IFRS
Tasty PLC
28 September 2007
Tasty plc
Impact of the adoption of International Financial Reporting Standards
Tasty plc ('Tasty', or 'the Company') today announces that it has completed
preparations to adopt International Financial Reporting Standards ('IFRS'). For
accounting periods commencing from 1 January 2007, Tasty will prepare accounts
in line with IFRS. As part of the transition to IFRS, Tasty today presents its
income statement comparative information for the year to 31 December 2006 and
for the 26 weeks ended 2 July 2006 under IFRS, together with restated balance
sheets as at 1 January 2006, 2 July 2006 and 31 December 2006.
This announcement provides explanations and reconciliations of the movements
between UK GAAP to IFRS for income statements for the year to 31 December 2006
and the 26 weeks ended 2 July 2006 and on the balance sheets as at 1 January
2006, 2 July 2006 and 31 December 2006. The principal changes to Tasty's
reported financial information are as follows:-
• Lease premiums have been reclassified from fixed assets to pre-paid
rental charges under current and non-current assets
• Lease incentives will now be recognised over the full term of the lease
• Deferred tax has been provided using the balance sheet liability
method and recognising all temporary differences
Tasty has historically prepared its accounts under UK General Accepted
Accounting Practice ('UK GAAP'). For accounting periods commencing after 1
January 2007, Tasty will prepare its accounts under International Financial
Reporting Standards ('IFRS') as adopted by the European Union. The first
results to be issued under IFRS will be the interim financial statements for the
26 weeks to 1 July 2007, however, the date of transition for Tasty is the 1
January 2006 and comparative figures have therefore been restated accordingly.
The first full set of financial statements to be issued under IFRS will be for
the 52 weeks to 30 December 2007.
This announcement provides the adjusted balance sheets and income statements for
Tasty for the comparative periods to 2 July 2006 and to 31 December 2006,
together with the reconciliation from UK GAAP to IFRS. It also sets out the
significant accounting policy changes from those set out in the UK GAAP
financial statements for year ended 31 December 2006.
The figures in this document are based on those IFRS expected to be applicable
at 30 December 2007 and the interpretation of those standards. IFRS are subject
to possible amendment by and the interpretive guidance from the International
Accounting Standards Board ('IASB') as well as the on-going endorsement and
review by the EU and are, therefore, still subject to further change. Therefore
these figures may require amendment before their inclusion in the IFRS financial
statements for the 52 weeks to 30 December 2007.
Relationships to statutory accounts
The financial information presented in this document is unaudited and does not
comprise statutory accounts within the meaning of section 240 of the Companies
Act 1985. The statutory accounts for the year ended 31 December 2006, on which
the auditors have issued an unqualified report, have been delivered to the
Registrar of Companies.
First time adoption
IFRS 1, 'First-time Adoption of International Financial Reporting Standards'
sets out the procedures that the Company must follow when it adopts IFRS for the
first time as the basis for preparing financial statements. The Company is
required to establish the IFRS accounting policies that it will adopt as at 30
December 2007 and to apply these retrospectively to determine the IFRS opening
balance sheet at its date of transition, 1 January 2006.
Presentation of Financial Information
The primary statements within the financial information contained in this
announcement have been presented in accordance with IAS 1, 'Presentation of
Financial Statements'. However, this format and presentation may require
modification as practice develops and in the event that further guidance is
issued.
Cash flow statement
There are no material differences between the cash flow statement prepared under
UK GAAP and the cash flow statement prepared under IFRS for any of the periods
concerned, but rather only minor presentational changes. For this reason, no
cash flow statements have been included within the conversion statement.
Key impacts on changes in accounting policy
a Pre-paid operating lease costs
The Company incurs certain upfront costs in acquiring property leases. It has
previously treated all such costs as additions to tangible fixed assets,
depreciating them over the term of the lease in question. However, under IFRS
advance payments to landlords or lease premiums are more correctly defined as
pre-paid operating lease costs. Accordingly, on transition such expenses have
been reclassified from tangible fixed assets to prepaid lease costs. These
prepaid charges are then amortised over the term of the lease and so this change
in treatment has had no impact on amounts recorded in the income statement.
b Lease incentives
Under UK GAAP the Company's accounting policy with respect to lease incentives
(primarily rent free periods) was to treat the value of the rent free period
from the first day of trading until rent is due to commence as deferred income
and to credit it to the income statement evenly over the period to the first
rent review (normally five years). According to the provisions in SIC 15, under
IFRS the value of rent free periods and all similar lease incentives must be
spread evenly over the full term of the lease. This resulted in an increase in
the loss for the year ended 31 December 2006 of £78,000 and the recognition of
an additional £78,000 of deferred income in respect of lease incentives in the
balance sheet at that date.
c Deferred taxation
Under IAS 12 income taxes, deferred tax balances are calculated using the
balance sheet liability method with the result that certain deferred tax assets
and liabilities which would not be recognised under UK GAAP will be recognised
under IFRS.
