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Explanation of Transition

EXPLANATION OF TRANSITION TO FRS 102 FROM OLD UK GAAP

Trading Operations

These are the Trading Operations' first non-statutory accounts prepared in accordance with FRS102. The accounting policies set out in note 2 have been applied in preparing the non-statutory accounts for the year ended 31 March 2016 and the comparative information presented in these non-statutory accounts for the year ended 31 March 2015. In preparing its FRS 102 balance sheet, the Press has adjusted amounts reported previously in non-statutory accounts prepared in accordance with its previous basis of accounting, old UK GAAP. An explantion of how thye transition from UK GAAP has affected the Press's financial position and financial performance is set out in the following tables.

RECONCILIATION OF EQUITY - 31 MARCH 2015 Note OLD UK GAAP Effect of transition FRS 102
£'m £'m £'m
FIXED ASSETS
Tangible fixed assets (a) 40.3 (18.2) 22.1
Intangible fixed assets (a) 63.6 18.2 81.8
Investments 0.5 - 0.5
104.4 - 104.4
CURRENT ASSETS
Intangible assets - pre-publication (b) - 21.0 21.0
Stock and work-in-progress (b) 98.3 (21.0) 77.3
Debtors (c) 190.6 8.9 199.5
Current asset investments (c) 153.3 0.1 153.4
Cash at bank and in hand 23.6 - 23.6
465.8 9.0 474.8
CREDITORS
Amounts falling due within one year (c),(d),(e) (226.6) (6.7) (233.3)
NET CURRENT ASSETS 239.2 2.3 241.5
TOTAL ASSETS LESS CURRENT LIABILITIES 343.6 2.3 345.9
CREDITORS
Amounts falling due after more than one year (c) (4.3) (1.7) (6.0)
PROVISION FOR LIABILITIES (1.9) - (1.9)
NET ASSETS EXCLUDING PENSION LIABILITY 337.4 0.6 338.0
PENSION LIABILITY (135.8) - (135.8)
NET ASSETS INCLUDING PENSION LIABILITY 201.6 0.6 202.2
RESERVES 200.1 0.6 200.7
MINORITY INTERESTS 1.5 - 1.5
TOTAL FUND 201.6 0.6 202.2
1 APRIL 2014 Note OLD UK GAAP Effect of transition FRS 102
£'m £'m £'m
FIXED ASSETS
Tangible fixed assets (a) 36.1 (15.8) 20.3
Intangible fixed assets (a) 75.8 15.8 91.6
Investments 0.5 - 0.5
112.4 0.0 112.4
CURRENT ASSETS
Intangible assets - pre-publication (b) - 24.1 24.1
Stock and work-in-progress (b) 98.4 (24.1) 74.3
Debtors (c) 188.5 5.5 194.0
Current asset investments (c) 212.0 (0.3) 211.7
Cash at bank and in hand 32.7 - 32.7
531.6 5.2 536.8
CREDITORS
Amounts falling due within one year (c),(d),(e) (231.3) (7.1) (238.4)
NET CURRENT ASSETS 300.3 (1.9) 298.4
TOTAL ASSETS LESS CURRENT LIABILITIES 412.7 (1.9) 410.8
CREDITORS
Amounts falling due after more than one year (c) (4.8) (0.3) (5.1)
PROVISION FOR LIABILITIES (1.7) - (1.7)
NET ASSETS EXCLUDING PENSION LIABILITY 406.2 (2.2) 404.0
PENSION LIABILITY (112.5) - (112.5)
NET ASSETS INCLUDING PENSION LIABILITY 293.7 (2.2) 291.5
RESERVES 292.4 (2.2) 290.2
MINORITY INTERESTS 1.3 - 1.3
TOTAL FUND 293.7 (2.2) 291.5

Notes on reconciliation of equity:

(a) Classification of Fixed Assets under FRS 102 requires computer software assets, including costs of configuring and implementing computer systems, to be shown as an intangible asset separate from the hardware on which the software is installed rather than a tangible fixed asset for the combined software and hardware. The net book value of capitalized software that has been reclassified as Intangible Fixed Assets, at 31 March 2015: £18.2m (1 April 2014 £15.8m).

