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Accounting developments

Forthcoming changes in IFRS

The following accounting standards and interpretations have not yet been adopted, but are expected to be adopted in future periods.

• Segment reporting

  IFRS 8 changes the reporting requirements for segmental reporting and will apply with effect from 1 April 2009. If IFRS 8 had been adopted in 2007/08, there would have been no change in business segments reported. However, we would not have had to report on geographical segments.

• Borrowing costs

  An amendment to IAS 23 on borrowing costs will require interest to be capitalised into the cost of assets under construction. We already follow this policy and so this will have no impact.

• Service concessions

  IFRIC 12 on service concessions, to be adopted from 1 April 2008, requires assets operated on behalf of a public authority as a concession, where the asset reverts back to the public authority at the conclusion of the arrangement, to be recognised as a financial or intangible asset depending on whether income is recovered from the public authority or from users.
  
  We do not operate any significant concessions of this type and so this is expected to have no impact.

• Customer loyalty programmes

  IFRIC 13, effective from 1 April 2008, requires the sale of goods or services and associated loyalty programmes to be accounted for as multi-element transactions. The separate elements will have to be fair valued and consideration allocated accordingly, which would defer recognition of an element of revenue.
  
  We do not have any material loyalty programmes of this nature and so this will have no impact.

• Pension assets and minimum funding

  IFRIC 14 on when net pension assets can be recognised in the balance sheet and on how to account for minimum funding requirements will apply with effect from 1 April 2008. In certain circumstances the recognition of an accounting surplus in a pension plan as an asset on the balance sheet may be restricted, or provision may be required for minimum funding requirements in excess of pension obligations recognised in the balance sheet.
  
  This is not expected to have a significant effect on National Grid as the accounting surpluses that could arise in the majority of our current pension plan arrangements would not be restricted.

• Presentation of financial statements

  Amendment to IAS 1, effective 1 April 2009, changes the presentation of financial information but does not affect the amount of reported earnings or assets and liabilities. The principal changes are: the statement of recognised income and expense must immediately follow the income statement and must include separate tax disclosure on each gain or loss recognised outside the income statement; the statement of changes in equity will be presented as a primary statement; and there will be an option to rename the primary statements.
  
  This will have a significant impact on the presentation of the 2009/10 financial statements as described above. However, there will be no impact on our results, assets or liabilities.

• Business combinations

  IFRS 3R, expected to be adopted 1 April 2010, makes a number of changes to business combination accounting including: consideration payments fair valued at acquisition date; subsequent consideration payments at fair value through the income statement; changes to calculation of goodwill; and all transaction costs expensed.
  
  IFRS 3R will be implemented prospectively and so will affect future acquisitions, possibly materially compared with how they would be accounted for under current standards. However, this change will have no impact on our current results, assets or liabilities.

• Non-controlling interests

  IAS 27R, expected to be adopted in 2010, requires transactions with non-controlling (minority) interests to be recorded in equity.
  
  We do not have any material minority interests and so this change will have no material impact.

• Share-based payments

  This amendment to IFRS 2, expected to be adopted 1 April 2009, clarifies the definition of vesting conditions and changes the accounting for cancellations. For cancellation, rather than reversing the previous expense any remaining expense will be accelerated.
  
  This will affect the way we account for our Save as You Earn share schemes, however, due to the low levels of cancellations by employees in the past, we do not anticipate that this is likely to have a material impact on future results.

• Financial instrument presentation

  Amendments to IAS 32 and IAS 1 require certain puttable financial instruments that impose an obligation to deliver a pro rata share of net assets on liquidation to be classified as liabilities.
  
  We currently have no such instruments and so this will have no impact.