Tasty Regulatory News (TAST)

28 Sep 2007 07:03

Tasty PLC28 September 2007 Tasty plc Impact of the adoption of International Financial Reporting Standards Tasty plc ("Tasty", or "the Company") today announces that it has completedpreparations to adopt International Financial Reporting Standards ("IFRS"). Foraccounting periods commencing from 1 January 2007, Tasty will prepare accountsin line with IFRS. As part of the transition to IFRS, Tasty today presents itsincome statement comparative information for the year to 31 December 2006 andfor the 26 weeks ended 2 July 2006 under IFRS, together with restated balancesheets as at 1 January 2006, 2 July 2006 and 31 December 2006. This announcement provides explanations and reconciliations of the movementsbetween UK GAAP to IFRS for income statements for the year to 31 December 2006and the 26 weeks ended 2 July 2006 and on the balance sheets as at 1 January2006, 2 July 2006 and 31 December 2006. The principal changes to Tasty'sreported financial information are as follows:- • Lease premiums have been reclassified from fixed assets to pre-paid rental charges under current and non-current assets • Lease incentives will now be recognised over the full term of the lease • Deferred tax has been provided using the balance sheet liability method and recognising all temporary differences Tasty has historically prepared its accounts under UK General AcceptedAccounting Practice ("UK GAAP"). For accounting periods commencing after 1January 2007, Tasty will prepare its accounts under International FinancialReporting Standards ("IFRS") as adopted by the European Union. The firstresults to be issued under IFRS will be the interim financial statements for the26 weeks to 1 July 2007, however, the date of transition for Tasty is the 1January 2006 and comparative figures have therefore been restated accordingly.The first full set of financial statements to be issued under IFRS will be forthe 52 weeks to 30 December 2007. This announcement provides the adjusted balance sheets and income statements forTasty for the comparative periods to 2 July 2006 and to 31 December 2006,together with the reconciliation from UK GAAP to IFRS. It also sets out thesignificant accounting policy changes from those set out in the UK GAAPfinancial statements for year ended 31 December 2006. The figures in this document are based on those IFRS expected to be applicableat 30 December 2007 and the interpretation of those standards. IFRS are subjectto possible amendment by and the interpretive guidance from the InternationalAccounting Standards Board ("IASB") as well as the on-going endorsement andreview by the EU and are, therefore, still subject to further change. Thereforethese figures may require amendment before their inclusion in the IFRS financialstatements for the 52 weeks to 30 December 2007. Relationships to statutory accounts The financial information presented in this document is unaudited and does notcomprise statutory accounts within the meaning of section 240 of the CompaniesAct 1985. The statutory accounts for the year ended 31 December 2006, on whichthe auditors have issued an unqualified report, have been delivered to theRegistrar of Companies. First time adoption IFRS 1, "First-time Adoption of International Financial Reporting Standards"sets out the procedures that the Company must follow when it adopts IFRS for thefirst time as the basis for preparing financial statements. The Company isrequired to establish the IFRS accounting policies that it will adopt as at 30December 2007 and to apply these retrospectively to determine the IFRS openingbalance sheet at its date of transition, 1 January 2006. Presentation of Financial Information The primary statements within the financial information contained in thisannouncement have been presented in accordance with IAS 1, "Presentation ofFinancial Statements". However, this format and presentation may requiremodification as practice develops and in the event that further guidance isissued. Cash flow statement There are no material differences between the cash flow statement prepared underUK GAAP and the cash flow statement prepared under IFRS for any of the periodsconcerned, but rather only minor presentational changes. For this reason, nocash flow statements have been included within the conversion statement. Key impacts on changes in accounting policy a Pre-paid operating lease costs The Company incurs certain upfront costs in acquiring property leases. It haspreviously treated all such costs as additions to tangible fixed assets,depreciating them over the term of the lease in question. However, under IFRSadvance payments to landlords or lease premiums are more correctly defined aspre-paid operating lease costs. Accordingly, on transition such expenses havebeen reclassified from tangible fixed assets to prepaid lease costs. Theseprepaid