TRUSTEES' REPORT AND ACCOUNTS 2014
22
NOTES TO THE ACCOUNTS
Notes to the accounts
YEAR ENDED 31 DECEMBER 2014
1 ACCOUNTING POLICIES
a) Basis of accounting
These financial statements have been prepared under the historical
cost convention, as modified by the revaluation of investments to
market value, and are in accordance with Accounting and
Reporting by Charities: a Statement of Recommended Practice
(SORP 2005) issued in February 2005, the Charities Act 2011 and
applicable United Kingdom accounting standards.
The particular accounting policies adopted are described below
and are consistent with previous years unless otherwise stated.
b) Consolidation
These accounts consolidate only the funds of the national RSPCA
and its subsidiary bodies (note 16). The consolidation is prepared on
a line by line basis.
The Group accounts do not consolidate the results of the 164
branches of the RSPCA which are independent charities, registered
separately with their own independent charity trustees and
charitable objects and are therefore not controlled by the Society.
The Society has taken advantage of the exemption contained in
FRS8, Related Party Transactions, where disclosure is not required
in the consolidated financial statements of intragroup transactions
and balances eliminated on consolidation. Unless otherwise stated,
the notes to the accounts refer to the Group and not the Society
as the Society balances are not materially different.
c) Properties
The accounts follow the transitional provisions contained in
FRS15, Tangible Fixed Assets. Accordingly, freehold and leasehold
properties, other than improvements to short leaseholds which are
shown at cost, are stated at valuations made in 1997 or 1999 with
subsequent additions at cost.
Properties relating to equity housing are owned by the Society,
which grants a lease at a peppercorn rent to any inspector
wishing to take advantage of the scheme. The inspector purchases
an investment in the equity of the property and any future change
in the value is shared between the Society and the inspector in
proportion to their shares in the property. The inspector's share
in an existing Society property, or an additional investment in an
equity property, is treated by the Society as sale proceeds for that
proportion of the property sold. Depreciation is charged on the
cost of the Society's equity share of the property using a 40-year
useful life. The inspector is entitled to purchase the remaining
equity owned by the Society in the property.
Unrealised losses arising on the revaluation of properties, where
there is an impairment below depreciated historical cost, are shown
in the statement of financial activities as resources expended. An
impairment review is performed whenever the Society becomes
aware that a significant event has occurred.
d) Computers and other equipment
Computers, computer software, equipment and motor vehicles,
other than those on operating leases, are capitalised where they
exceed £5,000.
e) Depreciation and provision for maintenance
Provision for depreciation is made on cost in respect of:
(i) leasehold interests in land, except those in excess of 40 years,
over the terms of the leases in equal annual instalments
(ii) completed freehold and leasehold buildings at the rate of 2.5
percent per annum
(iii) computers, other equipment and motor vehicles on a straight
line basis over their estimated useful lives, when new, of
between three and 10 years.
Based upon professional advice, provision is made for the
estimated cost of outstanding obligated major maintenance
work on the Society's leasehold properties.
f) Investments
Stocks and shares are included in the accounts at market value.
Donated and legacy investment properties consist of land
where development approval is being sought or the property is
being held in anticipation of increased value and are held at their
estimated current net realisable value. Unrealised gains and losses
arising on the revaluation of investments are, together with the
realised gains and losses arising on the sales of investments, shown
in the consolidated statement of financial activities as other
recognised gains.
g) Taxation
As a charity, the Society benefits from various exemptions from
taxation afforded by tax legislation and is not liable to corporation
tax on income or gains falling within those exemptions. Recovery is
made of tax deducted from income and from receipts under Gift
Aid, and partial recovery is also made of tax credits on UK dividend
income. The Society is also able to partially recover Value Added
Tax. Expenditure subject to VAT that is not recoverable by the
Society is recorded in the accounts inclusive of the VAT.
The Society is a charity within the meaning of Para 1 Schedule 6
Finance Act 2010. Accordingly, the Society is potentially exempt
from taxation in respect of income or capital gains within
categories covered by Chapter 3 of Part 11 of the Corporation
Tax Act 2010 or Section 256 of the Taxation of Chargeable Gains
Act 1992, to the extent that such income or gains are applied
exclusively to charitable purposes. The subsidiary trading
companies make qualifying donations of taxable profit to
the Society to the full extent allowable. Unless material any
corporation tax liability arising within the subsidiaries is included
within the resources expended of the Group.
h) Income
Incoming resources are included in the SOFA when the charity is
entitled to the income at the date of notification, provided that
sufficient information has been received to value the Society's
entitlement with virtual certainty. Bank interest and income from
fixed interest securities is accrued. Other investment income
is recognised when the Society's entitlement is irreversible.
Membership subscriptions are accounted for when received.
Legacies are deemed receivable from the date of notification,
provided that sufficient information has been received to enable
the Society to calculate its entitlement with virtual certainty.
The valuation method reflects the inherent uncertainty in that
a substantial proportion of legacy income is represented by
property and other investments whose value is subject to market
fluctuations until realised. Residuary legacies are valued in line with
these considerations.
Life interest legacies are not valued until conditions are met which