REGISTERED NUMBER: SC287850 (Scotland)

ARMSTRONG & SUTHERLAND LIMITED

GROUP STRATEGIC REPORT,

REPORT OF THE DIRECTOR AND

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

Page

Company Information

1

Group Strategic Report

2

Report of the Director

3

Report of the Independent Auditors

4

to

7

Consolidated Income Statement

8

Consolidated Other Comprehensive Income

9

Consolidated Balance Sheet

10

Company Balance Sheet

11

Consolidated Statement of Changes in Equity

12

Company Statement of Changes in Equity

13

Consolidated Cash Flow Statement

14

Notes to the Consolidated Cash Flow Statement

15

Notes to the Consolidated Financial Statements

16

to

27

DIRECTOR:

Martin Bell

SECRETARY:

Martin Bell

REGISTERED OFFICE:

19 Robert Drive

Helen Street

Glasgow

G51 3HE

REGISTERED NUMBER:

SC287850 (Scotland)

AUDITORS:

Azets Audit Services

Chartered Accountants

Statutory Auditor

Titanium 1

King's Inch Place

Renfrew

PA4 8WF

BANKERS:

Royal Bank of Scotland plc

Glasgow City Branch

10 Gordon Street

Glasgow

G1 3PL

SOLICITORS:

BTO Solicitors LLP

48 St Vincent Street

Glasgow

G2 5HS

The director presents his strategic report of the company and the group for the year ended 31 December 2024.

REVIEW OF BUSINESS

The results for the year and financial position of the company are as shown in the annexed financial statements.

The key financial highlights are as follows:

2024

2023

2022

£

£

£

Turnover

15,568,542

19,135,962

16,261,505

Turnover growth/(decrease)

(18.6%

17.7%

60.4%

Profit/(Loss) before tax

694,569

823,284

1,412,419

The net assets of the company have increased from £2,674,558 at 31 December, 2023 to £3,262,065 at 31 December, 2024.

The group maintains the highest levels of service, safety and quality which in itself has contributed to a high level of repeat business from valued clients.

PRINCIPAL RISKS AND UNCERTAINTIES

We believe that the group can meet the key business risks of competition, both local and national, and also of employee retention.

The group has a strong working relationship with its suppliers and clients and believe those relationships together with a focus on continued operational efficiencies place the group in a strong position for the future.

KEY PERFORMANCE INDICATORS

Key performance indicators are monitored on a regular basis and include; order book, contract margins and net assets.

ENVIRONMENT

The group recognises the importance of its environmental responsibilities, and has policies in place to manage its impact on the environment.

FINANCIAL INSTRUMENTS

The group's principal financial instruments comprise bank balances, trade creditors and bank loans. The main purpose of these instruments is to finance the company's operations.

Trade debtors are managed in respect of credit and cashflow risk by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding.

Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet amounts due.

ON BEHALF OF THE BOARD:

Martin Bell - Director

10 September 2025

The director presents his report with the financial statements of the company and the group for the year ended 31 December 2024.

PRINCIPAL ACTIVITY

The principal activity of the group in the year under review was that of design, building construction and steel fabrication.

DIVIDENDS

The total distribution of dividends for the year ended 31 December 2024 will be £75,018.

DIRECTOR

Martin Bell held office during the whole of the period from 1 January 2024 to the date of this report.

DONATIONS AND EXPENDITURE

Donations in the year amounted to £2,550.

STATEMENT OF DIRECTOR'S RESPONSIBILITIES

The director is responsible for preparing the Group Strategic Report, the Report of the Director and the financial statements in accordance with applicable law and regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is satisfied that they give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial statements, the director is required to:

-	select suitable accounting policies 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 director is responsible for keeping adequate accounting records that are sufficient to show and explain the company's and the group's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable him to ensure that the financial statements comply with the Companies Act 2006. He is also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the director is aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the group's auditors are unaware, and he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group's auditors are aware of that information.

AUDITORS

The auditors, Azets Audit Services, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Martin Bell - Director

10 September 2025

Opinion

We have audited the financial statements of Armstrong & Sutherland Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2024 which comprise the Consolidated Income Statement, Consolidated Other Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Consolidated Cash Flow Statement, Notes to the Financial Statements, 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).

In our opinion the financial statements:

-	give a true and fair view of the state of the group's and of the parent company affairs as at 31 December 2024 and of the group's profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

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 group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC'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.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's 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 group's and the parent 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 director with respect to going concern are described in the relevant sections of this report.

Other information

The director is responsible for the other information. The other information comprises the information in the Group Strategic Report and the Report of the Director, but does not include the financial statements and our Report of the Auditors thereon.

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.

In connection with our audit of the financial statements, 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 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.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Group Strategic Report and the Report of the Director for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Group Strategic Report and the Report of the Director have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Report of the Director.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

-	the parent company financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of director's remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of director

As explained more fully in the Statement of Director's Responsibilities set out on page three, the director is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the director determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the director is responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the director either intends to liquidate the group or the parent company or to cease operations, or has no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

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 a Report of the Auditors 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.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council's website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

- Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;

- Reviewing minutes of meetings of those charged with governance;

- Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;

- Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

- Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.

