REGISTERED NUMBER: SC055121 (Scotland)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2025

FOR

INGRAM MOTORING GROUP LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

6

Statement of Comprehensive Income

10

Balance Sheet

11

Statement of Changes in Equity

12

Cash Flow Statement

13

Notes to the Cash Flow Statement

14

Notes to the Financial Statements

16

DIRECTORS:

Jean McClure Allison Ingram

Malcolm Ingram

Andrew Fyfe

Kenneth Monaghan

SECRETARY:

Jean McClure Allison Ingram

REGISTERED OFFICE:

37 Portland Road

KILMARNOCK

Ayrshire

KA1 2DJ

REGISTERED NUMBER:

SC055121 (Scotland)

AUDITORS:

Gilmour Hamilton LLP

Statutory Auditor

37 Portland Road

KILMARNOCK

Ayrshire

KA1 2DJ

SOLICITORS:

The McKinstry Company

Queen's Court House

39 Sandgate

AYR

Ayrshire

KA7 1BG

The directors present their strategic report for the year ended 31 December 2025.

We aim to present a balanced and comprehensive review of the development and performance of our business during the year and its position at the year end. Our review is consistent with the size and nature of our business and is written in the context of the risks and uncertainties that we face.

REVIEW OF BUSINESS

As a main Volkswagen, Skoda and SEAT dealer, the company continued to deal in new and used motor vehicles, provide vehicle servicing and repairs and sell spare parts for vehicles.The company will also be expanding in to the CUPRA franchise in the coming year and made some initial investments in to showroom renovations in preparation for this.

The directors continued to implement measures to control costs and manage/protect cash flows.

Turnover decreased 5.5% during the year to £49m.

Gross profit decreased to £4.50m from £4.77m and the gross profit percentage remained stable at 9.2%.

Administrative expenses have increased from £5.8m to £6.3m.

Other operating income increased from £2.9m to £3.2m and operating profit decreased from £1.83m to £1.44m.

Exceptional costs totalling £992,080 were incurred in the year, these are explained further in the accompanying notes to the financial statements.

After interest, similar charges and tax, the profit for the year amounted to £42,377 (2024: £1,386,584).

The directors are happy with the performance across all areas of the business. We would again like to acknowledge the hard work and support of our staff, manufacturers and other business partners.

PRINCIPAL RISKS AND UNCERTAINTIES

The company continues to operate within the financing facilities available to it but is reliant on many of those facilities remaining available.

As with many businesses of our size, the environment in which we operate continues to be challenging. The new and used car market in the UK is highly competitive and margins continue to be tight. We are of course also subject to consumer spending patterns and the level of consumers' overall disposable income.

The directors are acutely aware that global supply issues could again impact UK supplies and that higher interest rates and cost of living increases could suppress demand in the coming year.

With these risks and uncertainties in mind, we are aware that any plans for the future development of our business may be subject to unforeseen future events outside of our control.

ON BEHALF OF THE BOARD:

Malcolm Ingram - Director

3 June 2026

The directors present their report with the financial statements of the company for the year ended 31 December 2025.

PRINCIPAL ACTIVITIES

The principal activities of the company in the year under review were those of motor vehicle distribution and repair, and the merchandising of parts.

DIVIDENDS

No dividends were paid during the year. The directors recommend that no final dividend be paid.

FUTURE DEVELOPMENTS

Details of future developments are included in the strategic report.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 January 2025 to the date of this report.

Jean McClure Allison Ingram

Malcolm Ingram

Andrew Fyfe

Kenneth Monaghan

FINANCIAL INSTRUMENTS

Interest rate risk

The company manages its cash and borrowing requirements to minimise interest expense whilst ensuring that it has sufficient liquid resources to meet the operating needs of the business. The company is exposed to increased interest costs should bank base rates increase.

Credit risk

All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtor's balances are monitored closely on an ongoing basis and provision is made for any doubtful debts where necessary.

