RNS Number:5863K
Strathdon Investments PLC
24 December 2007
Strathdon Investments plc
Restatement of Financial Information under International Financial Reporting
Standards ('IFRS')
24 December 2007
Strathdon Investments plc is required under EU Regulations to adopt
International Financial Reporting Standards ('IFRS') as its primary basis of
accounting for the year ending 31 March 2008. IFRS replaces UK Generally
Accepted Accounting Principles ('UK GAAP'), under which the Group previously
prepared its financial statements.
The most significant impact of adoption of IFRS on the Group's previously
reported financial information is with regard to the treatment of gains and
losses on both revaluation and trading of the groups quoted and unquoted
investments to both the income statement and directly to shareholders funds, and
the requirement under IFRS to account for the investment in Stagebeach Limited
as a subsidiary. These impacts are explained more fully in notes 3 and 7.
A summary of the impact on the Group of the transition to IFRS for the year
ended 31 March 2007 is as follows:
UK GAAP IFRS Movement
(as previously
reported)
�'000 �'000 %
Year ended 31 March 2007
Loss after tax (1,989) (2,281) (14.6)
Total equity as at 1 April 2006 16,269 16,269 -
Total equity as at 31 March 2007 13,988 13,988 -
Loss per share (3.84) (4.40) (14.6)
A full description of the impacts of the change and adjustments required to
bring the financial information in line with IFRS for the 12 months ended 31
March 2007 and the six months ended 30 September 2006, and on the balance sheet
as at the date of transition of 1 April 2006, is presented in the following
sections.
Contact details
Andrew Firth, Chariman, Strathdon Investments Plc Tel: 07889 438 023
Philip S Cammerman, Group Development Director, YFM Group Limited Tel: 0113 294 5000
Anne Jackson, Group Financial Controller YFM Group Limited Tel: 0113 294 5000
David Newton, Seymour Pierce Limited Tel: 0207 107 8000
Restatement of Financial Information under International Financial Reporting
Standards ('IFRS')
24 December 2007
Contents
1. Introduction
2. First Time adoption of IFRS
3. Summary of major impacts of adoption of IFRS
4. Reconciliation of equity at 1 April 2006 (date of transition to IFRS)
5. Reconciliation of equity at 31 March 2007 (end of last period presented under previous GAAP)
6. Reconciliation of loss for the year ended 31 March 2007
7. Summary of significant accounting policies under IFRS
8. Independent Auditors' Special Purpose Report to Strathdon Investments plc on the preliminary IFRS Financial
Statements for the year ended 31 March 2007
9. Appendix 1 - Reconciliation of equity at 30 September 2006 (last interim Statement presented under previous GAAP)
10. Appendix 2 - Reconciliation of loss for the 6 months ended 30 September 2006
1. Introduction
Strathdon Investments plc is a public limited company, incorporated in England
and Wales under the Companies Act 1985, whose shares are publicly traded on the
Alternative Investment Market (AIM). In these financial statements, 'Group'
means the company and all its subsidiaries. The Group has previously prepared
its primary financial statements in accordance with UK Generally Accepted
Accounting Principles (UK GAAP). From 2008 the Group is required to prepare its
consolidated financial statements in accordance with International Accounting
Standards (IAS) and International Financial Reporting Standards (IFRS) as
adopted by the European Union (EU). References to IFRS throughout this document
refer to the application of International Accounting Standards and International
Financial Reporting Standards.
The first Annual Report under IFRS will be for the twelve months ended 31 March
2008 and the first interim results reported under IFRS will be for the six
months ended 30 September 2007. This document explains the differences that will
arise when the Group's financial statements are prepared under IFRS rather than
UK GAAP. Specifically, this document sets out reconciliations of the Group's
balance sheets, as prepared under UK GAAP, to those prepared in accordance with
IFRS as at 1 April 2006 (the opening balance sheet as at the date of transition
to IFRS), 30 September 2006 and 31 March 2007. In addition, this document
includes reconciliations of the Group's profit and loss accounts prepared under
UK GAAP to those prepared in accordance with IFRS for the six months ended 30
September 2006 and for the year to 31 March 2007. No restated IFRS cash flows
have been presented as there is no difference between the net cash flows
presented under IFRS and the net cash flows presented under the previous GAAP.
