Registered number:
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
COMPANY INFORMATION
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MERIDIAN AUDIO LIMITED
CONTENTS
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MERIDIAN AUDIO LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2023
The directors present their strategic report for the period ended 31 May 2023.
Meridian Audio is principally engaged in the development of proprietary DSP audio technologies, audio engineering consultancy and commercial licensing activities, and the design, manufacture and distribution of high performance loudspeakers and specialist audio-video systems for luxury residential and bespoke marine projects.
The Company had a further successful year delivering sales and gross profit growth, adding to its net worth. Additionally, the Company continues to develop its medium term (2 – 5 year) pipeline of commercial licensing opportunities which if successful will provide further profitable growth in the coming years and further increase the Gross Profit margin percentage.
The underlying demand for the Company’s services and products continued to strengthen during the year resulting in a growth in turnover of 9% to £9.4m (2022 - £8.6m). Gross profit was maintained at 62% and the Company delivered a positive net comprehensive income of £0.5m (2022 - £1.2m). The Company strengthened its portfolio of automotive contracts, signing multiple long term commercial licensing agreements in the year as well as adding to its pipeline of active discussions with potential new licensing customers across a variety of industry sectors. The Company’s audio consultancy and commercial licensing activities are managed via the EbM (“Engineered by Meridian”) team and whilst this pipeline is not a guarantee of securing future contracts it reflects increasing interest in the Company’s services and technologies and is an indicator of future revenue potential. Revenue generated from sales of specialist audio-video systems increased in the year by 15% driven by a generally strong market for its products and the introduction of new products to its portfolio. The Company maintains its view that there continues to be growing demand for luxury residential and bespoke marine projects incorporating high performance home theatres and large-screen media rooms, which will lead to revenue growth. The Company’s range of new technologies and products, and its development pipeline, have been specifically designed to take advantage of this growing market space whilst also continuing to provide the highest quality products for 2-channel music listening applications. The Company continued to add to its portfolio of complimentary third-party products it distributes in the UK and Eire via the DbM (“Distributed by Meridian”) team, thus further strengthening its commercial position and increasing its access to a greater number of installation projects whilst also enabling the supply of a broader range of high value brands and solutions to each project. DbM will continue to look to add more third-party brands to its distribution portfolio in the UK and Eire. The Company continues to see investment in applied research and development activities as a key strategic driver for future growth and invested £1.3m during the year (2022 - £1.4m) representing 14% of turnover (2022 - 16%). Additionally, the Company regularly funds university research programmes which are designed to create specific solutions for new high performance audio experiences. Whilst much of the development costs will support future revenue generation, costs are charged to the profit and loss account in the year they are incurred unless they meet the strict criteria set out in the accounting policies. During the year £0.5m (2022 - £0.2m) was capitalised in relation to expenditure on the development of audio platforms that will form the basis for future products.
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MERIDIAN AUDIO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
BUSINESS REVIEW (CONTINUED)
Continuous investment in marketing is of importance to support existing customers and products as well as to drive greater awareness that will support the Company to win more commercial contracts and increase sales in the future. In the year the Company invested over 7% of turnover in such activities (2022 - 5%). Other income during the year consisted of property rental income and business service fees of £0.181m (2022 - £0.181m). There were no government grants receivable under Coronavirus support schemes during the year (2022 - £0.019m). At the year-end, the level of confirmed orders for specialist audio products combined with signed contracts for brand and IP licensing which will all commercialise in the next 12 months puts the Company in a strong position entering its next financial year.
Principal risks and uncertainties of the business include the following:
Economy Much of the underlying demand for the Company’s product is influenced by the underlying health of the economies in which it sells its products and licenses its technologies. The risk is minimised by serving a variety of customer segments across multiple geographic areas. Issues in global supply chains, particularly in relation to semi-conductors, may impact the level of licensing income generated by certain contracts. Additionally, the same issues may impact the ability to manufacture and supply the Company’s products in a timely manner, though this risk is minimised by investment in stocks. Such risks have been built into the Company’s forward business plans. Relationships with key customers Damage to or loss of any of these relationships could have a detrimental impact on the financial results of the business. This risk is minimised in the area of licensing by securing long-term contracts with a number of different customers. In the area of specialist audio products, the risk is minimised by selling globally to a broad portfolio of customers and territories. In all areas business risk is mitigated by continued investment in new products, support services and building brand awareness. Funding The business is dependent on the timely receipt of invoiced sales and managing its level of other working capital investments.
