1 Accounting policies continued Taxation Taxation on the profit or loss for the year comprises current and deferred taxation. Taxation is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the Balance Sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the Balance Sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. R&D tax credits are recognised for the UK tax jurisdiction within administrative expenses and within income tax for the US tax jurisdiction. Intra-group financial instruments Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the Group, the Company considers these to be insurance arrangements and accounts for them as such. In this respect the Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and deposits repayable on demand. Bank overdrafts that are repayable on demand form part of the Group’s cash management and are included as a component of cash and cash equivalents for the purpose only of the Statement of Cash Flows. Treasury shares NCC Group plc shares held by the Group are deducted from equity as “treasury shares” and are recognised at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being taken to reserves. No gain or loss is recognised in the Income Statement on the purchase, sale, issue or cancellation of equity shares. 2 Critical accounting judgements, key sources of estimation uncertainty and other estimates The preparation of Financial Statements requires management to exercise judgement in applying the Group’s accounting policies. Different judgements would have the potential to change the reported outcome of an accounting transaction or Statement of Financial Position. It also requires the use of estimates that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis, with changes recognised in the period in which the estimates are revised and in any future periods affected. The table below shows those areas of critical accounting judgements and estimates that the Directors consider material and that could reasonably change significantly in the next year.
Accounting judgement?
Accounting estimate?
Accounting area
Carrying value of goodwill
No Yes No Yes
Yes No Yes No
Control of IPM Software Resilience business Recognition of research and development tax credits
Intangible assets – cloud-based software and development costs
2.1 Critical accounting judgements Information about critical accounting judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated Financial Statements are as follows. Control of IPM Software Resilience business A key judgement in the year ended 31 May 2021 is the acquisition date for the purchase of the IPM Software Resilience business. Management considers shareholder approval of the transaction constitutes a change in control and therefore the date of shareholder approval is considered to be the acquisition date for the transaction. Shareholder approval was granted on 1 June 2021 and the IPM Software Resilience business will be consolidated into the Group results from that date. Intangible assets – cloud-based software and development costs When the Group incurs customisation and configuration costs, as part of a service agreement, judgement is also required in assessing whether the Group has control over the resources defined in the arrangement. Management has considered the IFRS Interpretations Committee (IFRIC) agenda decision in April 2021 on the clarification of accounting in relation to these costs. The costs expensed amount to £5.1m (2020: £7.9m). See further details in Notes 12 and 34 in relation to a prior year restatement. Development activities involve a plan or design for the production of new or substantially improved products or processes. Judgement is required in determining whether the project is technically and commercially feasible; judgement is required in assessing the future economic benefit and viability of the project. Such judgements are inherently subjective and can have a material impact on determining whether such costs should be capitalised.
NCC Group plc — Annual report and accounts for the year ended 31 May 2021
151
Made with FlippingBook Converter PDF to HTML5