This restatement document has been prepared on the basis that all IFRSs,
International Financial Reporting Interpretation Committee ('IFRIC')
interpretations and current IASB exposure drafts will be issued as final
standards and endorsed by the EU. It should be noted that, should the EU fail to
endorse all of these standards in time for financial reporting in 2008 or if
IFRIC issues further interpretations prior to the reporting date, this may
result in the need to change the basis of accounting and or the presentation of
certain items from those presented in this document.
The UK GAAP information contained in this document does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. The auditors,
Ernst & Young LLP, have issued unqualified opinions on the Group's GAAP
financial statements for the years ended 31 March 2006 and 31 March 2007.
2. First time adoption of IFRS
The Group has applied IFRS 1 'First Time Adoption of International Financial
Reporting Standards' as a starting point for reporting under IFRS. The Group's
date of transition to IFRS is 1 April 2006 and comparative information in the
financial statements is restated to reflect the Group's adoption of IFRS except
where otherwise required or permitted by IFRS 1.
IFRS 1 requires an entity to comply with each IFRS effective at the reporting
date for its first financial statements prepared under IFRS. As a general rule,
IFRS 1 requires such standards to be applied retrospectively. However, the
standard allows several optional exemptions from full retrospective application.
3. Summary of major Impacts of adoption of IFRS
IAS39 Financial Instruments: recognition and measurement
Investments at fair value through profit and loss
The Groups financial assets are designated at fair value through profit or loss.
Under UK GAAP rules, when the Group revalues its investments, any unrealised
gains or losses above historical cost are credited/charged to the revaluation
reserve, whilst any gains or losses below historical costs are taken immediately
to the profit and loss account. When an investment is sold or written off, any
balance already held on the revaluation reserve in respect of that investment is
transferred to the profit and loss account as a movement on reserves.
Under IAS39 all gains and losses on investments whether realised or not go
through the Income statement (Profit and Loss account).
As IFRS has been adopted after 1 January 2006, the Group is unable to take
advantage of the exemption available to it under IFRS 1 not to adopt IAS 39,
'Financial Instruments: Recognition and measurement' and IAS 32 'Financial
Instruments: Disclosure and presentation', retrospectively. Consequently, prior
year comparatives have been restated. As the Group previously valued its
investments at fair value, the only change required is the reclassification of
where the gains and losses are presented.
Under IAS 27, 'Consolidated and separate financial statements', control is
presumed to exist when the parent owns, directly or indirectly, more than half
of the voting power by a number of means. The company does not hold more than
50% of the equity of any of the companies within the portfolio with the
exception of the investment in Stagebeach Limited.
At 1 April 2006 and 31 March 2007, Strathdon held a controlling interest in
Stagebeach Limited. Under UK GAAP, due to its expected temporary nature, this
was accounted for as a fixed asset investment held at fair value. However, under
IFRS, the criteria for recognition as an asset held for sale have not been met,
and so no such exemption is available. Consequently, there is a requirement to
account for Stagebeach Limited in accordance with IAS 27 as a subsidiary. The
investment in Stagebeach Limited has not been so accounted for in the financial
statements as the directors are of the opinion that it would not assist
shareholders in their understanding of these financial statements, and that it
would be inconsistent with the nature of the business of the Group, which is
that of an investment company. Furthermore, the company does not have access to
the necessary information to enable Stagebeach Limited's financial results to be
accounted for under IAS 27.
