net cash and liquid resources less
borrowings. Net cash comprises cash in hand and held with
qualifying financial institutions in current accounts
or overnight deposits net of overdrafts with qualifying
financial institutions. Liquid resources include government
securities and term deposits with qualifying financial
institutions and are classified as investments under current
assets. Borrowings represent term loans from qualifying
financial institutions together with capital instruments
classified as liabilities under FRS4.
Deferred taxation
Deferred tax is recognised, without discounting, in respect
of all timing differences between the treatment of certain
items for taxation and accounting purposes which have
arisen but not reversed by the balance sheet date, except
as otherwise required by FRS19 (see note 27).
Leases
The Group has no material assets held under finance leases.
Operating lease rentals are charged to the profit and
loss account on a straight line basis over the course
of the lease period. The benefits of rent free periods
and similar incentives are credited to the profit and
loss account on a straight line basis over the period
up to the date on which the lease rentals are adjusted
to the prevailing market rate.
Employee Share Trust
Where shares are issued to the Electrocomponents Qualifying
Employee Share Ownership Trust (“QUEST”) an amount representing
the difference between market value and the option price
is transferred from the profit and loss account to the
share premium account. |
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