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 of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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 Report of the Auditors.

Use of our 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 a Report of the Auditors 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.

Alex Webb BAcc FCCA (Senior Statutory Auditor)

for and on behalf of Azets Audit Services

Chartered Accountants

Statutory Auditor

Titanium 1

King's Inch Place

Renfrew

PA4 8WF

10 September 2025

TURNOVER

3

15,568,542

19,135,962

Cost of sales

(12,789,896

)

(16,738,302

)

GROSS PROFIT

2,778,646

2,397,660

Administrative expenses

(2,192,135

)

(1,638,652

)

586,511

759,008

Other operating income

25,451

16,372

OPERATING PROFIT

611,962

775,380

Interest receivable and similar income

83,544

53,640

695,506

829,020

Interest payable and similar expenses

5

(937

)

(5,736

)

PROFIT BEFORE TAXATION

6

694,569

823,284

Tax on profit

7

(32,044

)

24,444

PROFIT FOR THE FINANCIAL YEAR

662,525

847,728

Profit attributable to:

Owners of the parent

662,525

847,728

PROFIT FOR THE YEAR

662,525

847,728

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

662,525

847,728

Total comprehensive income attributable to:

Owners of the parent

662,525

847,728

FIXED ASSETS

Tangible assets

10

201,277

132,144

Investments

11

-

-

201,277

132,144

CURRENT ASSETS

Debtors

12

4,803,078

4,105,023

Cash at bank and in hand

2,222,377

3,604,038

7,025,455

7,709,061

CREDITORS

Amounts falling due within one year

13

3,920,574

5,071,647

NET CURRENT ASSETS

3,104,881

2,637,414

TOTAL ASSETS LESS CURRENT LIABILITIES

3,306,158

2,769,558

CREDITORS

Amounts falling due after more than one year

14

(35,000

)

(95,000

)

PROVISIONS FOR LIABILITIES

18

(9,093

)

-

NET ASSETS

3,262,065

2,674,558

CAPITAL AND RESERVES

Called up share capital

19

21

21

Retained earnings

20

3,262,044

2,674,537

SHAREHOLDERS' FUNDS

3,262,065

2,674,558

The financial statements were approved by the director and authorised for issue on 10 September 2025 and were signed by:

Martin Bell - Director

FIXED ASSETS

Tangible assets

10

-

-

Investments

11

253,891

253,891

253,891

253,891

CURRENT ASSETS

Debtors

12

63,758

63,758

Cash at bank

1,255

1,298

65,013

65,056

CREDITORS

Amounts falling due within one year

13

48,982

48,948

NET CURRENT ASSETS

16,031

16,108

TOTAL ASSETS LESS CURRENT LIABILITIES

269,922

269,999

CAPITAL AND RESERVES

Called up share capital

19

21

21

Retained earnings

269,901

269,978

SHAREHOLDERS' FUNDS

269,922

269,999

Company's profit for the financial year

74,941

78,622

The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime.

The financial statements were approved by the director and authorised for issue on 10 September 2025 and were signed by:

Martin Bell - Director

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2023

21

1,905,427

1,905,448

Changes in equity

Dividends

-

(78,618

)

(78,618

)

Total comprehensive income

-

847,728

847,728

Balance at 31 December 2023

21

2,674,537

2,674,558

Changes in equity

Dividends

-

(75,018

)

(75,018

)

Total comprehensive income

-

662,525

662,525

Balance at 31 December 2024

21

3,262,044

3,262,065

Called up

share

Retained

Total

capital

earnings

equity

£

£

£

Balance at 1 January 2023

21

269,974

269,995

Changes in equity

Dividends

-

(78,618

)

(78,618

)

Total comprehensive income

-

78,622

78,622

Balance at 31 December 2023

21

269,978

269,999

Changes in equity

Dividends

-

(75,018

)

(75,018

)

Total comprehensive income

-

74,941

74,941

Balance at 31 December 2024

21

269,901

269,922

Cash flows from operating activities

Cash generated from operations

1

(592,457

)

2,027,574

Interest paid

(937

)

(3,983

)

Interest element of hire purchase or finance lease rental payments paid

-

(1,753

)

Tax paid

(91,230

)

(41,557

)

Net cash from operating activities

(684,624

)

1,980,281

Cash flows from investing activities

Purchase of tangible fixed assets

(158,327

)

(44,343

)

Sale of tangible fixed assets

73,969

55,251

Interest received

83,544

53,640

Net cash from investing activities

(814

)

64,548

Cash flows from financing activities

Loan repayments in year

(60,000

)

(60,000

)

Capital repayments in year

(18,036

)

(21,429

)

Loan to associated company

(543,169

)

(543,169

)

Equity dividends paid

(75,018

)

(78,618

)