4. Reconciliation of equity at 1 April 2006 (date of transition to IFRS)
UK GAAP
IAS1 IAS39 and
UK GAAP Presenataion of IAS32 Post IFRS
Pre IFRS Adj financial Financial Total IFRS Adjustements
Continuing statements instruments Adjustments total
�'000 �'000 �'000 �'000 �'000
Fixed assets Non-current assets
Tangible fixed assets 13 - - - 13 Plant and equipment
Investments 18,497 - - - 18,497 Financial assets
designated at fair value
through profit or loss
-------- -------- -------- -------- --------
18,510 - - - 18,510
-------- -------- -------- -------- --------
Current assets Current assets
Debtors 786 - - - 786 Trade and other receivables
Cash at bank 288 - - - 288 Cash and cash equivalents
-------- -------- -------- -------- --------
1,074 - - - 1,074
Creditors: Amounts
falling due within one year (669) 669 - 669 - Current Liabilities
- (621) - (621) (621) Trade and other payables
-------- -------- -------- -------- --------
Net current assets 405 48 - 48 453 Net current assets
-------- -------- -------- -------- --------
Total assets less current
liabilities 18,915 48 - 48 18,963
Creditors Amounts Non current liabilities
falling due after more
than one year (2,646) 2,646 - 2,646 -
- (2,694) - (2,694) (2,694) Bank overdraft and loans
-------- -------- -------- -------- --------
Total net assets 16,269 - - - 16,269 Net assets
======== ======== ======== ======== ========
Capital and reserves Equity
Called up share capital 2,591 - - - 2,591 Share capital
Share premium account 6,392 - - - 6,392 Share premium
Special reserve 36,290 - - - 36,290 Share premium
Revaluation reserve 2,633 - (2,633) (2,633) - Revaluation reserve
Warrant reserve 928 - - - 928 Warrant reserve
Profit and loss account (32,565) - 2,633 2,633 (29,932) Retained earnings
-------- -------- -------- -------- --------
Total shareholders funds 16,269 - - - 16,269 Total equity
======== ======== ======== ======== ========
5. Reconciliation of equity at 31 March 2007 (end of last period presented under previous GAAP)
UK GAAP
IAS1 IAS39 and
UK GAAP Presenataion of IAS32 Post IFRS
Pre IFRS Adj financial Financial Total IFRS Adjustements
Continuing statements instruments Adjustments total
�'000 �'000 �'000 �'000 �'000
Fixed assets Non-current assets
Tangible fixed assets 5 - - - 5 Plant and equipment
Investments 14,674 - - - 14,674 Financial assets
designated at fair value
through profit or loss
-------- -------- -------- -------- --------
14,679 - - - 14,679
-------- -------- -------- -------- --------
Current assets Current assets
Debtors 1,027 - - - 1,027 Trade and other receivables
Cash at bank 67 - - - 67 Cash and cash equivalents
-------- -------- -------- -------- --------
1,094 - - - 1,094
Creditors: Amounts falling
due within one year (1,644) 364 - 364 (1,280) Financial liabilities
- (364) - (364) (364) Trade and other payables
-------- -------- -------- -------- --------
Net current liabilities (550) - - - (550) Net current liabilities
-------- -------- -------- -------- --------
Total assets less current
liabilities 14,129 - - - 14,129
Creditors Amounts Non current liabilities
falling due after more
than one year (141) 141 - 141 -
- (141) - (141) (141) Bank overdraft and loans
-------- -------- -------- -------- --------
Total net assets 13,988 - - - 13,988 Net assets
======== ======== ======== ======== ========
Capital and reserves Equity
Called up share capital 2,591 - - - 2,591 Share capital
Share premium account 6,392 - - - 6,392 Share premium
Special reserve 36,290 - - - 36,290 Share premium
Revaluation reserve 1,973 - (1,973) (1,973) - Revaluation reserve
Warrant reserve 928 - - - 928 Warrant reserve
Profit and loss account (34,186) - 1,973 1,973 (32,213) Retained earnings
-------- -------- -------- -------- --------
Total shareholders funds 13,988 - - - 13,988 Total equity
======== ======== ======== ======== ========
6. Reconciliation of loss for the year ended 31 March 2007
UK GAAP
IAS1 IAS39 and
UK GAAP Presenataion of IAS32 Post IFRS
Pre IFRS Adj financial Financial Total IFRS Adjustements
Continuing statements instruments Adjustments total
�'000 �'000 �'000 �'000 �'000
Turnover 600 129 - 129 729 Revenue
Administration expenses (1,316) - - - (1,316) Administrative expenses
-------- -------- -------- -------- --------
Operating loss (716) 129 - 129 (587) Operating loss
Realised losses on
financial assets designated
Loss on disposal of at fair value through
fixed asset investments (965) - 368 368 (597) profit or loss (net)
Unrealised losses on
financial assets designated
at fair value through
- - (988) (988) (988) profit or loss (net)
-------- -------- -------- -------- --------
Loss on ordinary
activities before
provision against Loss on ordinary activities
carrying value of before finance costs
investments and interest (1,681) 129 (620) (491) (2,172) and taxation
-------- -------- -------- -------- --------
Change in carrying value
of investments (328) - 328 328 -
Interest payable (109) - - - (109) Finance costs
Interest receivable 129 (129) - (129) -
-------- -------- -------- -------- --------
Loss on ordinary activities Loss from continuing
before taxation (1,989) - (292) (292) (2,281) operations before taxation
Taxation - - - - - Taxation
-------- -------- -------- -------- --------
Retained loss Loss for the year from
for the financial year (1,989) - (292) (292) (2,281) continuing operations
======== ======== ======== ======== ========
7. Summary of significant accounting policies under IFRS
Authorisation of Financial Statements and statement of compliance with IFRSs
The preliminary IFRS financial statements of Strathdon Investment plc were
authorised for issue by the board of directors on 24 December 2007.