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MERIDIAN AUDIO LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
Turnover, gross margin and operating profit are key measures of the Company's performance.
∙Turnover for the period was £9.4m (2021 - £8.6m)
∙Gross margin was 62% (2022 - 62%)
∙Operating profit was £1.0m (2022 - £1.6m)
Growth in positive net worth is seen as an important long-term target for the business. The reported comprehensive income for the year increased the value of shareholder funds by £0.5m however the adjustments arising on revaluation of the Company's freehold property have resulted in a reduction in Balance Sheet net assets from £5.9m to £4.4m.
This report was approved by the board and signed on its behalf by:
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MERIDIAN AUDIO LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MAY 2023
The directors present their report and the financial statements for the year ended 31 May 2023.
The profit for the year, after taxation, amounted to £542,171 (2022 - £1,197,009).
There were no dividends paid during the year (2022 - £NIL) or subsequent to the year end.
The directors who served during the year were:
The directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Future developments relevant to the Company are covered in the Strategic Report.
During the post year end period, the Company undertook a number of significant refinancing transactions, which have substantially improved its liquidity position (see note 28).
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MERIDIAN AUDIO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
The auditors, Peters Elworthy & Moore, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf by:
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MERIDIAN AUDIO LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERIDIAN AUDIO LIMITED
We have audited the financial statements of Meridian Audio Limited (the 'Company') for the year ended 31 May 2023, which comprise the Profit and Loss Account, the Statement of Comprehensive Income, the Balance Sheet, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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MERIDIAN AUDIO LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERIDIAN AUDIO LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' Report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
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MERIDIAN AUDIO LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERIDIAN AUDIO LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
∙we identified the laws and regulations applicable to the Company through discussions with management and from our commercial knowledge and experience of the manufacturing & distribution and licensing sectors;
∙we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements, including the Companies Act 2006 and relevant taxation legislation in the jurisdictions in which the Company operates, or the operations of the Company including data protection, employment and health and safety legislation;
∙we obtained an understanding of the Company’s policies and procedures on compliance with laws and regulations, including documentation of any instances of non-compliance;
∙we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting correspondence available; and
∙identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the Company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud and considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
We discussed among the audit engagement team regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might occur in the financial statements. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of fraud through management bias and override of controls. In addressing the risk of fraud through management override of controls we:
∙tested the appropriateness of journal entries and other adjustments;
∙designed procedures to identify unexpected and unusual journal entries and performed testing to confirm the validity of such postings;
∙assessed whether the significant accounting judgements and estimates made in the financial statements were indicative of potential bias; and
∙evaluated the business rationale of any significant transactions that were unusual or outside the normal course of business.
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MERIDIAN AUDIO LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERIDIAN AUDIO LIMITED (CONTINUED)
AUDITORS' RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
∙agreeing financial statement disclosures to underlying supporting documentation;
∙reading the minutes of meetings of those charged with governance; and
∙enquiring of management as to actual and potential litigation and claims.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' Report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditors
Salisbury House
Station Road
CB1 2LA
Date:
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MERIDIAN AUDIO LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
REGISTERED NUMBER: 02710631
BALANCE SHEET
AS AT 31 MAY 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 16 to 34 form part of these financial statements.
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MERIDIAN AUDIO LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Meridian Audio Limited is a private company limited by shares and registered in England and Wales. Its registered office is Latham Road, Huntingdon, Cambridgeshire, PE29 6YE.
2.ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The Company generated a trading profit for the year and had net assets of £4,368,865 as at 31 May 2023.