(b) Pre-production costs of publications have been shown as First Costs within Stock, and amortized over 12 months from first publication. Under FRS 102, these costs will be reclassified as Intangible Assets–Pre-Publication but will continue to be disclosed alongside Stock as Current Assets in the balance sheet. These assets will also continue to be amortized over 12 months from publication. Pre-production costs of publications were £21.0m at 31 March 2015 and £24.1m at 1 April 2014.

(c) The Press enters into hedging contracts to protect itself from within-period exchange rate volatility. Under old UK GAAP, there was no requirement to hold hedging instruments (such as future currency sales or purchases at a fixed rate) on the balance sheet or to revalue them to current market value. Effective hedging under FRS 102 allows transactions to be recorded at the hedged rate and changes in the market value of hedges relating to future periods to be recorded through OCI rather than in the profit and loss account for the current period. This is achieved by matching FX contracts with phased cash flow forecasts. Hedges deemed as ineffective are revalued to market rate with changes in value taken through the profit and loss account. Previously, hedged transactions were recorded at the hedged rate and any mismatch between the value of transactions and hedges was closed out at spot rate with any differences taken to exchange gains and losses in the profit and loss account (this is equivalent to assuming that all hedges were fully effective) and periodic changes in market value of the hedging instruments did not need to be reflected in the profit and loss account. Under FRS 102, all outstanding invoiced transactions are revalued to the period end spot rate. At 1 April 2014 amounts recognized in the Balance Sheet in relation to cash flow hedges, the revaluation of invoiced items, and cash to the year end rate was £2.0m (31 March 2015 £4.8m). In 2014/15, amounts taken to the profit or loss account due to ineffectiveness, the revaluation of invoiced items, and cash was a loss of £1.1m. Effective hedges recognized in OCI at 1 April 2014 was a gain of £3.1m, the movement on OCI in 2014/15 was a gain of £1.8m.

(d) The cost of unused holiday entitlement at the end of the year is accrued under FRS 102 with movements in the accrual taken through the profit and loss account. An opening accrual of £3.9m has been posted in the balance sheet at 1 April 2014, and the movement in the accrual will be recognized in the profit and loss account each year. The accrual at 31 March 2015 was calculated to be £4.2m, thus a £0.3m profit and loss account movement was recognized in 2014/15.

(e) Deferred tax on unremitted earnings under old FRS 19 unremitted earnings of subsidiaries only gave rise to deferred tax liabilities to the extent that dividends had been accrued. Under FRS 102 deferred tax is recognized when income from a subsidiary or branch has been recognized in the financial statements and the subsidiary is a regular remitter of dividends. Deferred tax on unremitted earnings was £0.2m at 1 April 2014 and reduced to £0.1m at 31 March 2015, with the movement taken to Taxation in the profit and loss account in 2014/15.

EXPLANATION OF TRANSITION TO FRS 102 FROM OLD UK GAAP

RECONCILIATION OF PROFIT AND LOSS-YEAR ENDED 31 MARCH 2015 Note OLD UK GAAP Effect of transition FRS 102
£'m £'m £'m
TURNOVER (a) 767.2 (5.0) 762.2
TRADING PROFIT BEFORE SALE OF FIXED ASSETS
PROFIT ON SALE OF FIXED ASSETS 0.1 - 0.1
OPERATING PROFIT (c) 105.2 (3.4) 101.8
NET INTEREST RECEIVABLE/(PAYABLE) (1.0) - (1.0)
OTHER FINANCE (EXPENSE)/INCOME (b) (0.5) (4.3) (4.8)
PROFIT BEFORE INVESTMENT INCOME 103.7 (7.7) 96.0
INVESTMENT INCOME 0.3 - 0.3
PROFIT BEFORE TAX (a) 104.0 (7.7) 96.3
TAXATION (d) (9.5) 0.2 (9.3)
PROFIT AFTER TAX 94.5 (7.5) 87.0
PROFIT ATTRIBUTABLE TO MINORITY INTEREST (1.4) (0.1) (1.5)
PROFIT FOR THE YEAR 93.1 (7.6) 85.5