STREAMLINED ENERGY AND CARBON REPORTING

This report encompasses information in relation to energy and carbon usage for the period from 1 January 2025 to 31 December 2025.

Reporting Parameters

The reporting parameters are based on the financial year ended 31 December 2025 and covers the operations of the company only.

The reporting intensity ratio used is tonnes of CO2 emissions per £million turnover. It is considered that this provides the best representation of activity across the company.

The table below shows the total electricity, natural gas and transportation fuel consumed by the company for the period 1 January 2025 to 31 December 2025. This is the first year that the company has been obliged to provide Streamlined Energy and Carbon Reporting data, comparative data will be provided in future periods.

Energy consumption and greenhouse gas emissions

2025

kWh/

tCO2e/

annum

%

annum

%

Total electricity

348,231

28.49

62

25.10

Total gas

556,274

45.51

114

46.15

Road fuel

317,794

26.00

71

28.75

1,222,299

100.00

247

100.00

Intensity Ratio

The energy intensity metric being reported is tCO2e/£million turnover and the results are shows below:

Intensity ratio

Emissions

Intensity ratio

tCO2e/

Turnover

tCO2e/

annum

£m

turnover £m

2025

247

49.1

5.03

Methodology used

The carbon emission figures used the 2025 Government emission conversion factors for greenhouse gases. Measurement of total energy consumption has focused on the supply of all grid electricity, natural gas and transportation fuel.

Energy Efficiency

We have implemented various strategies in an effort to reduce our carbon emissions and will continue to review operations for opportunities to further reduce our emissions and environmental impact. Over time, we expect that the proportion of electric vehicles in our fleet will continue to grow, reducing our reliance on road fuel.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are 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 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 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.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

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

AUDITORS

The auditors, Gilmour Hamilton LLP, will be proposed for re-appointment at the forthcoming Annual General Meeting.

ON BEHALF OF THE BOARD:

Malcolm Ingram - Director

3 June 2026

Opinion

We have audited the financial statements of Ingram Motoring Group Limited (the 'company') for the year ended 31 December 2025 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the 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 company's affairs as at 31 December 2025 and of its 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 company 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 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.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, 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 Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors 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 company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

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, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

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

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, the directors are 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 directors determine 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 directors are responsible for assessing the 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 directors either intend to liquidate the company or to cease operations, or have 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, 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:

We identified and assessed the risks of material misstatement of the financial statements, whether due to fraud or error and then performed audit procedures responsive to those risks.

From our general and sector experience and through discussion with the directors, we identified areas of laws and regulations that could reasonably be expected to have a material impact on the financial statements. We discussed the company's policies and procedures regarding the compliance with laws and regulations with the directors and considered the internal controls established to mitigate risks of fraud or non-compliance with laws or regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.

We reviewed available regulatory and legal correspondence, available board minutes and enquired of the directors regarding any pending litigation or known instances of irregularities, including fraud.

We also performed analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud.

We addressed the risk of fraud through management override of controls, reviewing the appropriateness of journal entries and other adjustments, assessed accounting estimates for potential bias and reviewed any significant unusual transactions.

We reviewed the accounting policies and presentation adopted in the financial statements to determine if they were in accordance with applicable law and United Kingdom Accounting Standards;

We addressing the risk of fraud in revenue recognition by obtaining an understanding of the controls in place and where possible testing the operating effectiveness of those controls. Substantive tests were executed to supplement testing of controls.

We vouched balances and reconciling items in management's key control account reconciliations to supporting documentation as at 31 December 2025 and carried out detailed testing, on a sample basis, of transactions to verify the completeness, occurrence and accuracy of the reported financial statements.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

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.