The accounting policies are drawn up in accordance with International Accounting
Standards (IAS) and International Financial Reporting Standards (IFRS), which
comprise standards and interpretations approved by the International Accounting
Standards Board (IASB) and the International Accounting Standards Committee
(IASC) as adopted by the European Union and those parts of the Companies Act
1985 applicable to companies reporting under IFRS.
The significant accounting policies adopted in the preparation of the Group's
IFRS financial information are set out below:
Basis of preparation
The consolidated financial statements have been prepared on the historical cost
basis, except for financial assets and liabilities which have been measured at
fair value through profit or loss. The consolidated financial statements are
rounded to the nearest thousand pounds (�'000) except when otherwise indicated.
Critical Accounting estimates and judgements
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may ultimately differ
from those estimates. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are those used to determine the fair
value of investments at fair value through profit or loss.
The fair value of investments at fair value through profit or loss is determined
by using valuation techniques. The Company uses its judgement to select a
variety of methods and makes assumptions that are mainly based on market
conditions at each balance sheet date.
Basis of consolidation
The consolidated financial statements comprise the financial statements of
Strathdon Investments plc and its subsidiaries with the exception of Stagebeach
Limited.
Under IAS 27, 'Consolidated and separate financial statements', control is
presumed to exist when the parent owns, directly or indirectly, more than half
of the voting power by a number of means. The company does not hold more than
50% of the equity of any of the companies within the portfolio with the
exception of the investment in Stagebeach Limited.
At 1 April 2006 and 31 March 2007, Strathdon held a controlling interest in
Stagebeach Limited. Under UK GAAP, due to its expected temporary nature, this
was accounted for as a fixed asset investment held at fair value. However, under
IFRS, the criteria for recognition as an asset held for sale have not been met,
and so no such exemption is available. Consequently, there is a requirement to
account for Stagebeach Limited in accordance with IAS 27 as a subsidiary. The
investment in Stagebeach Limited has not been so accounted for in the financial
statements as the directors are of the opinion that it would not assist
shareholders in their understanding of these financial statements, and that it
would be inconsistent with the nature of the business of the Group, which is
that of an investment company. Furthermore, the company does not have access to
the necessary information to enable Stagebeach Limited's financial results to be
accounted for under IAS 27.
The Group does not control any other of the companies held as part of the
investment portfolio through the exercise of voting rights or other means. It is
not considered that any of the holdings represent investments in subsidiary
undertakings.
Although the Group holds more than 20% of the equity of certain companies, the
investments are held as part of the investment portfolio. Accordingly, as
permitted by IAS 28, 'Investments in associates', and IAS 31, ' Financial
reporting of interest in joint ventures', these have been accounted for as
investments held at fair value through profit or loss in accordance with IAS 39
as described above.
Subsidiaries are consolidated from the date of acquisition when the Group
obtains control and cease to be consolidated from the date on which control is
transferred out of the Group. Where there is a loss of control of a subsidiary,
the consolidated financial statements include the results for the part of the
reporting year during which the Group has control. The financial statements
include the results of a subsidiary, Strathdon Finance Limited for the period to
disposal on 22 December 2006, the date of its sale outside the group. The
disposal does not warrant disclosure as a discontinued operation under IFRS 5 on
materiality grounds.