An additional deferred tax asset of £15,000 has been recognised for the year
ended 31 December 2006 in respect of the above accounting policy changes.
Significant accounting policies
Basis of accounting
The restated financial statements and reconciliations shown above have been
prepared in accordance with all International Financial Reporting Standards
(IFRS) that are expected to be adopted by the European Union (EU) at 30 December
2007 and therefore comply with Article 4 of the EU IAS Regulation. The
disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS
are included.
The figures in this document are based on those IFRS expected to be applicable
at 30 December 2007 and the interpretation of those standards. IFRS are subject
to possible amendment by and interpretive guidance from the International
Accounting Standards Board ('IASB') as well as on-going endorsement and review
by the EU and are, therefore, still subject to further change. Therefore these
figures may require amendment before their inclusion in the IFRS financial
statements for the 26 weeks to 1 July 2007 and the 52 weeks to 30 December 2007.
The preparation of financial statements in compliance with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the recorded amounts of assets and
liabilities, income and expenses. The assumptions are based on historical
experience and various other factors that are believed to be appropriate to the
circumstances and form the basis of judgements about the carrying values of
assets and liabilities that are not otherwise readily determinable. Actual
results may differ from these estimates.
The financial statements have been prepared on the historical cost basis.
The principal accounting policies adopted are set out below.
Revenue
Revenue represents amounts received or receivable for goods and services
provided in the normal course of business (net of VAT).
Operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight line basis.
Pre-opening costs
Property rentals and other related overhead expenses incurred prior to a new
restaurant opening are expenses in the income statement in the period that they
are incurred. Similarly, the costs of training new staff during the pre-opening
phase are written-off as incurred.
Share-based payments
The Company has applied the requirements of IFRS 2 Share-based payment.
The Company operates a share-based payment scheme under which share options are
granted to certain employees. The costs of equity-settled transactions are
measured at fair value at the date of grant. Fair value is measured using the
Black-Scholes model. In determining fair value, no account is taken of any
vesting conditions, other than conditions linked to the price of the company's
shares (market-based conditions).
The fair value determined at the grant date is then expensed on a straight line
over the vesting period, based on the Directors' best estimate of the number of
shares that will eventually vest and adjusted for the effect of non-market based
vesting conditions. The movement in the cumulative expense since the previous
balance sheet date is recognised in the Income Statement, with the corresponding
increase taken into equity.
Operating profit
Operating profit is stated after all expenses, including the profit or loss on
disposal of fixed assets, which are considered to be non-trading items, but
before financial income or expenses. Non-trading items are items of income or
expenses which because of the nature and expected infrequency of events giving
rise to them, merit separate presentation to allow shareholders to understand
better the elements of financial performance in the year, so as to facilitate
comparison with prior periods and to assess better trends in financial
performance.
Taxation
The tax expense included in the Income Statement comprises both current and
deferred tax. Current tax is the expected tax payable on the taxable income
arising in the period reported on, calculated using tax rates enacted or
substantively enacted as at the balance sheet date.
Tax is recognised in the income statement except to the extent that it relates
to items recorded directly in equity, in which case it is recognised in equity.
Deferred tax is provided using the balance sheet liability method, providing for
all temporary differences between the carrying amounts of assets and liabilities
recorded for reporting purposes and the amounts used for tax purposes. Deferred
tax is calculated on an undiscounted basis, at the tax rates that are expected
to apply when the liability is settled or the asset is realised. Deferred tax
is charged or credited to the Income Statement, except when it relates to items
charged or credited directly to equity, in which case deferred tax is also dealt
with in equity.
The carrying value of deferred tax assets is reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.