James H Hamilton BAcc CA (Senior Statutory Auditor)

for and on behalf of Gilmour Hamilton LLP

Statutory Auditor

37 Portland Road

KILMARNOCK

Ayrshire

KA1 2DJ

3 June 2026

TURNOVER

3

49,112,895

51,955,534

Cost of sales

44,616,015

47,189,719

GROSS PROFIT

4,496,880

4,765,815

Administrative expenses

6,252,741

5,813,059

(1,755,861

)

(1,047,244

)

Other operating income

3,198,283

2,872,665

OPERATING PROFIT

6

1,442,422

1,825,421

Exceptional item

7

992,080

-

450,342

1,825,421

Interest receivable and similar income

8

38,241

46,837

488,583

1,872,258

Gain/loss on revaluation of investment property

-

150,000

488,583

2,022,258

Interest payable and similar expenses

9

357,959

187,650

PROFIT BEFORE TAXATION

130,624

1,834,608

Tax on profit

10

88,247

448,024

PROFIT FOR THE FINANCIAL YEAR

42,377

1,386,584

OTHER COMPREHENSIVE INCOME

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

42,377

1,386,584

FIXED ASSETS

Tangible assets

11

6,236,859

2,490,476

Investment property

12

573,000

573,000

6,809,859

3,063,476

CURRENT ASSETS

Stocks

13

9,380,662

7,096,554

Debtors

14

1,427,385

1,775,829

Cash at bank and in hand

2,926,445

3,335,259

13,734,492

12,207,642

CREDITORS

Amounts falling due within one year

15

10,539,281

8,091,311

NET CURRENT ASSETS

3,195,211

4,116,331

TOTAL ASSETS LESS CURRENT LIABILITIES

10,005,070

7,179,807

CREDITORS

Amounts falling due after more than one year

16

(1,877,189

)

-

PROVISIONS FOR LIABILITIES

21

(941,373

)

(35,676

)

NET ASSETS

7,186,508

7,144,131

CAPITAL AND RESERVES

Called up share capital

22

295,725

295,725

Capital redemption reserve

23

277,725

277,725

Fair value reserve

23

136,728

136,728

Retained earnings

23

6,476,330

6,433,953

SHAREHOLDERS' FUNDS

7,186,508

7,144,131

The financial statements were approved by the Board of Directors and authorised for issue on 3 June 2026 and were signed on its behalf by:

Malcolm Ingram - Director

Called up

Capital

Fair

share

Retained

redemption

value

Total

capital

earnings

reserve

reserve

equity

£

£

£

£

£

Balance at 1 January 2024

295,725

5,184,097

277,725

-

5,757,547

Changes in equity

Total comprehensive income

-

1,386,584

-

-

1,386,584

Transfer to fair value reserve

-

(136,728

)

-

136,728

-

Balance at 31 December 2024

295,725

6,433,953

277,725

136,728

7,144,131

Changes in equity

Total comprehensive income

-

42,377

-

-

42,377

Balance at 31 December 2025

295,725

6,476,330

277,725

136,728

7,186,508

Cash flows from operating activities

Cash generated from operations

1

(547,051

)

1,778,423

Interest paid

(312,887

)

(157,365

)

Interest element of hire purchase payments paid

(45,072

)

(30,285

)

Tax paid

(188,771

)

(637,361

)

Net cash from operating activities

(1,093,781

)

953,412

Cash flows from investing activities

Purchase of tangible fixed assets

(3,939,171

)

(89,240

)

Sale of tangible fixed assets

3,667

-

Interest received

38,241

46,837

Net cash from investing activities

(3,897,263

)

(42,403

)

Cash flows from financing activities

New loans in year

2,170,000

-

Loan repayments in year

(120,584

)

(61,564

)

Movement in vehicle stocking loans

2,475,318

140,600

Increase in short term finance leases

203,159

51,323

Net cash from financing activities

4,727,893

130,359

(Decrease)/increase in cash and cash equivalents

(263,151

)

1,041,368

Cash and cash equivalents at beginning of year

2

2,897,774

1,856,406

Cash and cash equivalents at end of year

2

2,634,623

2,897,774

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

2025

2024

£

£

Profit before taxation

130,624

1,834,608

Depreciation charges

190,788

117,793

Profit on disposal of fixed assets

(1,667

)