The financial statements of the subsidiaries are prepared for the same reporting
year as the parent company using accounting policies applicable under
International Financial Reporting Statements (IFRS). Where necessary appropriate
adjustments are made to the subsidiary financial statements in preparing the
consolidated financial statements.
All intra group balances and transactions, income and expenses and profit and
losses from intra-group transactions are eliminated in full.
Functional currency
The functional and presentation currency of Strathdon Investments plc and its
subsidiaries is the pound sterling (�). There are no non-uk resident
subsidiaries within the Group. Strathdon does have one investment denominated in
US dollars which is reported, as with all investments, at fair value through
profit or loss. The exchange rate used is that prevailing at the reporting
period date.
Any exchange differences on investments held at fair value arising on currencies
other than the presentation currency between reporting periods are reported
through the income statement as part of the fair value gain or loss.
Transactions denominated in a foreign currency are translated into sterling at
the rates of exchange ruling at the date of the transaction. Assets are
translated into sterling at rates of exchange ruling at the reporting period
date. Any differences are taken to the income statement in the period in which
they arise.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received, stated net
of value added tax and is earned within the United Kingdom as follows:
* Management fee income represents fees for the provision of fund management
services and is recognised in the income statement in line with applicable
service contracts evenly over the period the service is provided.
* Dividends are brought into account when the Group's right to receive payment
is established. Fixed returns on non-equity shares are recognised on a time
apportionment basis so as to reflect the effective yield, provided there is no
reasonable doubt that payment will be received in due course.
* Other income is recognised on an accruals basis.
* Loan interest income represents interest receivable on the Group's loan
investments and is measured using the effective interest method.
Expenses
Expenses are accounted for on an accruals basis.
Plant and equipment
Plant and equipment is stated at cost less any accumulated depreciation and any
impairment in value. Cost comprises the aggregate amount paid and the fair value
of any other consideration given to acquire the asset and includes costs
directly attributable to making the asset capable of operating as intended.
Depreciation is calculated to write off the cost of the asset over its estimated
useful life to its residual value on the following basis:
Fixtures and fittings - 33% reducing balance
Computer equipment - 33% straight line basis
All tangible fixed assets are reviewed for impairment when there are indications
that the carrying value may not be recoverable. If there is evidence of
impairment then the asset is written down to its recoverable amount. Any
depreciation or impairment is charged in the Income Statement as an expense.
An item of plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any
gain or loss arising on derecognition of the asset is included in the Income
Statement in the period of derecognition.
Impairment of assets
At each reporting date, the Group assesses whether there is an indication that
an asset may be impaired. Where an indicator of impairment exists, the Group
makes a formal estimate of the asset's recoverable amount. Where the carrying
amount of an asset exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. Recoverable amount is
the higher of an asset's or cash generating unit's fair value less costs to sell
and its value in use and is determined for an individual asset, unless the asset
does not generate cash flows that are largely independent of those from other
assets or groups of assets. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. Impairment losses on continuing operations are recognised
in the income statement in those expense categories consistent with the
functions of the impaired asset.
Investments held at fair value through profit or loss
Purchases and sales of financial assets at fair value through profit or loss are
recognised on trade date being the date the group commits to purchase or sell
the asset to the market. A financial asset is derecognised when the contract
that gives rise to it is settled, sold, cancelled or expires.
Financial assets designated as at fair value through profit or loss at inception
are those that are managed, and whose performance is evaluated on a fair value
basis, in accordance with the documented investment strategy of the Group.
Information about these financial assets is provided internally on a fair value
basis to the Group's key management. The Group's investment strategy is to
invest cash resources in venture capital investments as part of the Group's
long-term capital growth strategy. Consequently, all investments are classified
as held at fair value through profit and loss.
Transaction costs on purchases are expensed immediately through the income
statement in accordance with IFRS.
All investments are measured at fair value with gains and losses arising from
changes in fair value being included in the income statement as unrealised gains
(losses) on investments held at fair value.
The fair value of quoted investments is determined by reference to market bid
prices at the close of business on the balance sheet date.