Notes on reconciliation of equity:

(a) Under previous UK GAAP the translation of results from overseas operations into Sterling was made at period end closing rates. The Balance Sheet and Profit and Loss account were translated at the same rate. Under FRS 102, assets and liabilities for each Balance Sheet are translated at the closing rate at the date of that Balance Sheet. Income and expenses for each Profit and Loss account are translated at the exchange rate of the dates of the transactions, although for practical reasons the average rate of each currency each month has been used. All resulting exchange differences are recognized in Other Comprehensive Income. The retranslation of the profit and loss account for the year ended 31 March 2015 to average rates reduced Trading Operations turnover by £5.0m and net profit before tax by £4.2m compared to what was previously reported under old UK GAAP.

(b) The costs of providing post-retirement benefits for employees is recognized in the profit and loss account through a Service Charge that recognizes the cost of the benefits actually accruing to current employees during the year, and a Finance Charge which reflects the notional interest on the future scheme liabilities (calculated at a discount rate set in line with high-quality corporate bonds) less the income generated from scheme assets. Under FRS 17, the income on assets was calculated according to the type and mix of assets and different rates of income were assumed on each separate class of asset. Under FRS 102, there is no change in Service Charge but returns on assets are calculated using the same rate used to discount the liabilities and no investment premium can be assumed. The resultant increase in Finance Charge for 2014/15 was £4.3m.

(c) The profit and loss account movement in the holiday accrual in 2014/15 was a charge of £0.3m.

(d) Deferred tax on unremitted earnings recognized in the profit and loss account in 2014/15 was a £0.1m credit.

EXPLANATION OF TRANSITION TO FRS 102 FROM OLD UK GAAP

DPRF

These are the DPRF's first non-statutory accounts prepared in accordance with FRS 102. The accounting policies set out in note 2 have been applied in preparing the non-statutory accounts for the year ended 31 March 2016 and the comparative information presented in these non-statutory accounts for the year ended 31 March 2015. In preparing its FRS 102 Balance Sheet, the DPRF has adjusted amounts reported previously in non-statutory accounts prepared in accordance with its previous basis of accounting, old UK GAAP. An explanation of how the transition from old UK GAAP has affected the DPRF's financial position and financial performance is set out in the following tables.

RECONCILIATION OF EQUITY - 31 MARCH 2015 Note OLD UK GAAP Effect of transition FRS 102
£'m £'m £'m
FIXED ASSETS
Properties (a) 131.0 102.8 233.8
Investments 40.1 - 40.1
171.1 102.8 273.9
CURRENT ASSETS
Debtors 0.2 - 0.2
Cash at bank and in hand 14.6 - 14.6
14.8 - 14.8
Creditors: amounts falling due within one year (b) (16.7) (1.4) (18.1)
NET CURRENT ASSETS (1.9) (1.4) (3.3)
TOTAL ASSETS LESS CURRENT LIABILITIES 169.2 101.4 270.6
Creditors: amounts falling due after more than one year - - -
NET ASSETS 169.2 101.4 270.6
RECONCILIATION OF FUNDS
Opening balance 172.4 76.5 248.9
Net movement in funds (3.2) 24.9 21.7
TOTAL FUNDS 169.2 101.4 270.6

1 APRIL 2014 Note OLD UK GAAP Effect of transition FRS 102
£'m £'m £'m
FIXED ASSETS
Properties (a) 117.9 77.7 195.6
Investments 47.0 - 47.0
164.9 77.7 242.6
CURRENT ASSETS
Debtors 0.4 - 0.4
Cash at bank and in hand 22.7 - 22.7
23.1 - 23.1
Creditors: amounts falling due within one year (b) (15.5) (1.2) (16.7)
NET CURRENT LIABILITIES 7.6 (1.2) 6.4
TOTAL ASSETS LESS CURRENT LIABILITIES 172.5 76.5 249.0
Creditors: amounts falling due after more than one year (0.1) - (0.1)
NET ASSETS 172.4 76.5 248.9
RECONCILIATION OF FUNDS
Opening balance 152.8 - 152.8
Net movement in funds 19.6 76.5 96.1
TOTAL FUNDS 172.4 76.5 248.9