-

Gain on revaluation of fixed assets

-

(150,000

)

Exceptional provision

878,610

-

Finance costs

357,959

187,650

Finance income

(38,241

)

(46,837

)

1,518,073

1,943,214

Increase in stocks

(2,284,108

)

(717,910

)

Decrease/(increase) in trade and other debtors

348,444

(306,952

)

(Decrease)/increase in trade and other creditors

(129,460

)

860,071

Cash generated from operations

(547,051

)

1,778,423

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 2025

31.12.25

1.1.25

£

£

Cash and cash equivalents

2,926,445

3,335,259

Bank overdrafts

(291,822

)

(437,485

)

2,634,623

2,897,774

Year ended 31 December 2024

31.12.24

1.1.24

£

£

Cash and cash equivalents

3,335,259

2,278,711

Bank overdrafts

(437,485

)

(422,305

)

2,897,774

1,856,406

3.	ANALYSIS OF CHANGES IN NET DEBT

At 1.1.25

Cash flow

At 31.12.25

£

£

£

Net cash

Cash at bank and in hand

3,335,259

(408,814

)

2,926,445

Bank overdrafts

(437,485

)

145,663

(291,822

)

2,897,774

(263,151

)

2,634,623

Debt

Finance leases

(1,140,297

)

(203,159

)

(1,343,456

)

Debts falling due within 1 year

(4,408,245

)

(2,647,545

)

(7,055,790

)

Debts falling due after 1 year

-

(1,877,189

)

(1,877,189

)

(5,548,542

)

(4,727,893

)

(10,276,435

)

Total

(2,650,768

)

(4,991,044

)

(7,641,812

)

1.	ACCOUNTING POLICIES

General information and basis of preparing the financial statements

Ingram Motoring Group Limited is a private limited company, limited by shares and incorporated in Scotland. The address of the registered office is given in the company information on page 1 of these financial statements. The company's principal place of business is 2 Wheatpark Place, Ayr, KA8 9RT. The nature of the company's operations and principal activities are set out in the Report of the Directors on page 3.

The financial statements have been prepared in accordance with applicable accounting standards including Financial Reporting Standard 102 "The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102) and the Companies Act 2006.

The directors have prepared forecasts for the year to 31 December 2026 and beyond. Having reviewed and stressed these forecasts and considered the funding and cash resources available to the company, the directors believe the company has sufficient financial headroom and that the company can continue to operate for the foreseeable future. The accounts have therefore been prepared on a going concern basis.

The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented.

The financial statements are presented in Pounds Sterling, rounded to the nearest pound.

Turnover

Turnover is measured at the fair value of the consideration received or receivable, net of discounts and value added taxes. Turnover includes revenue earned from the sale of goods and from rendering services, along with related commission earned.

Sale of goods

Turnover from sale of goods is recognised when the significant risks and rewards of ownership of the goods has transferred to the buyer. This is usually at the point that the customer takes delivery of the goods.

Rendering of services

Turnover from rendering services is recognised by reference to the stage of completion of the contract. Stage of completion is measured by comparing the costs incurred for work performed to date to the total estimated costs. Turnover is only recognised to the extent of the recoverable expenses when the outcome of the contract cannot be estimated reliably.

Commission and other income

The company earns commission from the sale of finance and insurance products. It earns additional income related to the sale of vehicles. Such income is recognised on an accruals basis in accordance with the substance of the relevant agreement.

Tangible fixed assets

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

Freehold property

-

2% on cost

Plant and machinery

-

25% on cost

Fixtures and fittings

-

25% on cost

Motor vehicles

-

25% on cost

Impairment of assets

At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is any indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to that figure and an impairment loss is recognised immediately in profit or loss.

Investment property

Investment properties are initially recognised at cost which includes purchase cost and any directly attributable expenditure.