The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In making this assessment the directors have considered the Company’s financial resources at the time of approving the financial statements, as well as budgets which have been prepared. The Company continues to perform strongly in the post year end period, despite the ongoing turbulent socio-economic environment, which demonstrates the resilience of the business in uncertain times and the directors remain positive regarding future prospects. Given the Company’s strong Balance Sheet, combined with the nature of its activities, the directors believe the Company is well placed to manage its business risks successfully in the current economic climate and remain comfortable with the going concern assessment.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.ACCOUNTING POLICIES (CONTINUED)
Functional and presentation currency
Transactions and balances
For goods sold, turnover is recognised once the risks and rewards of ownership of the goods supplied have been transferred to customers. This usually coincides with acceptance of the goods by the customers, except where bill and hold arrangements operate, in which case revenue is recognised when the Company has completed substantially all its obligations in connection with the sale. Royalty income is based on structured licence agreements with customers, using either a fixed amount per product sold or a percentage of sales value. Income is recognised on an accruals basis.
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance Sheet. The assets of the plan are held separately from the Company in independently administered funds.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.ACCOUNTING POLICIES (CONTINUED)
Intangible assets are recognised from the development phase of a project if and only if certain specific criteria are met as detailed in accounting policy note 2.11.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.ACCOUNTING POLICIES (CONTINUED)
Expenditure on developing assets is recognised as an expense when incurred unless it meets the following recognition criteria for capitalisation:
∙Completion of the asset is technically feasible;
∙The Company intends to complete the intangible asset and use or sell it;
∙The Company has the ability to use the asset or sell it;
∙The intangible asset will generate probable future economic benefits in excess of its costs. Among other things, this requires that there is a market for the output from the intangible asset, or, if it is to be used internally, the asset will be used in generating such benefits;
∙There are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
∙The expenditure attributable to the intangible asset during its development can be measured reliably.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.ACCOUNTING POLICIES (CONTINUED)
Fair values are determined from market based evidence on a periodic basis. Revaluation gains and losses are recognised in other comprehensive income unless losses exceed the previously recognised gains or reflect a clear consumption of economic benefits, in which case the excess losses are recognised in profit or loss. At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its net realisable value. The impairment loss is recognised immediately in profit or loss.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
2.ACCOUNTING POLICIES (CONTINUED)
Provisions are measured as the best estimate of the amount required to settle the obligation, taking into account the related risks and uncertainties.
The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares.
The items in the financial statements where these judgements and estimates have been made include: Capitalisation of development costs A judgement has been made on whether development costs meet the criteria for capitalisation and whether they have been subsequently impaired which will impact the amount of capitalised development expenditure reported in the Balance Sheet. Revenue from long term contracts A judgement has been made on the percentage completeness of ongoing long term revenue contracts at the period end which will impact the amount of revenue reported in the Profit and Loss Account. Additionally, areas of judgement and estimates include: Carrying value of investment in subsidiaries A judgement has been made on the carrying value of its investment in its subsidiary company and as a result a significant provision has been taken and is reflected in the Balance Sheet. Revaluation of freehold land and buildings A judgement has been made on the fair value of freehold land and buildings. Fair values have been determined by the directors, based on professional advice received.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Analysis of turnover by country of destination:
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
12.TAXATION (CONTINUED)
Unrelieved trading losses estimated at £9,608,000 (2022 - £9,667,000) remain available to offset against future taxable trading profits. No deferred tax asset has been recognised in respect of the tax losses due to uncertainty over the timing of their recovery. The Company also has fixed asset and other short term timing differences held on the balance sheet estimated at £3,172,000 (2022 - £5,658,000), which would result in a deferred tax liability were it not for the existence of the unrelieved trading losses.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
The freehold land and buildings were valued by the directors as at 31 May 2023, based on professional advice received. The basis of valuation was open market value, which is equivalent to its fair value.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Page 28
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Page 29
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Page 30
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Page 31
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
Revaluation reserve
Profit and loss account
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost represents contributions payable by the Company to the fund and amounted to £177,224 (2022 - £144,509). Contributions totalling £29,541 (2022 - £20,136) were payable to the fund at the balance sheet date and are included in creditors.
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MERIDIAN AUDIO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2023
In addition, during the post year end period the Company repurchased 113,293 A Ordinary shares for total consideration of £481,495. This transaction was financed by an issue of 113,292 Ordinary shares for consideration of £1m.
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