Annual Report 2016
Notes to the Financial Statements
1 Statement of Accounting Policies
The principal accounting policies are
summarised below, which have all been
applied consistently throughout the year.
(a) Basis of Accounting
The Company and Group have adopted the
accounting standards of FRS 102 for the first
time in the year ended 31 March 2016. The
impact of the change has been detailed
in note 31. For comparative purposes, the
figures for the year ended 31 March 2015
have been restated as if FRS 102 was adopted
for that period also and as such the transition
date is 1 April 2014. The Company and
Group meet the definition of a qualifying
entity under FRS 102 and has therefore taken
advantage of the disclosure exemptions
available to it in respect of the remuneration
of key management personnel.
(b) Basis of Consolidation
The Group accounts consolidate the
accounts of the Company and its subsidiary
undertakings made up to 31 March each year.
Certain group reorganisations which took
place in previous years have been accounted
for using merger accounting principles, in
order to meet the overriding requirement
under section 393 of the Companies Act
2006 for financial statements to present
a true and fair view. The transactions
accounted for using these principles did
not meet all of the conditions for merger
accounting under the Companies Act 2006,
namely that the fair value of any non-equity
consideration must not exceed 10 per cent
of the nominal value of equity shares issued
as consideration. However, the Directors
consider that in substance the consideration
for these transactions comprised equity
share capital with no net cash impact and
that the alternative approach of acquisition
accounting, with the restatement of
separable assets and liabilities to fair values,
the creation of goodwill, and the inclusion
of post reorganisation results only would
not give a true and fair view of the Group’s
results and financial position. The substance
of the transactions was not the acquisition of
businesses but rather a group reconstruction
under which the ultimate shareholders of the
businesses transferred and their rights relative
to the others remained unchanged. The
Directors consider that it is not practicable to
quantify the effect of this departure from the
Companies Act 2006 requirements.
Other business combinations have been
accounted for under the acquisition method.
(c) Turnover
South Staffs Water turnover includes amounts
billed together with an estimation of amounts
for water supply services provided but
remaining unbilled at the year-end.
Software licence income is recognised within
turnover once software implementation and
customer acceptance are complete unless
there is an agreement to pay a rental charge
for the product, in which case, turnover is
recognised based on the value of the rental
charge each month. Income from separate
software maintenance contracts is recognised
evenly over the contract period to which
it relates. Income generated through the
performance of software development and
consultancy services is included within
turnover on the basis that turnover is
matched with the delivery of the service.
Contract accounting is applied to certain
contracts the Group is a party to. Where the
outcome of the contract can be assessed
with reasonable certainty, attributable
turnover and profit are calculated on an
appropriate and prudent basis and included
in the accounts for the period under review.
Where a