Basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared under the historical cost convention (except for the revaluation of financial instruments which are held at fair value as disclosed below. Historical cost is generally based on the fair value of the consideration given in exchange for the goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36. Categorisation of fair value is set out in the Group Accounts Note 19.
The separate financial statements have been prepared in accordance with Financial Reporting Standard 101, "Reduced Disclosure Framework" (FRS 101) and the Companies Acts 2006 as applicable to companies using FRS 101. FRS 101 sets out a reduced disclosure framework for a qualifying entity that would otherwise apply the recognition, measurement and disclosure requirements of EU-adopted IFRS. The Company is a qualifying entity for the purposes of FRS 101.
The following new and revised Standards and Interpretations have been adopted in the current period:
- Annual improvements – 2010-2012 cycle
- Annual improvements – 2012-2014 cycle
- Disclosure Initiative (amendments to IAS 1 "Presentation of Financial Statements").
The application of these specific Standards and Interpretations has not had a material effect on the Company.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101:
- the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 "Share-based Payment"
- the requirements of IFRS 7 "Financial Instruments: Disclosures"
- the requirements of paragraphs 91 to 99 of IFRS 13 "Fair Value Measurement"
- the requirement in paragraph 38 of IAS 1 "Presentation of Financial Statements" to present comparative information in respect of:
- paragraph 79(a)(iv) of IAS 1
- paragraph 73(e) of IAS 16 "Property, Plant and Equipment"
- the requirements of paragraphs 10(d), 10(f), 16, 38A to 38D, 40A to 40B, 111, and 134 to 136 of IAS 1 "Presentation of Financial Statements"
- the requirements of IAS 7 "Statement of Cash Flows"
- the requirements of paragraphs 30 and 31 of IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors"
- the requirements of paragraph 17 of IAS 24 "Related Party Disclosures"
- the requirements in IAS 24 "Related Party Disclosures" to disclose related party transactions entered into between two or more members of a group
- the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 "Impairment of Assets".
The Company has notified its Shareholders in writing, and they do not object to the use of the disclosure exemptions used by the Company in these financial statements. Where required, equivalent disclosures are given in the Group Accounts.
The accounting policy for share-based payments (IFRS 2) is consistent with that of the Group as detailed in the Statement of Significant Accounting Policies.
Derivative financial instruments
The accounting policy for derivative financial instruments is consistent with that of the Group as detailed in the Statement of Significant Accounting Policies.
Financial assets and liabilities
The accounting policy for financial assets and liabilities is consistent with that of the Group as detailed in the Statement of Significant Accounting Policies.
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
Tangible fixed assets
The accounting policy for tangible fixed assets is consistent with that of the Group as detailed in the Statement of Significant Accounting Policies.
The accounting policy for foreign currency is consistent with that of the Group as detailed in the Statement of Significant Accounting Policies.
The accounting policy for taxation is consistent with that of the Group as detailed in the Statement of Significant Accounting Policies.
Dividends proposed by the Board of Directors that have not been paid by the end of the year are not recognised in the Accounts until they have been approved by the Shareholders at the Annual General Meeting.
Critical accounting judgments and key sources of estimation uncertainty
In the application of the Company's accounting policies, which are described above, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the change takes place if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The critical judgments, estimates and assumptions that have the most important significant impact on the carrying value of the assets and liabilities recognised by the Company, and will have the most significant impact in the next financial year, are detailed below. All are considered to be estimates made by the Company.
Impairment of fixed asset investments
Determining whether the Company's investments in subsidiaries have been impaired requires estimations of the investments' values in use. The value in use calculations require the entity to estimate the future cash flows expected to arise from the investments and suitable discount rates in order to calculate present values. The carrying amount of investments in subsidiaries at the balance sheet date was £443m (2015: £443m) with no impairment loss recognised in 2016 or 2015.
Deferred tax assets
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Therefore, estimates are made to establish whether deferred tax balances should be recognised, in particular in respect of non-trading losses.