Unquoted investments are valued in accordance with IAS 39, 'Financial
Instruments: Recognition and measurement', and where appropriate, the
International Private Equity and Venture Capital ('IPEVC') Valuation Guidelines
issued in October 2006.
Valuation of Investments
Initial measurement
Financial assets are initially measured at fair value. The best estimate of fair
value of a financial asset that is either quoted or not quoted in an active
market is the transaction price (i.e. cost).
Subsequent measurement
The revised IPEVC Valuation Guidelines identifies six of the most widely used
valuation methodologies. The Guidelines advocate that the best valuation
methodologies are those that draw on external, objective market based data in
order to derive a Fair Value.
Unquoted Investments
* Price of recent investment This represents the cost of the investment or
the price at which a significant amount of new investment has been made by
an independent third party, but is only considered relevant for a limited
period following the date of the relevant transaction. A period of twelve
months is used in practice. During this period, the value of the investment
is assessed for changes or events that would imply impairment to the fair
value. In addition, the valuation technique also represents certain
situations where although the twelve month period has expired, an
alternative valuation technique is not followed because an additional
investment has been made by the Company at the same price as the previous
investment and an alternative valuation technique would not result in a
better estimate of fair value. The whole investment is also assessed for
impairment.
* Earnings multiple A multiple that is appropriate and reasonable, given
the risk profile and earnings growth prospects of the underlying company, is
applied to the maintainable earnings of that company.
* Net assets The value of the business is derived by using appropriate
measures to value the assets and liabilities of the investee company.
* Discounted cash flows of the underlying business The present value of
the underlying business is derived by using reasonable assumptions and
estimations of expected future cash flows and the terminal value, and
discounting by applying the appropriate risk-adjusted rate that quantifies
the risk inherent in the company.
* Discounted cash flows from the investment Under this method, the
discounted cash flow concept is applied to the expected cash flows from the
investment itself rather than the underlying business as a whole.
* Industry valuation benchmarks Where appropriate comparator companies can
be identified multiples of revenues may be used as a valuation benchmark.
Discounted cash flows and industry valuation benchmarks are only likely to be
reliable as the main basis of estimating fair value in limited situations. Their
main use is to support valuations derived using other methodologies and for
assessing impairment.
Where an independent third party valuation exists, this will be used as the
basis to derive the gross attributable enterprise value of the company. In other
cases, the most suitable valuation technique, as set out above, is used to
determine this value. This value is then apportioned appropriately to reflect
the respective amounts accruing to each financial instrument holder in the event
of a sale at that level at the reporting date.
Trade and other receivables
Trade and other receivables are recognised and carried at the lower of their
invoiced value and recoverable amount. Provision is made when there is objective
evidence that the Group will not be able to recover balances in full.
Cash and cash equivalents
Cash and short term deposits in the balance sheet comprise cash at bank and in
hand and short term deposits with an original maturity of 3 months or less.
For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event and it is probable that an outflow of
economic benefits will be acquired to settle an obligation.
Taxation
Tax on profit and loss for the year comprises current and deferred tax. Tax is
recognised in the income statement except where it relates to an item recognised
directly to equity in which case the related tax is also recognised directly to
equity.
Current tax is the expected tax payable on the taxable income for the year,
using rates enacted or substantively enacted at the balance sheet date and any
adjustments in respect of prior years. Deferred tax is provided, using the
balance sheet liability method.
Deferred tax is provided on all temporary differences at the balance sheet date
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes with the following exceptions:
i. Where the deferred income tax liability arises from the initial recognition
of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss;
ii. In respect of taxable temporary differences associated with investments in
subsidiaries, except where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences
will not reverse in the foreseeable future;
iii. Deferred income tax assets are recognised only to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax assets and unused tax
losses can be utilised.
Deferred income tax assets and liabilities are measured on an undiscounted basis
at the tax rates that are expected to apply to the year when the asset is
realised or the liability settled, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Segmental Reporting
Business segments are considered to be the primary reporting segment. The
directors are of the opinion that the Group has engaged in a single of business
of investing in equity and debt securities and therefore no segmental reporting
is provided.
Geographical segments are considered to be the secondary reporting segment. The
majority of investment income and expenses is derived from one geographical
segment being that of the United Kingdom. The proportion derived from outside
the UK is not considered to be significant and consequently an analysis has not
been provided. An analysis of investments and the remaining assets and
liabilities of the Group by geographical segment has not been given, as the
results are not considered to be significant.