charges are then amortised over the term of the lease and so this changein treatment has had no impact on amounts recorded in the income statement. b Lease incentives Under UK GAAP the Company's accounting policy with respect to lease incentives(primarily rent free periods) was to treat the value of the rent free periodfrom the first day of trading until rent is due to commence as deferred incomeand to credit it to the income statement evenly over the period to the firstrent review (normally five years). According to the provisions in SIC 15, underIFRS the value of rent free periods and all similar lease incentives must bespread evenly over the full term of the lease. This resulted in an increase inthe loss for the year ended 31 December 2006 of £78,000 and the recognition ofan additional £78,000 of deferred income in respect of lease incentives in thebalance sheet at that date. c Deferred taxation Under IAS 12 income taxes, deferred tax balances are calculated using thebalance sheet liability method with the result that certain deferred tax assetsand liabilities which would not be recognised under UK GAAP will be recognisedunder IFRS. An additional deferred tax asset of £15,000 has been recognised for the yearended 31 December 2006 in respect of the above accounting policy changes. Significant accounting policies Basis of accounting The restated financial statements and reconciliations shown above have beenprepared in accordance with all International Financial Reporting Standards(IFRS) that are expected to be adopted by the European Union (EU) at 30 December2007 and therefore comply with Article 4 of the EU IAS Regulation. Thedisclosures required by IFRS 1 concerning the transition from UK GAAP to IFRSare included. The figures in this document are based on those IFRS expected to be applicableat 30 December 2007 and the interpretation of those standards. IFRS are subjectto possible amendment by and interpretive guidance from the InternationalAccounting Standards Board ("IASB") as well as on-going endorsement and reviewby the EU and are, therefore, still subject to further change. Therefore thesefigures may require amendment before their inclusion in the IFRS financialstatements for the 26 weeks to 1 July 2007 and the 52 weeks to 30 December 2007. The preparation of financial statements in compliance with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of accounting policies and the recorded amounts of assets andliabilities, income and expenses. The assumptions are based on historicalexperience and various other factors that are believed to be appropriate to thecircumstances and form the basis of judgements about the carrying values ofassets and liabilities that are not otherwise readily determinable. Actualresults may differ from these estimates. The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below. Revenue Revenue represents amounts received or receivable for goods and servicesprovided in the normal course of business (net of VAT). Operating lease payments Payments made under operating leases are recognised in the income statement on astraight line basis. Pre-opening costs Property rentals and other related overhead expenses incurred prior to a newrestaurant opening are expenses in the income statement in the period that theyare incurred. Similarly, the costs of training new staff during the pre-openingphase are written-off as incurred. Share-based payments The Company has applied the requirements of IFRS 2 Share-based payment. The Company operates a share-based payment scheme under which share options aregranted to certain employees. The costs of equity-settled transactions aremeasured at fair value at the date of grant. Fair value is measured using theBlack-Scholes model. In determining fair value, no account is taken of anyvesting conditions, other than conditions linked to the price of the company'sshares (market-based conditions). The fair value determined at the grant date is then expensed on a straight lineover the vesting period, based on the Directors' best estimate of the number ofshares that will eventually vest and adjusted for the effect of non-market basedvesting conditions. The movement in the cumulative expense since the previousbalance sheet date is recognised in the Income Statement, with the correspondingincrease taken into equity. Operating profit Operating profit is stated after all expenses, including the profit or loss ondisposal of fixed assets, which are considered to be non-trading items, butbefore financial income or expenses. Non-trading items are items of income orexpenses which because of the nature and expected infrequency of events givingrise to them, merit separate presentation to allow shareholders to understandbetter the elements of financial performance in the year, so as to facilitatecomparison with prior periods and to assess better