Notes to the Financial Statements continued for the year ended 31 May 2022
1 Accounting policies continued 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 and key sources of estimation uncertainty 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
Valuation of separately identifiable intangible assets
No
Yes
2.1 Critical accounting judgements No critical accounting judgements have been made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated Financial Statements. 2.2 Key sources of estimation uncertainty Information about estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying values of assets and liabilities within the next financial year is addressed below. While every effort is made to ensure that such estimates and assumptions are reasonable, by their nature they are uncertain, and as such changes in estimates and assumptions may have a material impact. Estimates and assumptions used in the preparation of the Financial Statements are continually reviewed and revised as necessary at each reporting date. The Directors have considered the impact of climate change on the following estimation uncertainties. Due to nature of the climate change impact on the Group, no material impact has been identified. Valuation of separately identifiable intangible assets As part of the acquisition of the IPM business (see Note 34) the Group has acquired an intangible asset relating to the customer relationships acquired with a fair value of £91.4m. The valuation approach taken is an income approach, specifically the multi-period excess earnings method (MEEM). As part of this valuation exercise certain key sources of estimation uncertainty have been identified that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year. A description of such estimates and reasonably possible sensitivities is described in Note 34.
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NCC Group plc — Annual report and accounts for the year ended 31 May 2022
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