Share based payments
The cost of equity-settled transactions with employees is measured by reference
to the fair value at the date on which they are granted and is recognised as an
expense over the vesting period, which ends on the date on which the relevant
employees become fully entitled to the award. Fair value is determined using the
Black-Scholes pricing model. In valuing equity settled transactions, no account
is taken of any vesting conditions other than the conditions linked to the price
of the shares of the company (market conditions).
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and the
management's best estimate of the achievement or otherwise of non-market
conditions and of the number of equity investments that will ultimately vest in
or, in the case of an instrument subject to a market condition, be treated as
vesting as described above. The movement in cumulative expense since the
previous balance sheet date is recognised in the income statement, with a
corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on the
difference between the fair value of the original award and the fair value of
the modified award, both as measured on the date of modification. No reduction
is recognised if this difference is negative.
When an equity-settled award is cancelled, it is treated as if it had vested on
the date of cancellation, and any cost not yet recognised in the income
statement for the award at the cancellation or settlement date is deducted from
equity, with any excess over fair value being treated as an expense in the
income statement.
8. Independent Auditors' Special Purpose Report to Strathdon Investments plc on
the preliminary IFRS Financial Statements for the year ended 31 March 2007.
We have audited the accompanying preliminary International Financial Reporting
standards ('IFRS') financial statements of Strathdon Investments plc ('the
Company') for the year ended 31 March 2007 which comprise a Reconciliation of
Equity as at 1 April 2006, the Reconciliation of Profit and a Reconciliation of
Equity as at 31 March 2007, together with the related accounting policies note
set out on pages 8 to 12. We have not audited nor reviewed and we will not
provide any opinion in respect of the reconciliation of equity and the
reconciliation of profit for the six months ended 30 September 2006 which have
been included on pages 15 to 16.
This report is made solely to the Company in accordance with our engagement
letter dated 7 December 2007. Our audit work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
auditors' report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility or liability to anyone other than
the Company for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
This preliminary IFRS financial statements are the responsibility of the
company's directors and have been prepared as part of the Company's conversion
to IFRS. They have been prepared in accordance with the basis set out in Note 2
and Note 7 which describes how IFRS have been applied under IFRS 1, including
the assumptions management has made about the standards and interpretations
expected to be effective, and the policies expected to be adopted, when
management prepares its first complete set of IFRS financial statements as at 31
March 2008.
Our responsibility is to express an independent opinion on the preliminary IFRS
Financial statements based on our audit. We read the other information
accompanying the preliminary IFRS financial statements and consider whether it
is consistent with the preliminary IFRS financial statements. This other
information comprises the description of significant changes in accounting
policies on page 1. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
preliminary IFRS financial statements. Our responsibilities do not extend to any
other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. Those Standards require
that we plan and perform the audit to obtain reasonable assurance whether the
preliminary IFRS financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the preliminary IFRSs financial statements. An audit also
includes assessing the accounting principles used and the significant estimates
made by management, as well as evaluating the overall presentation of the
preliminary IFRS financial statements. We believe that our audit provides a
reasonable basis for our opinion.
Adverse opinion on the preliminary IFRS financial statements
As more fully explained in Note 7 to the preliminary IFRS financial statements,
the company held a majority investment in Stagebeach Ltd, which has been
accounted for as a financial asset designated at fair value through profit or
loss as at 31 March 2007 and 1 April 2006. The reported fair values of this
investment were �5,261,000 and �4,563,000 as at 31 March 2007 and 1 April 2006
respectively. The company has not accounted for its investment in Stagebeach Ltd
as a subsidiary as required by IAS 27
In our opinion:
The subsidiary Stagebeach Ltd met the criteria of IAS 27 which would require it
to be consolidated as a subsidiary. In view of this, in our opinion the
preliminary IFRS financial statements do not give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the state of
company's affairs at 31 March 2007 and 1 April 2006 and of its losses for the
years then ended.
