Notes 1 - 5
1 Principal accounting policies
The financial statements of Kingfisher plc (‘the Company’) are made up to the nearest Saturday to 31 January each year.
The directors of Kingfisher plc, having made appropriate enquiries, consider that adequate resources exist for the Company to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the financial statements for the year ended 30 January 2010. Refer to the Directors’ statement of responsibility.
The financial statements have been prepared under the historical cost convention, as modified by the use of valuations for certain financial instruments, share-based payments and pensions, and are prepared in accordance with applicable accounting standards in the United Kingdom and the Companies Act 2006.
The Company’s financial statements are included in the consolidated financial statements of Kingfisher plc. As permitted by section 408 of the Companies Act 2006, the profit and loss account and statement of total recognised gains and losses are not presented. The Company has taken advantage of the exemption from preparing a cash flow statement under the terms of FRS 1, ‘Cash flow statements’. The Company is exempt under the terms of FRS 8, ‘Related party disclosures’, from disclosing related party transactions with wholly owned subsidiaries of Kingfisher plc. The Company has taken advantage of the exemption to provide financial instrument disclosures under the terms of FRS 29, ‘Financial instruments: Disclosures’.
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the years presented, unless otherwise stated.
The following amendment became effective in these financial statements, but did not have a significant impact on the Company’s results:
FRS 20 (amendment)
Share-based payments – Vesting conditions and cancellations
Clarifies that vesting conditions are service conditions and performance conditions only. Other features that are not vesting conditions are required to be included in the grant date fair value.
The following amendments became effective in these financial statements but had no impact on the Company’s results:
FRS 8 (amendment)
Related party disclosures
Removes the scope exclusion for 90% owned subsidiary undertakings and replaces it with wholly owned subsidiaries only.
|FRS 29 (amendment)||
Improving disclosures about financial instruments
Requires enhanced disclosures about fair value measurements and liquidity risk.
a. Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated into Sterling at the rates of exchange at the balance sheet date. Exchange differences on monetary items are taken to the profit and loss account.
Principal rate of exchange:
|Year end rate||1.15||1.12|
b. Tangible fixed assets
Tangible fixed assets are carried in the balance sheet at cost less accumulated depreciation and any provisions for impairment. Depreciation is provided to reflect a straight line reduction from cost to estimated residual value over the estimated useful life of the asset as follows:
Tangible fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of value-in-use and net realisable value. Any impairment in value is charged to the profit and loss account in the period in which it occurs.
Investments in subsidiaries and associates are included in the balance sheet at cost, less any provisions for impairment.
d. Operating leases
Rentals under operating leases are charged to the profit and loss account in the period to which the payments relate. Incentives received or paid to enter into lease agreements are released to the profit and loss account on a straight line basis over the lease term or, if shorter, the period to the date on which the rent is first expected to be adjusted to the prevailing market rate.
e. Employee benefits
The Company operates defined benefit and defined contribution pension schemes for its employees. A defined benefit scheme is a pension scheme that defines an amount of pension benefit that an employee will receive on retirement. A defined contribution scheme is a pension scheme under which the Company usually pays fixed contributions into a separate entity. In all cases a separate fund is being accumulated to meet the accruing liabilities. The assets of each of these funds are either held under trusts or managed by insurance companies and are held entirely separate from the Company’s assets.
The asset or liability recognised in the balance sheet in respect of defined benefit pension schemes is the fair value of scheme assets less the present value of the defined benefit obligation at the balance sheet date, together with an adjustment for any past service costs not yet recognised. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds which are denominated in the currency in which the benefits will be paid and which have terms to maturity approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited directly to the profit and loss reserve as they arise.
Past service costs are recognised immediately in the profit and loss account, unless the changes to the pension scheme are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight line basis over the vesting period.
For defined contribution schemes, the Company pays contributions to privately administered pension schemes on a contractual basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
(ii) Share-based compensation
The Company operates several equity-settled, share-based compensation schemes. The fair value of the employee services received in exchange for the grant of options or deferred shares is recognised as an expense and is calculated using Black-Scholes and stochastic models. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or deferred shares granted, excluding the impact of any non-market vesting conditions. The value of the charge is adjusted to reflect expected and actual levels of options vesting due to non-market vesting conditions.
(iii) Employee Share Ownership Plan Trust ('ESOP')
The ESOP is a separately administered discretionary trust. Liabilities of the ESOP are guaranteed by the Company and the assets of the ESOP mainly comprise shares in the Company.
Own shares held by the ESOP are deducted from equity shareholders’ funds and the shares are held at historical cost until they are sold. The assets, liabilities, income and costs of the ESOP are included in both the Company’s and the consolidated financial statements.
f. Deferred tax
Provision is made for deferred tax using the incremental provision approach and is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws substantively enacted at the balance sheet date.
Deferred tax is recognised in respect of timing differences that have originated but not reversed by the balance sheet date subject to the following:
- Deferred tax is not recognised on the revaluation of non-monetary assets such as property unless a binding sale agreement exists at the balance sheet date. Where rollover relief is available on an asset then deferred tax is not recognised.