Investment properties whose fair value can be measured reliably are measured at fair value. The surplus or deficit on revaluation is recognised in the profit or loss for the period. Revaluation gains, net of relevant deferred tax provisions are transferred from retained earning to a fair valuation reserve, to distinguish the unrealised gains from distributable profits.

Stocks and work in progress

Stocks and work in progress are stated at the lower of cost and selling price less costs to complete and sell. Cost is determined on the first-in, first out basis.

At the end of the reporting period, stocks are assessed for impairment. If any item is impaired, it is reduced to its selling price less cost to complete and sell and the impairment charge is recognised in the profit or loss for the period.

Taxation

Current tax is recognised for the amount of corporation tax payable in respect of 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 on all timing differences at the reporting date except for certain exceptions. Unrelieved tax losses and other deferred tax assets are only recognised when it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Where investment properties are revalued, any tax liability that would arise if the property were disposed of at its fair value at the period end is recognised in the profit and loss for the period.

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

Leases

Leases are classified as finance leases wherever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the company. All other leases are classified as operating leases.

Fixed assets acquired under finance leases are capitalised and depreciated over the shorter of the lease term and expected useful life of the asset. Minimum lease payments are apportioned between the finance charge and the reduction in outstanding lease liability using the effective interest rate method. The related obligations, net of future finance charges, are included in creditors.

Demonstrator vehicles obtained under short term finance lease agreements are included in the balance sheet as stock at cost, less an allowance for impairment where required.

Rentals payable under operating leases are charged on a straight-line basis over the term of the lease unless the rental payments are structured to increase in line with expected general inflation, in which case the company recognises annual rent expense equal to amounts owed to the lessor.

Incentives received to enter into an operating lease are credited to the profit and loss account, to reduce the lease expense, on a straight-line basis over the period of the lease.

Employee benefits

Short-term employee benefits and contributions to defined contribution plans are recognised as an expense in the period in which they are incurred.

Financial instruments

Basic financial assets, including trade debtors and other receivables, cash and bank balances are recognised at transaction price less any impairment.

Short term trade creditors are measured at transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs and are measured subsequently at amortised cost using the effective interest method.

Provisions

Provisions are recognised when the company has a legal or constructive obligation arising from a past event, and it is probable that an outflow of the company's financial resources will be required to settle the obligation. Provisions are measured as management's best estimate of the amount with which the liability is expected to be settled. Where the impact is expected to be material, a provision would be discounted to reflect the time value of cash flows.

Consignment stock

Stocks held on consignment have been included on the balance sheet because the terms of the consignment agreement and location of the vehicles indicate that the principal benefits and risks of ownership rest with the company. The corresponding liability to the manufacturer has been included within current liabilities under stocking loans.

2.	CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported as assets, liabilities, revenues and expenses for the year. The key sources of estimation uncertainty are as follows:

Depreciation and amortisation of tangible fixed assets

Tangible fixed assets are depreciated over their useful lives taking into account residual values, where appropriate. The expected lives of assets and their residual values are assessed regularly and may vary depending on a number of factors including technological innovation, product life cycles, future market conditions and maintenance programmes.

Impairment of assets

Tangible fixed assets, intangible fixed assets, fixed asset investments, stock and debtors are all reviewed for evidence of impairment.

In connection with fixed assets factors taken into consideration include the economic viability, the expected future financial performance of the asset and, where appropriate, the viability and expected future performance of related cash generating units.

For stock, past and expected future sales, current stock levels and expected selling price less cost to complete and sell are all considered to determine the appropriate level of impairment provision.

Trade debtors are reviewed for evidence of impairment. Factors considered include ageing, past recovery rates, customer creditworthiness, and the stage and expected outcome of any recovery proceedings

Provisions

Determining the level of provisions required involves estimating expected future cash flows, including (where relevant) estimating inflationary increases and discount rates to be applied to recognise the time value of money. Market expectations regarding inflation and interest rates at the balance sheet date are taken into consideration in determining the level of provision required.