In all other material respects, in our opinion, the preliminary IFRS financial
statements for the year ended 31 March 2007 have been prepared in accordance
with the basis set out in Note 2 and Note 7, which describe how IFRSs have been
applied under IFRS 1, and the policies expected to be adopted, when management
prepares its first complete set of IFRS financial statements as at 31 March
2008.
Emphasis of matter
Without qualifying our opinion, we draw attention to the fact that, under IFRSs
only a complete set of financial statements with comparative financial
information and explanatory notes can provide a fair presentation of the
Company's financial position, results of operations and cash flows in accordance
with IFRSs.
Ernst & Young LLP
London
24 December 2007
9. Appendix 1 - Reconciliation of equity at 30 September 2006 (last Interim Statement presented under previous UK GAAP)
UK GAAP
IAS1 IAS39 and
UK GAAP Presenataion of IAS32 Post IFRS
Pre IFRS Adj financial Financial Total IFRS Adjustements
Continuing statements instruments Adjustments total
�'000 �'000 �'000 �'000 �'000
Fixed assets Non-current assets
Tangible fixed assets 11 - - - 11 Plant and equipment
Investments 14,239 - - - 14,239 Financial assets
designated at fair value
through profit or loss
-------- -------- -------- -------- --------
14,250 - - - 14,250
-------- -------- -------- -------- --------
Current assets Current assets
Debtors 1,292 - - - 1,292 Trade and other receivables
Cash at bank 561 - - - 561 Cash and cash equivalents
-------- -------- -------- -------- --------
1,853 - - - 1,853
Creditors: Amounts falling
due within one year (541) 541 - 541 -
- (541) - (541) (541) Trade and other payables
-------- -------- -------- -------- --------
Net current assets 1,312 - - - 1,312 Net current assets
-------- -------- -------- -------- --------
Total assets less current
liabilities 15,562 - - - 15,562
Creditors Amounts Non current liabilities
falling due after more
than one year (394) 394 - 394 -
- (394) - (394) (394) Financial liabilities
-------- -------- -------- -------- --------
Total net assets 15,168 - - - 15,168 Net assets
======== ======== ======== ======== ========
Capital and reserves Equity
Called up share capital 2,591 - - - 2,591 Share capital
Share premium account 6,392 - - - 6,392 Share premium
Special reserve 36,290 - - - 36,290 Share premium
Revaluation reserve 1,974 - (1,974) (1,974) - Revaluation reserve
Warrant reserve 928 - - - 928 Warrant reserve
Profit and loss account (33,007) - 1,974 1,974 (31,033) Retained earnings
-------- -------- -------- -------- --------
Total shareholders funds 15,168 - - - 15,168 Total equity
======== ======== ======== ======== ========
10. Appendix 2 reconciliation of loss for the six months ended 30 September 2006
UK GAAP
IAS1 IAS39 and
UK GAAP Presenataion of IAS32 Post IFRS
Pre IFRS Adj financial Financial Total IFRS Adjustements
Continuing statements instruments Adjustments total
�'000 �'000 �'000 �'000 �'000
Turnover 298 111 - 111 409 Revenue
Administration expenses (641) - - - (641) Administrative expenses
-------- -------- -------- -------- --------
Operating loss (343) 111 - 111 (232) Operating loss
Realised losses on
financial assets designated
Loss on disposal of at fair value through
fixed asset investments (851) - 367 367 (484) profit or loss (net)
Unrealised losses on
financial assets designated
at fair value through
- - (317) (317) (317) profit or loss (net)
-------- -------- -------- -------- --------
Loss on ordinary
activities before
provision against Loss on ordinary activities
carrying value of before finance costs
investments and interest (1,194) 111 50 161 (1,033) and taxation
-------- -------- -------- -------- --------
Change in carrying value
of investments 342 - (342) (342) -
Interest payable (68) - - - (68) Finance costs
Interest receivable 111 (111) - (111) -
-------- -------- -------- -------- --------
Loss on ordinary activities Loss from continuing
before taxation (809) - (292) (292) (1,101) operations before taxation
Taxation - - - - - Taxation
-------- -------- -------- -------- --------
Retained loss Loss for the year from
for the financial year (809) - (292) (292) (1,101) continuing operations
======== ======== ======== ======== ========
This information is provided by RNS
The company news service from the London Stock Exchange
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