Notes to the Financial Statements continued for the year ended 31 May 2021
34 Prior year restatement In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision on the clarification of accounting in relation to the configuration and customisation costs incurred in implementing Software-as-a-Service (SaaS) as follows: • Amounts paid to the cloud vendor for configuration and customisation that are not distinct from access to the cloud software are expensed over the SaaS contract term • In limited circumstances, other configuration and customisation costs incurred in implementing SaaS arrangements may give rise to an identifiable intangible asset, for example, where code is created that is controlled by the entity • In all other instances, configuration and customisation costs will be expensed as the customisation and configuration services are received Due to the nature of this agenda decision and the level of spend incurred in relation to the Group’s Securing Growth Together digital transformation programme, the Group’s accounting policy in relation to such customisation and configuration costs has been reviewed and changed to align with the IFRIC guidance issued in relation to Software-as-a-Service (SaaS) costs previously capitalised. The restatement represents a non-cash adjustment. The revision to the accounting policy has been accounted for retrospectively resulting in a prior year restatement. The Group identified £17.8m additions made in the years ending 31 May 2019 and 31 May 2020 in relation to software and development costs. £7.9m of these costs capitalised for the year ended 31 May 2020 related to cloud computing arrangements that should be expensed after the consideration of the IFRIC guidance and a further £3.6m for the year ended 31 May 2019. In relation to the year ended 31 May 2020 assets, £1.4m of amortisation was charged, which is to be reversed. A further £0.2m of costs capitalised are to be reclassified to prepayments. These costs give rise to a reduction in the tax charge for the year ended 31 May 2020 of £1.2m and a corresponding increase in the Group’s deferred tax asset. The affected financial statement line items are as follows:
31 May 2020 (previously reported) £m
31 May 2020 (restated) £m
Restatement £m
31 May 2020
Income Statement impact Depreciation and amortisation
(23.6)
(25.0)
1.4
(7.9)
Individually Significant Items – expense cloud configuration and customisation costs previously capitalised
–
(7.9) (6.5) (6.5)
12.6
Operating profit
19.1 16.1
9.6
Profit before taxation
(3.2)
Taxation
(4.4)
1.2
6.4
Profit for the year
11.7
(5.3)
2.3p 2.3p
Basic EPS Diluted EPS
4.2p 4.2p
(1.9p) (1.9p)
Balance Sheet impact Expense cloud configuration and customisation costs previously capitalised
(11.5)
– – –
(11.5)
(0.2)
Amounts reclassified to prepayments in relation to cloud computing arrangements (restated) Reversal of amortisation on cloud configuration and customisation costs previously capitalised
(0.2)
1.5
1.5
29.0
Other intangible assets Deferred tax assets Total non-current assets Trade and other receivables
39.2
(10.2)
2.3
0.5
1.8
267.3
275.7
(8.4)
73.4
73.2
0.2 0.2
169.9 205.9
Current assets
169.7 214.1
Net assets
(8.2)
(22.0)
Retained earnings
(13.8)
(8.2) (8.2)
205.9
Total equity
214.1
184
NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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