- Deferred tax is recognised on unremitted earnings of overseas subsidiaries and associates only where dividends are accrued as receivable or there is an intention to remit these in the foreseeable future.
- Deferred tax assets are recognised to the extent that they are regarded as recoverable. Assets are regarded as recoverable when it is regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
- Deferred tax is not recognised on permanent differences.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
h. Financial instruments
Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or the Company has substantially transferred the risks and rewards of ownership. Financial liabilities (or a part of a financial liability) are derecognised when the obligation specified in the contract is discharged or cancelled or expires.
Interest bearing borrowings are recorded at the proceeds received, net of direct issue costs and subsequently measured at amortised cost. Where borrowings are in designated and effective fair value hedge relationships, adjustments are made to their carrying amounts to reflect the hedged risks. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are amortised to the profit and loss account using the effective interest method.
(ii) Trade creditors
Trade creditors are initially recognised at fair value and are subsequently measured at amortised cost.
(iii) Derivatives and hedge accounting
Where hedge accounting is not applied, or to the extent to which it is not effective, changes in the fair value of derivatives are recognised in the profit and loss account as they arise.
Derivatives are initially recorded at fair value on the date a derivative contract is entered into and subsequently carried at fair value. The accounting treatment of derivatives classified as hedges depends on their designation, which occurs at the start of the hedge relationship. The Company designates certain derivatives as a hedge of the fair value of an asset or liability (‘fair value hedge’).
For an effective hedge of an exposure to changes in fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with the corresponding entry being recorded in the profit and loss account. Gains or losses from remeasuring the corresponding hedging instrument are also recognised in the profit and loss account.
In order to qualify for hedge accounting, the Company documents in advance the relationship between the item being hedged and the hedging instrument. The Company also documents and demonstrates an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge has been and will be highly effective on an ongoing basis. The effectiveness testing is re-performed at each period end to ensure that the hedge remains highly effective.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts, and the host contracts are not carried at fair value with unrealised gains or losses reported in the profit and loss account.
2 Profit and loss account disclosures
The Company’s audit fee is £0.2m (2008/09: £0.5m).
Dividend disclosures are provided in note 11 of the Kingfisher plc consolidated financial statements.
|Wages and salaries||18||15|
|Social security costs||3||2|
|Employee benefit expenses||28||21|
|Average number of persons employed|
Directors’ remuneration and details of share option exercises are disclosed in the Directors’ remuneration report. Total directors’ remuneration for the year is £4.4m (2008/09: £4.7m).
3 Tangible fixed assets
|£ millions||Fixtures, fittings and equipment|
|At 1 February 2009||4|
|At 30 January 2010||4|
|At 1 February 2009||(3)|
|At 30 January 2010||(3)|
|Net carrying amount|
|At 30 January 2010||1|
|At 31 January 2009||1|
|£ millions||Investments in Group undertakings|
|At 1 February 2009||5,585|
|At 30 January 2010||6,765|
Additions to investments in Group undertakings represent £1,198m (2008/09: £10m) of capital injections into a number of subsidiary undertakings as part of Group restructuring activities undertaken.
The directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of excessive length. A full list of subsidiary undertakings is attached to the latest annual return. The following information relates to those Group undertakings at the year end whose results or financial position, in the opinion of the directors, principally affect the figures of the consolidated financial statements of Kingfisher plc.
|Country of incorporation and operation||% interest held and voting rights||Class of share owned||Main activity|
|B&Q plc 1||Great Britain||100%||Ordinary & special 2||Retailing|
|B&Q Ireland Limited||Ireland||100%||Ordinary||Retailing|
|B&Q Properties Limited||Great Britain||100%||Ordinary||Property investment|
|Screwfix Direct Limited||Great Britain||100%||Ordinary||Retailing|
|Castorama France S.A.S. 3||France||100%||Ordinary||Retailing|
|Immobilière Castorama S.A.S. 3||France||100%||Ordinary||Property investment|
|Brico Dépôt S.A.S. 3||France||100%||Ordinary||Retailing|
|Eurodépôt Immobilier S.A.S. 3||France||100%||Ordinary||Property investment|
|Castorama Polska Sp.z.o.o. 3||Poland||100%||Ordinary||Retailing|
|B&Q (China) B.V. 4||Netherlands||100%||Ordinary||Holding company|
|B&Q Asia Holdings Ltd 5||Hong Kong||100%||Ordinary||Holding company|
|Euro Depot España S.A. 3||Spain||100%||Ordinary||Retailing|
|Castorama RUS LLC 6||Russia||100%||Ordinary||Retailing|
|Halcyon Finance Ltd 7||Great Britain||100%||Ordinary||Finance|
|Castorama Dubois Investissements S.C.A. 1,3||France||100%||Ordinary||Holding company|
|Kingfisher France S.A.S. 3||France||100%||Ordinary||Holding company|
|Sheldon Holdings Limited 7||Great Britain||100%||Ordinary||Holding company|
|Zeus Land Investments Limited||Great Britain||100%||Ordinary||Holding company|
|Amounts falling due within one year|
|Owed by Group undertakings||2,526||2,622|
|Amounts falling due after more than one year|
|Deferred tax assets||8||7|