Net cash from financing activities

(696,223

)

(703,216

)

(Decrease)/increase in cash and cash equivalents

(1,381,661

)

1,341,613

Cash and cash equivalents at beginning of year

2

3,604,038

2,262,425

Cash and cash equivalents at end of year

2

2,222,377

3,604,038

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2024

2023

£

£

Profit before taxation

694,569

823,284

Depreciation charges

34,962

45,019

Profit on disposal of fixed assets

(19,737

)

(18,461

)

Government grants

(25,451

)

-

Finance costs

937

5,736

Finance income

(83,544

)

(53,640

)

601,736

801,938

(Increase)/decrease in trade and other debtors

(111,399

)

311,431

(Decrease)/increase in trade and other creditors

(1,082,794

)

914,205

Cash generated from operations

(592,457

)

2,027,574

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 December 2024

31/12/24

1/1/24

£

£

Cash and cash equivalents

2,222,377

3,604,038

Year ended 31 December 2023

31/12/23

1/1/23

£

£

Cash and cash equivalents

3,604,038

2,262,425

3.	ANALYSIS OF CHANGES IN NET FUNDS

At 1/1/24

Cash flow

At 31/12/24

£

£

£

Net cash

Cash at bank and in hand

3,604,038

(1,381,661

)

2,222,377

3,604,038

(1,381,661

)

2,222,377

Debt

Debts falling due within 1 year

(60,000

)

-

(60,000

)

Debts falling due after 1 year

(95,000

)

60,000

(35,000

)

(155,000

)

60,000

(95,000

)

Total

3,449,038

(1,321,661

)

2,127,377

1.	STATUTORY INFORMATION

Armstrong & Sutherland Limited is a private company, limited by shares, registered in Scotland. The company’s registered number is SC287850 and registered office address is 19 Robert Drive, Glasgow, G51 3HE.

The nature of the company's operations and its principal activities are that of design, building construction and steel fabrication.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention.

The financial statements are prepared in sterling, which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest £.

Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Basis of consolidation

The accounts include the consolidated results of the company and its subsidiaries made up to 31 December each year.

Turnover

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Consideration is given to the point at which the Company is entitled to receive the income, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

Revenue from the provision of services is recognised in the period in which the services are provided when all of the following conditions are satisfied:

- the amount of revenue can be measured reliably;

- it is probable that the Company will receive the consideration due;

- the costs incurred can be measured reliably.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures and fittings

-

20% on cost

Motor vehicles

-

20% on cost

Financial instruments

The Company has elected to apply the provisions of Section 11 'Basic Financial Instruments' and Section 12 ' Other Financial Instruments Issues' of FRS 102 to all of its financial instruments. Financial instruments are recognised in the Company's balance sheet when the Company becomes party to the contractual provisions of the instrument. Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transactions costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

Basic financial liabilities

Basic financial liabilities, including creditors, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Investments

Investments in group companies are accounted for at cost less provision for diminution in value which is regarded as permanent, should that be appropriate.

Investments in joint ventures where there is no controlling right exercised are accounted for at the group's share of the net assets or liabilities, which is regarded as being equivalent to fair value.

Taxation

Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting periods using the tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

If and when all conditions for retaining tax allowances for the cost of a fixed asset have been met, the deferred tax is reversed.

Deferred tax is calculated using the tax rates and laws that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference.

With the exception of changes arising on the initial recognition of a business combination, the tax expense (income) is presented either in profit or loss, other comprehensive income or equity depending on the transaction that resulted in the tax expense (income).

Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors.

Deferred tax assets and deferred tax liabilities are offset only if the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously.

Research and development

Expenditure on research activities is recognised in the income statement as an expense as incurred.

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Company intends to and has the technical ability and sufficient resources to complete development, future economic benefits are probable and if the Company can measure reliably the expenditure attributable to the intangible asset during its development. Development activities improve a plan or design for the production of new or substantially improved products or processes. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads and capitalised borrowing costs. Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses

Pension costs and other post-retirement benefits

The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to profit or loss in the period to which they relate.

Cash and cash equivalents

Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks and other short-term liquid investments with original maturities of three months or less.

Leases

Assets held under finance leases, hire purchase contracts and other similar arrangements, which confer rights and obligations similar to those attached to owned assets, are capitalised as tangible fixed assets at the fair value of the leased asset (or, if lower, the present value of the minimum lease payments as determined at the inception of the lease) and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the leases to produce a constant periodic rate of interest on the remaining balance of the liability.

Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight-line basis over the lease term.

Impairment of assets

Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss as described below.

Non-financial assets

An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated recoverable value of the asset has been reduced. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.

Where indicators exist for a decrease in impairment loss, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment been recognised.

Financial assets

For financial assets carried at amortised cost, the amount of impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

For financial assets carried at cost less impairment, the impairment loss is the difference between the asset's carrying amount and the best estimate of the amount that would be received for the asset if it were to be sold at the reporting date.

Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal.

An impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment been recognised.