trends in financialperformance. Taxation The tax expense included in the Income Statement comprises both current anddeferred tax. Current tax is the expected tax payable on the taxable incomearising in the period reported on, calculated using tax rates enacted orsubstantively enacted as at the balance sheet date. Tax is recognised in the income statement except to the extent that it relatesto items recorded directly in equity, in which case it is recognised in equity. Deferred tax is provided using the balance sheet liability method, providing forall temporary differences between the carrying amounts of assets and liabilitiesrecorded for reporting purposes and the amounts used for tax purposes. Deferredtax is calculated on an undiscounted basis, at the tax rates that are expectedto apply when the liability is settled or the asset is realised. Deferred taxis charged or credited to the Income Statement, except when it relates to itemscharged or credited directly to equity, in which case deferred tax is also dealtwith in equity. The carrying value of deferred tax assets is reviewed at each balance sheet dateand reduced to the extent that it is no longer probable that sufficient taxableprofits will be available to allow all or part of the asset to be recovered. Property, Plant and Equipment Items of property, plant and equipment are stated at cost less the accumulatedcharge for depreciation and any recognised impairment losses. Cost comprisesthe aggregate amount paid and the fair value of any other consideration given toacquire the asset and includes costs directly attributable to making the assetoperate as intended. Depreciation is charged so as to write-off the cost over their estimated usefuleconomic lives. It is calculated at the following rates. Trademarks 10% per annum Leasehold improvements over the period of the lease Fixtures, fittings and equipment 10% per annum Land and buildings under construction are not depreciated. All property, plant and equipment are reviewed for impairment in accordance withIAS 36 Impairment of Assets, when there are indications that the carrying valuemay not be recoverable. Impairment The carrying values of the Company's assets are reviewed at each balance sheetdate to determine whether there is any indication of impairment. If any suchcondition exists, the recoverable amount of the asset is estimated in order todetermine the extent, if any of the impairment loss. An impairment loss isrecognised whenever the carrying value of an asset exceeds its recoverableamount and impairment losses are recognised in the income statement. Leases Leases are classified as finance leases whenever the terms of the lease are suchthat they transfer substantially all the risks and rewards of ownership to thelessee. All other leases are classified as operating leases. The Companycurrently has no finance leases. Assets leased under operating leases are not recorded on the balance sheet.Rental payments are charged directly to the income statement. Lease incentives,primarily rent-free periods, are capitalised and then systemically released tothe income statement over the period of the lease term. Payments made toacquire operating leases are treated as prepaid lease expenses and are amortisedover the period of the lease. Inventories Inventories are stated at the lower of cost and net realisable value. Cost isdetermined on a first-in, first-out basis. Net realisable value is based onestimated selling price less any further costs to be incurred up until the pointof sale. Trade receivables Trade receivables are measured at their nominal values reduced by anyappropriate allowances for irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and othershort-term, highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of changes in value. Trade payables Trade payables are measured at their nominal values. Equity Equity issued by the Company is recorded as amounts received less direct issuecosts. Financial Instruments The carrying amounts of cash and cash equivalents, trade receivables, otheraccounts receivable, trade payables and other accounts payable approximate totheir fair value. The Company does not hold or issue derivative financialinstruments. Tasty PlcReconciliation of movements between UK GAAP and IFRSConsolidated income statement for the year ended 31 December 2006 Under Under UK GAAP Adjustments IFRS £'000 £'000 £'000 Revenue 2,676 - 2,676 Cost of sales (1,598) - (1,598) Gross profit 1,078 - 1,078 Administration costs (a and b) (1,329) (78) (1,407) Operating profit (251) (78) (329) Finance income 77 - 77 Loss before tax (174) (78) (252) Income tax expense (c) 6 15 21 Loss for the financial period (168) (63) (231) Attributable to -Equity Shareholders (168) (63) (231) Earnings per shareBasic (0.83p) (1.14p)Diluted (0.83p) (1.14p) Tasty PlcReconciliation of movements between UK GAAP