Government refundable advances
Government refundable advances are reported in Trade and other payables in the balance sheet. Refundable advances include amounts advanced by Government, accrued interest and directly attributable costs. Refundable advances are provided to the Group to part- nance expenditures on speci c development programmes. The advances are provided on a risk sharing basis, i.e. repayment levels are determined subject to the success of the related programme. Interest is calculated using the e ective interest rate method.
Standards, revisions and amendments to standards and interpretations issued but not yet adopted
The Group does not intend to adopt any standard, revision or amendment before the required implementation date. At the date of authorisation of these nancial statements, the following standards which have not been applied in these nancial statements were in issue but not yet e ective (and in some cases had not yet been adopted by the EU): • IFRS 9 Financial Instruments (e ective from 1 January 2018) • IFRS 15 Revenue from contracts with customers (e ective from 1 January 2018) • IFRS 16 Leases (e ective from 1 January 2019). These standards and other revisions to standards and interpretations which have an implementation date in 2017 or therea er are still being assessed.
Share options granted to employees and share-based arrangements put in place since 7 November 2002 are valued at the date of grant or award using an appropriate option pricing model and are charged to operating pro t over the performance or vesting period of the scheme. The annual charge is modi ed to take account of shares forfeited by employees who leave during the performance or vesting period and, in the case of non-market related performance conditions, where it becomes unlikely the option will vest.
Signi cant judgements, key assumptions and estimates
Provisions for onerous or loss making contracts, warranty exposures, environmental matters, restructuring, employee obligations and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks speci c to the obligation. Any increase in provisions due to discounting, only recorded where material, is recognised as interest expense within other net nancing charges.
The Group’s signi cant accounting policies are set out above. The preparation of nancial statements, in conformity with IFRS, requires the use of estimates, subjective judgement and assumptions that may a ect the amounts of assets and liabilities at the balance sheet date and reported pro t and earnings for the year. The Directors base these estimates, judgements and assumptions on a combination of past experience, professional expert advice and other evidence that is relevant to the particular circumstance. Accounting policies where the Directors consider the more complex estimates, judgements and assumptions have to be made are those in respect of business combinations (note 30), post-employment obligations (note 24), derivative and other nancial instruments (notes 4b and 20), taxation (note 6), provisions (note 21) and impairment of non-current assets (note 11c). Details of the principal judgements, assumptions and estimates made are set out in the related notes as identi ed.
GKN plc Annual Report and Accounts