Notes to the Financial Statements
Other Assets
Other assets are stated at cost less
accumulated depreciation and any provision
for impairment. Depreciation is provided on
a straight line basis to write off the cost less
estimated residual value over the estimated
useful lives of the assets, with the exception
of land which is not depreciated. The
estimated useful lives of assets are as follows:
Boreholes
Buildings and
Service Reservoirs
Fixed Plant
Water Meters
Office Equipment
Mobile Plant
Motor Vehicles
100 years
Up to 80 years
Up to 30 years
Up to 20 years
Up to 20 years
Up to 20 years
3–7 years
(g) Capital Contributions
Capital contributions are treated as deferred
income and amortised over the estimated
useful lives of the assets concerned, except
in the case of contributions towards the
cost of infrastructure assets, which are
not amortised. This departure from the
requirements of the Companies Act 2006
is, in the opinion of the Directors consistent
with industry accounting practice and is
necessary for the financial statements to
show a true and fair view as it is not possible
to amortise contributions to the profit and
loss account over the lives of the fixed assets
concerned, as infrastructure assets do not
have determinable finite lives as they are
maintained in perpetuity.
(h) Leased Assets
Assets financed by leasing and hire-purchase
arrangements which transfer substantially
all the risks and rewards of ownership to the
Group are included in tangible fixed assets,
and the net obligation to pay future rentals
is included as borrowings within creditors.
Rentals are apportioned between finance
charges and a reduction of the outstanding
liability for future rentals so as to produce a
constant charge to the profit and loss account
62
based upon the capital outstanding. Operating
lease rentals are charged to the profit and loss
account on a straight line basis.
(i) Investments
Investments held as fixed assets are stated
at cost less amounts written off and any
provision for impairment. In accordance with
Section 611 of the Companies Act 2006,
the cost of shares acquired from a fellow
group undertaking by way of a share for
share exchange are recorded at the higher
of the nominal value of the shares issued as
consideration and the carrying value of the
investment in the transferring company.
(j) Stocks
Stocks are valued at the lower of cost and net
realisable value. Cost includes an appropriate
element of overheads. Provision is made for
obsolete, slow moving or defective items
where appropriate.
(k) Foreign Currency
Transactions in foreign currencies are
recorded at the rate of exchange at the date
of the transaction. Monetary assets and
liabilities denominated in foreign currencies
at the balance sheet date are reported at the
rates of exchange prevailing at that date.
The results of overseas operations are
translated at the average rates of exchange
during the year and their balance sheets at
the rates prevailing at the balance sheet date.
Exchange differences arising on translation
of the opening net assets and results of
overseas operations and on foreign currency
borrowings, to the extent that they hedge
the Group’s investment in such operations,
are reported in the consolidated statement
of total recognised gains and losses. All other
exchange differences are included in the
profit and loss account.
(l) Pensions
The profit and loss charge in respect of
defined benefit pension schemes represents:
-
the increase in the present value of
scheme liabilities expected to arise
from employee service in the year. This
is charged against operating profit.
-
the difference between the unwinding
of the discount on scheme liabilities
and the expected return on scheme
assets. This is charged or credited within
finance charges (net).
Actuarial gains and losses are charged
or credited directly to t he consolidated
statement of total recognised gains and
losses net of deferred tax. The defined benefit
schemes’ liabilities, valued using the projected
unit method and the fair value of schemes’
assets, are recognised in the consolidated
balance sheet (net of deferred tax) as a net
retirement benefit obligation or surplus. In
the case of a surplus, this is recognised in the
consolidated balance sheet to the extent that
the Group is legally entitled to recover the
surplus in the future either through reduced
contributions to schemes, or refunds from
schemes.
In respect of the Group defined contribution
schemes the amounts charged to the profit
and loss account are the contributions
payable in the year.
(m) Research and Development
Research and development expenditure is
charged to the profit and loss account in the
year in which it is incurred.