Property, Plant and Equipment
Items of property, plant and equipment are stated at cost less the accumulated
charge for depreciation and any recognised impairment losses. Cost comprises
the aggregate amount paid and the fair value of any other consideration given to
acquire the asset and includes costs directly attributable to making the asset
operate as intended.
Depreciation is charged so as to write-off the cost over their estimated useful
economic lives. It is calculated at the following rates.
Trademarks 10% per annum
Leasehold improvements over the period of the lease
Fixtures, fittings and equipment 10% per annum
Land and buildings under construction are not depreciated.
All property, plant and equipment are reviewed for impairment in accordance with
IAS 36 Impairment of Assets, when there are indications that the carrying value
may not be recoverable.
Impairment
The carrying values of the Company's assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If any such
condition exists, the recoverable amount of the asset is estimated in order to
determine the extent, if any of the impairment loss. An impairment loss is
recognised whenever the carrying value of an asset exceeds its recoverable
amount and impairment losses are recognised in the income statement.
Leases
Leases are classified as finance leases whenever the terms of the lease are such
that they transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases. The Company
currently has no finance leases.
Assets leased under operating leases are not recorded on the balance sheet.
Rental payments are charged directly to the income statement. Lease incentives,
primarily rent-free periods, are capitalised and then systemically released to
the income statement over the period of the lease term. Payments made to
acquire operating leases are treated as prepaid lease expenses and are amortised
over the period of the lease.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
determined on a first-in, first-out basis. Net realisable value is based on
estimated selling price less any further costs to be incurred up until the point
of sale.
Trade receivables
Trade receivables are measured at their nominal values reduced by any
appropriate allowances for irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other
short-term, highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Trade payables
Trade payables are measured at their nominal values.
Equity
Equity issued by the Company is recorded as amounts received less direct issue
costs.
Financial Instruments
The carrying amounts of cash and cash equivalents, trade receivables, other
accounts receivable, trade payables and other accounts payable approximate to
their fair value. The Company does not hold or issue derivative financial
instruments.
Tasty Plc
Reconciliation of movements between UK GAAP and IFRS
Consolidated income statement for the year ended 31 December 2006
Under Under
UK GAAP Adjustments IFRS
£'000 £'000 £'000
Revenue 2,676 - 2,676
Cost of sales (1,598) - (1,598)
Gross profit 1,078 - 1,078
Administration costs (a and b) (1,329) (78) (1,407)
Operating profit (251) (78) (329)
Finance income 77 - 77
Loss before tax (174) (78) (252)
Income tax expense (c) 6 15 21
Loss for the financial period (168) (63) (231)
Attributable to -
Equity Shareholders (168) (63) (231)
Earnings per share
Basic (0.83p) (1.14p)
Diluted (0.83p) (1.14p)
Tasty Plc
Reconciliation of movements between UK GAAP and IFRS
Consolidated Balance Sheet as at 31 December 2006
Under Lease Lease Deferred Under
UK GAAP Premiums Incentives Tax IFRS
(a) (b) ( c)
Notes £'000 £'000 £'000 £'000 £'000
Non-current assets
Intangibles - trademarks 7 - - - 7
Property, plant and equipment 3,517 (324) - - 3,193
Prepaid operating lease charges - 311 - - 311
Deferred tax asset 101 - - 15 116
Rent deposits 197 - - - 197
3,822 (13) - 15 3,824
Current assets
Inventories 82 - - - 82
Trade and other receivables 27 - - - 27
Prepayments & accrued income 205 - - - 205
Prepaid operating lease charges 73 13 - - 86
Cash and cash equivalents 4,003 - - - 4,003
4,390 13 - - 4,403
Total assets 8,212 - - - 8,227
Current liabilities
Trade & other payables (741) - - - (741)
