Annual Report 2016 - Page 61

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