1 Accounting policies continued Leases continued
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in the Income Statement if the carrying amount of the right-of-use asset has been reduced to zero. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low value assets, including certain IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Lease rental costs in respect of short-term leases (less than one year) and low value assets which are exempt from being accounted for under IFRS 16 are charged to the Income Statement on a straight-line basis over the period of the lease. Investments Investments in subsidiaries are carried at cost less impairment. Investments in property and unlisted shares are carried at cost less impairment, which is based on the fair value at acquisition. Inventory Inventory is held at the lower of cost or net realisable value. Revenue recognition Summary The Group provides independent global cyber assurance security and Software Resilience services. The revenue streams in relation to Assurance include: • Global Professional Services (GPS) – global cyber security consultancy services • Global Managed Services (GMS) – operational cyber defence, incident response, scanning, simulation and managed security operations centres (SOCs) including new Microsoft XDR (Sentinel) proposition • Product sales – sale of own manufactured and/or resale of third party products The revenue streams in relation to Software Resilience include: • Escrow contract services – securely maintain in “escrow” the long-term availability of business critical software and applications • Verification services – verify source code, and provide a fully managed secure service and result validation While the detailed recognition is contract specific, and set out in the table on pages 158 to 161, in most cases: • GPS revenues are recognised on an input method over time • GMS revenues are bifurcated according to the separate performance obligations (see pages 158 to 160) • Product sales are recognised when control passes, usually on delivery • Escrow contract revenues are recognised over time • Verification services are recognised on the completion of the verification service Revenue is presented net of VAT and other sales related taxes. Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer. Due to the nature of the Group’s activities, the Group transaction price for the majority of its contracts is entirely variable consideration as these contracts are on a time and material basis, using set contractual rates per hour/day worked, giving rise to no estimation or reversal risk at period end. The Group does not have any material obligations in respect of returns, refunds or warranties. The impact of any financing component within contracts with customers has been assessed and concluded to be immaterial. On contract inception, the probability of collectability is assessed across the Group and, unless there is a significant change in facts and circumstances, revenue is recognised. During the year, no instances have been identified where reassessment of the collectability has had to be reassessed, nor have there been any new contracts with customers for which the collection of consideration has not been assessed at inception as probable. This current year assessment also takes into account the impact of Covid-19 on the Group’s customer base with no adverse material impact. Detailed policies The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers by reportable segments, including significant payment terms, and the related revenue recognition policies.
NCC Group plc — Annual report and accounts for the year ended 31 May 2022
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