Notes on reconciliation of equity:

(a) Strategic properties, regardless of their occupation for business use, are treated as Investment Properties in the non-statutory accounts, as the exemption under old UK GAAP for properties held by other companies within a group has been removed in FRS 102. The movement in the fair value of investment properties is recognized in the Statement of Financial Activities (including investment properties already held at fair value in the EOR). The fair value of properties, based on management opinion, at 1 April 2014 increased the net assets of the DPRF balance sheet by £77.7m as they were previously recognized at depreciated cost. At 31 March 2015 the revaluation of the strategic properties, based on professional advice, increased the value of properties by a further £25.1m..

(b) FRS 102 section 29 requires deferred tax to be recognized in respect of all timing differences at the reporting date. The recognition of deferred tax for timing differences arising on a revaluation is recognized consistent with the accounting itself, therefore, the upward revaluation of an asset gives rise to a deferred tax liability. Under FRS 19, asset revaluations did not give rise to deferred tax assets and liabilities where gains and losses were recorded in the SOFA unless there was a binding commitment to sell, and the resulting gain/loss on disposal was recognized in the non-statutory accounts. At 1 April 2014 the deferred tax liability on the movement in property valuation in taxable jurisdictions was £1.2m (31 March 2015: £1.5m).

EXPLANATION OF TRANSITION TO FRS 102 FROM OLD UK GAAP

RECONCILIATION OF STATEMENT OF FINANCIAL ACTIVITIES -
YEAR ENDED 31 MARCH 2015
Note OLD UK GAAP Effect of transition FRS 102
£'m £'m £'m
INCOME
Rental income from properties (a) 18.0 (0.3) 17.7
Income from investments 0.4 - 0.4
Transfer from Trading Operations 145.9 - 145.9
TOTAL INCOME 164.3 (0.3) 164.0
EXPENDITURE
Costs of generating funds
Other resources expended (a),(b),(c) (10.7) 1.6 (9.1)
Expenditure on charitable activities
Transfer of funds to the rest of the University:
- Cash (165.9) - (165.9)
- Benefits in kind (0.9) - (0.9)
TOTAL EXPENDITURE (177.5) 1.6 (175.9)
Gains on investment properties - 27.8 27.8
NET (LOSS) / INCOME (13.2) 29.1 15.9
Other gains / (losses):
Surplus on revaluation of investment properties (b) 8.2 (8.2) -
Currency translation differences on foreign currency net investments (a),(c) 1.8 4.0 5.8
NET MOVEMENT IN FUNDS (3.2) 24.9 21.7
RECONCILIATION OF FUNDS
TOTAL FUNDS BROUGHT FORWARD 172.4 76.5 248.9
TOTAL FUNDS CARRIED FORWARD 169.2 101.4 270.6

Notes :

(a) Under previous UK GAAP the translation of results from overseas operations into Sterling was made at period end closing rates. The Balance Sheet and statement of financial activities were translated at the same rate. Under FRS 102, assets and liabilities for each Balance Sheet are translated at the closing rate at the date of that Balance Sheet. Income and expenses for each Profit and Loss account are translated at the exchange rate of the dates of the transactions, although for practical reasons the average rate of each currency each month has been used. All resulting exchange differences are recognized within the net movement in funds. The retranslation of total income for the year ended 31 March 2015 to average rates reduced total income by £0.3m compared to what was previously reported under old UK GAAP.

(b) As investment properties are recognized at market value, depreciation that would previously have been charged was added back to other resources expended. Gains on the revaluation of investment properties were recognized within net income on the statement of financial activities as well as the gain on EOR investment properties which was previously shown within the net movement of funds.

(c) An increase in the deferred tax liability of £0.3m on revaluation gains of investment properties was recognized within other resources expended.