32816-Lucy-Group-AR-2025 web ready spreads_FINAL

Principal Accounting Policies continued

FINANCIAL STATEMENTS

Employee benefits are provided elsewhere in the Group through defined benefit and defined contribution schemes in accordance with local labour laws. Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Significant management judgement When preparing the financial statements, management makes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements. Revenue recognition IFRS 15 requires significant judgements and estimates related to determining performance obligations within contracts with customers. Assumptions are also required in relation to determining appropriate measures of progress towards completion and how and when control of goods or services is transferred to the customer. Development expenditure Distinguishing the research and development phases of internally generated assets and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. Taxation Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Interest rate risk Interest rate risk arises on the Group’s variable rate borrowings. If deemed necessary, the treasury policy allows forward cover up to a maximum of 60% of total borrowings for periods of up to five years. This does not eliminate the risk but provides some certainty. Non-current assets held for sale Non-current assets or disposal groups comprising assets and liabilities that are highly probable to be recovered primarily through sale or distribution rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Group’s other accounting policies. Thereafter, generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost to sell. Financial assets and financial liabilities are recognised when the Group becomes party to the contractual provisions of the instrument. Inventories Inventories are valued at the lower of cost and net realisable value. Work in progress, including long-term contracts and goods for resale include attributable overheads. Net realisable value is the estimated selling price reduced by all costs of completion, marketing and distribution. Residential trading properties are carried in the statement of financial position at the lower of cost and net realisable value. In assessing net realisable value, the Group uses valuations carried out by its own in-house surveying team based on information supplied by local property consultants. Taxation The tax expense represents the sum of current and deferred taxes recognised in the financial year. Current tax payable or recoverable is based on the taxable profit for the period. Taxable profit differs from profit reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current tax is based on the results shown in the financial statements and is calculated using the tax rates and laws that have been enacted or substantively enacted by the reporting period date.

Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. The rate is based on tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited in the income statement except where it relates to items charged or credited in other comprehensive income or in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the income taxes levied in the same taxation authority on either the same entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis. Government grants Government grants are initially recognised in the statement of financial position as deferred income, or for grants related to assets only, by deducting the grant in arriving at the carrying amount of the assets when there is reasonable assurance that the entity will comply with the relevant conditions and the grant will be received. Subsequently, deferred income is released to the income statement on a systematic basis as the cost that the grant is intended to compensate is expensed.

The Group has elected to take advantage of the research and development expenditure credit (RDEC) introduced in the Finance Act 2013 in the UK. The credit is used to discharge the corporation tax liability for the Company in the period and if there is a remainder it can be surrendered to another Group company. The Group recognises research and development expenditure credit as an item of other income, taking advantage of the ‘above the line’ presentation. Cash In the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with maturities of three months. Short term highly liquid investments are measured at fair value. Cash and cash equivalents comprise cash balances, call deposits and investments in certain money market funds. The Group’s investments in money market funds can generally be converted to cash with less than one day’s notice and the risk of day-to-day changes in the value of the investments is considered to be insignificant. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement. Equity and reserves Share capital represents the nominal (par) value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date. Post-employment benefits The Group provides post-employment benefits through various defined contribution and defined benefit plans. In the United Kingdom the Group operates a pension scheme providing benefits based on final pensionable pay for eligible employees who joined on or before 10 April 2002. The pension cost of the defined benefit scheme is charged to the income statement so as to spread the cost of pensions over employees’ working lives with the Group. Defined contribution schemes include a Group Personal Pension plan, including auto enrolment. The pension costs of these schemes are charged as incurred.

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