Tax and social security (39) - - - (39)
Accrual for lease incentives (31) - (7) - (38)
Accruals & deferred income (265) - - - (265)
Other creditors (273) - - - (273)
(1,349) - (7) - (1,356)
Non-current liabilities
Accrual for lease incentives - - (71) - (71)
Total liabilities (1,349) - (78) - (1,427)
Net assets 6,863 - (78) 15 6,800
Capital and reserves
attributable to equity
shareholders
Called-up share capital (2,601) - - - (2,601)
Share premium account (3,732) - - - (3,732)
Share option reserve (186) - - - (186)
Merger reserve (992) - - - (992)
Retained earnings 648 - 78 (15) 711
Capital and reserves (6,863) - 78 (15) (6,800)
Movement in equity
Balance as at 1 January 2006 (2,348) - - - (2,348)
Loss for 52 weeks ended 31 December 2006 168 - 78 (15) 231
New capital subscribed (4,391) - - - (4,391)
Merger reserve (106) - (106)
Share-base payments - credit to equity (186) - - - (186)
Balance as at 31 December 2006 (6,863) - 78 (15) (6,800)
Tasty Plc
Reconciliation of movements between UK GAAP and IFRS
Consolidated income statement for the 26 weeks ended 2 July 2006
Under Under
UK GAAP Adjustments IFRS
£'000 £'000 £'000
Revenue 1,151 - 1,151
Cost of sales (660) - (660)
Gross profit 491 - 491
Administration costs (422) - (422)
Operating profit 69 - 69
Finance income 21 - 21
Profit before tax 90 - 90
Income tax expense (29) - (29)
Profit for the financial period 61 - 61
Attributable to -
Equity Shareholders 61 - 61
Earnings per share
Basic 0.31p 0.31p
Diluted 0.31p 0.31p
Tasty Plc
Reconciliation of movements between UK GAAP and IFRS
Consolidated Balance Sheet as at 2 July 2006
Under Lease Lease Deferred Under
UK GAAP Premiums Incentives Tax IFRS
(a) (b) ( c)
Notes £'000 £'000 £'000 £'000 £'000
Non-current assets
Property, plant and equipment 1,541 (143) - - 1,398
Prepaid operating lease charges - 137 - - 137
Deferred tax asset 60 - - - 60
Rent deposits 123 - - - 123
1,724 (6) - - 1,718
Current assets
Inventories 25 - - - 25
Prepayments & accrued income 249 - - - 249
Prepaid operating lease charges 49 6 - - 55
Cash and cash equivalents 1,167 - - - 1,167
1,490 6 - - 1,496
Total assets 3,214 - - - 3,214
Current liabilities
Trade & other payables (60) - - - (60)
Tax and social security (28) - - - (28)
Accruals & deferred income (389) - - - (389)
Other creditors (222) - - - (222)
Total liabilities (699) - - - (699)
Net assets 2,515 - - - 2,515
Capital and reserves
attributable to equity
shareholders
Called-up share capital (2,774) - - - (2,774)
Share premium account (159) - - - (159)
Retained earnings 418 - - - 418
Capital and reserves (2,515) - - - (2,515)
Movement in equity
Balance as at 1 January 2006 (2,348) - - - (2,348)
Profit for 26 weeks ended 2 July 2006 (61) - - - (61)
New capital subscribed (106) - - - (106)
Balance as at 2 July 2006 (2,515) - - - (2,515)
Tasty Plc
Reconciliation of movements between UK GAAP and IFRS
Consolidated Balance Sheet as at 1 January 2006
Under Lease Lease Deferred Under
UK GAAP Premiums Incentives Tax IFRS
(a) (b) ( c)
Notes £'000 £'000 £'000 £'000 £'000
Non-current assets
Property, plant and equipment 1,117 (146) - - 971
Prepaid operating lease charges - 140 - - 140
Deferred tax asset 95 - - - 95
Rent deposits 123 - - - 123
1,335 (6) - - 1,329
Current assets
Inventories 25 - - - 25
Prepayments & accrued income 41 - - - 41
Prepaid operating lease charges 45 6 - - 51
Cash and cash equivalents 1,230 - - - 1,230
1,341 6 - - 1,347
Total assets 2,676 - - - 2,676
Current liabilities
Trade & other payables (162) - - - (162)
Tax and social security (44) - - - (44)
Accruals & deferred income (104) - - - (104)
Other creditors (12) - - - (12)
Current tax liabilities (6) - - - (6)
Total liabilities (328) - - - (328)
Net assets 2,348 - - - 2,348
Capital and reserves
attributable to equity
shareholders
Called-up share capital (1,942) - - - (1,942)
Merger reserve (886) - - - (886)
Retained earnings 480 - - - 480
Capital and reserves (2,348) - - - (2,348)
Movement in equity
Balance as at 1 January 2005 (1,296) - - - (1,296)
Profit for 52 weeks ended 31 December 2005 (231) - - - (231)
New capital subscribed (821) - - - (821)
Balance as at 1 January 2006 (2,348) - - - (2,348)
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