Accounting Policies

for the year ended 31st March 2012

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Current and deferred tax are recognised in the income statement, except when they relate to items recognised directly in equity when the related tax is also recognised in equity.

Current tax is the amount of income tax expected to be paid in respect of taxable profits using the tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the balance sheet. It is provided using the tax rates that are expected to apply in the period when the asset or liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. No deferred tax asset or liability is recognised in respect of temporary differences associated with investments in subsidiaries, branches and associates where the group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Provisions and contingencies

Provisions are recognised when the group has a present obligation as a result of a past event and a reliable estimate can be made of a probable adverse outcome, for example warranties, environmental claims and restructurings. Otherwise, material contingent liabilities are disclosed unless the transfer of economic benefits is remote. Contingent assets are only disclosed if an inflow of economic benefits is probable.

The parent company considers financial guarantees of its subsidiaries’ borrowings and precious metal leases to be insurance contracts. These are treated as contingent liabilities unless it becomes probable that it will be required to make a payment under the guarantee.

Share-based payments and employee share ownership trust (ESOT)

The fair value of outstanding shares allocated to employees under the long term incentive plan is calculated by adjusting the share price on the date of allocation for the present value of the expected dividends that will not be received. The resulting cost is charged to the income statement over the relevant vesting periods, adjusted to reflect actual and expected levels of vesting where appropriate.

The group and parent company provide finance to the ESOT to purchase company shares in the open market. Costs of running the ESOT are charged to the income statement. The cost of shares held by the ESOT is deducted in arriving at equity until they vest unconditionally in employees.

Pensions and other post-employment benefits

The group operates a number of contributory and non-contributory plans, mainly of the defined benefit type, which require contributions to be made to separately administered funds.

The costs of the defined contribution plans are charged to the income statement as they fall due.

For defined benefit plans, the group and parent company recognise the net assets or liabilities of the schemes in their balance sheets. Obligations are measured at present value using the projected unit credit method and a discount rate reflecting yields on high quality corporate bonds. Assets are measured at their fair value at the balance sheet date. The changes in scheme assets and liabilities, based on actuarial advice, are recognised as follows:

Standards and interpretations adopted in the year

During the year, the following new and amendments to accounting standards and interpretations were adopted:

IAS 24 – ‘Related Party Disclosures’, Amendments to IFRIC 14 – ‘Prepayments of a Minimum Funding Requirement’, IFRIC 19 – ‘Extinguishing Financial Liabilities with Equity Instruments’, Amendments to IFRS 1 – ‘Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters’ and the ‘Improvements to IFRSs’ issued in May 2010 have all been adopted during the year. There was no material impact on the reported results or financial position of the group and parent company.

Standards and interpretations issued but not yet applied

The impact of the adoption of IFRS 9 – ‘Financial Instruments’, Amendments to IFRS 9 and IFRS 7 – ‘Mandatory Effective Date and Transition Disclosures’, IFRS 10 – ‘Consolidated Financial Statements’, IFRS 11 – ‘Joint Arrangements’, IFRS 12 – ‘Disclosure of Interests in Other Entities’ and IFRS 13 – ‘Fair Value Measurement’ and the revised IAS 27 – ‘Separate Financial Statements’ and IAS 28 – ‘Investments in Associates and Joint Ventures’ are still being evaluated.

IAS 19 – ‘Employee Benefits’ was revised in June 2011 and is applicable for periods beginning on or after 1st January 2013. It removes the ‘corridor approach’ for recognising actuarial gains and losses and eliminates options for presenting gains and losses which will have no effect on the group and parent company. It also amends the disclosures and requires the replacement of the expected return on plan assets and interest cost on plan obligations with net interest on the net defined benefit liability based on the discount rate. The full effect on the group and parent company is still being evaluated but it is likely to reduce the group’s profit before tax by approximately £6 million.

The effects of any standards and interpretations amended or issued after 30th April 2012 have not yet been evaluated.

The group and parent company do not consider that any other standards or interpretations issued by the IASB but not yet applicable will have a significant impact on their reported results or net assets.

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