and IFRSConsolidated Balance Sheet as at 31 December 2006 Under Lease Lease Deferred Under UK GAAP Premiums Incentives Tax IFRS (a) (b) ( c)Notes £'000 £'000 £'000 £'000 £'000Non-current assetsIntangibles - trademarks 7 - - - 7Property, plant and equipment 3,517 (324) - - 3,193Prepaid operating lease charges - 311 - - 311Deferred tax asset 101 - - 15 116Rent deposits 197 - - - 197 3,822 (13) - 15 3,824 Current assetsInventories 82 - - - 82Trade and other receivables 27 - - - 27Prepayments & accrued income 205 - - - 205Prepaid operating lease charges 73 13 - - 86Cash and cash equivalents 4,003 - - - 4,003 4,390 13 - - 4,403 Total assets 8,212 - - - 8,227 Current liabilitiesTrade & other payables (741) - - - (741)Tax and social security (39) - - - (39)Accrual for lease incentives (31) - (7) - (38)Accruals & deferred income (265) - - - (265)Other creditors (273) - - - (273) (1,349) - (7) - (1,356)Non-current liabilitiesAccrual for lease incentives - - (71) - (71) Total liabilities (1,349) - (78) - (1,427) Net assets 6,863 - (78) 15 6,800 Capital and reservesattributable to equityshareholdersCalled-up share capital (2,601) - - - (2,601)Share premium account (3,732) - - - (3,732)Share option reserve (186) - - - (186)Merger reserve (992) - - - (992)Retained earnings 648 - 78 (15) 711 Capital and reserves (6,863) - 78 (15) (6,800) Movement in equityBalance as at 1 January 2006 (2,348) - - - (2,348)Loss for 52 weeks ended 31 December 2006 168 - 78 (15) 231New capital subscribed (4,391) - - - (4,391)Merger reserve (106) - (106)Share-base payments - credit to equity (186) - - - (186) Balance as at 31 December 2006 (6,863) - 78 (15) (6,800) Tasty PlcReconciliation of movements between UK GAAP and IFRSConsolidated income statement for the 26 weeks ended 2 July 2006 Under Under UK GAAP Adjustments IFRS £'000 £'000 £'000 Revenue 1,151 - 1,151 Cost of sales (660) - (660) Gross profit 491 - 491 Administration costs (422) - (422) Operating profit 69 - 69 Finance income 21 - 21 Profit before tax 90 - 90 Income tax expense (29) - (29) Profit for the financial period 61 - 61 Attributable to -Equity Shareholders 61 - 61 Earnings per shareBasic 0.31p 0.31pDiluted 0.31p 0.31p Tasty PlcReconciliation of movements between UK GAAP and IFRSConsolidated Balance Sheet as at 2 July 2006 Under Lease Lease Deferred Under UK GAAP Premiums Incentives Tax IFRS (a) (b) ( c)Notes £'000 £'000 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 1,541 (143) - - 1,398Prepaid operating lease charges - 137 - - 137Deferred tax asset 60 - - - 60Rent deposits 123 - - - 123 1,724 (6) - - 1,718 Current assetsInventories 25 - - - 25Prepayments & accrued income 249 - - - 249Prepaid operating lease charges 49 6 - - 55Cash and cash equivalents 1,167 - - - 1,167 1,490 6 - - 1,496 Total assets 3,214 - - - 3,214 Current liabilitiesTrade & other payables (60) - - - (60)Tax and social security (28) - - - (28)Accruals & deferred income (389) - - - (389)Other creditors (222) - - - (222) Total liabilities (699) - - - (699) Net assets 2,515 - - - 2,515 Capital and reservesattributable to equityshareholdersCalled-up share capital (2,774) - - - (2,774)Share premium account (159) - - - (159)Retained earnings 418 - - - 418 Capital and reserves (2,515) - - - (2,515) Movement in equityBalance as at 1 January 2006 (2,348) - - - (2,348)Profit for 26 weeks ended 2 July 2006 (61) - - - (61)New capital subscribed (106) - - - (106) Balance as at 2 July 2006 (2,515) - - - (2,515) Tasty PlcReconciliation of movements between UK GAAP and IFRSConsolidated Balance Sheet as at 1 January 2006 Under Lease Lease Deferred Under UK GAAP Premiums Incentives Tax IFRS (a) (b) ( c)Notes £'000 £'000 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 1,117 (146) - - 971Prepaid operating lease charges - 140 - - 140Deferred tax asset 95 - - - 95Rent deposits 123 - - - 123 1,335 (6) - - 1,329 Current assetsInventories 25 - - - 25Prepayments & accrued income 41 - - - 41Prepaid operating lease charges 45 6 - - 51Cash and cash equivalents 1,230 - - - 1,230 1,341 6 - - 1,347 Total assets 2,676 - - - 2,676 Current liabilitiesTrade & other payables (162) - - - (162)Tax and social security (44) - - - (44)Accruals & deferred income (104) - - - (104)Other creditors (12) - - - (12)Current tax liabilities (6) - - - (6) Total liabilities (328) - - - (328) Net assets 2,348 - - - 2,348 Capital and reservesattributable to equityshareholdersCalled-up share capital (1,942) - - - (1,942)Merger reserve (886) - - - (886)Retained earnings 480 - - - 480 Capital and reserves (2,348) - - - (2,348) Movement in equityBalance as at 1 January 2005 (1,296) - - - (1,296)Profit for 52 weeks ended 31 December 2005 (231) - - - (231)New capital subscribed (821) - - - (821) Balance as at 1 January 2006 (2,348) - - - (2,348) This information is provided by RNS The company news service from the London Stock Exchange