Notes to the consolidated financial statements

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Land and buildings
£m

Plant and machinery
£m

Assets in the course of construction
£m

Total
£m

Cost

 

 

 

 

At 1 April 2009

591

2 394

345

3 330

Additions at cost

2

12

68

82

Transfers on completion

6

44

(50)

Disposals and write-offs

(1)

(13)

(1)

(15)

Exchange and other movements

(20)

(88)

(17)

(125)

At 31 March 2010

578

2 349

345

3 272

Accumulated depreciation and impairments

 

 

 

 

At 1 April 2009

288

1 493

1

1 782

Depreciation charge

15

101

116

Impairment losses and write-downs

31

209

240

Disposals and write-offs

(1)

(13)

(14)

Exchange and other movements

(10)

(48)

(2)

(60)

At 31 March 2010

292

1 564

208

2 064

Net book value at 31 March 2010

286

785

137

1 208

Cost

 

 

 

 

At 1 April 2008

466

1 815

222

2 503

Additions at cost

6

15

208

229

Transfers on completion

27

134

(161)

Businesses sold

(6)

(32)

(38)

Disposals and write-offs

(18)

(37)

(6)

(61)

Exchange and other movements

116

499

82

697

At 31 March 2009

591

2 394

345

3 330

Accumulated depreciation and impairments

 

 

 

 

At 1 April 2008

219

1 088

1 307

Depreciation charge

18

94

112

Impairment losses

18

87

1

106

Businesses sold

(4)

(32)

(36)

Disposals and write-offs

(15)

(34)

(49)

Exchange and other movements

52

290

342

At 31 March 2009

288

1 493

1

1 782

Net book value at 31 March 2009

303

901

344

1 548

Additions to fixed assets includes capitalised borrowing costs of £2 million (2009 – £11 million).

Impairment losses

It is the Group’s policy to test assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

(a) Impact of changes to the EU Sugar Regime

The Group continues to monitor the impact of the announced changes to the EU Sugar Regime, which were implemented in July 2006 and significantly reduce both EU refined sugar prices, raw sugar prices, and EU subsidised exports of sugar.

The UK and Portuguese Sugars businesses are impacted by the changes to the EU Sugar Regime. Management’s impairment review of these businesses was based on internal forecasts of future cash flows for the next five years, a pre-tax discount rate of 11% (2009 – 11%) and a zero growth rate assumed in perpetuity. This did not result in an impairment in either the year ended 31 March 2010 or 31 March 2009.

Food & Industrial Ingredients, Europe is a major supplier of sweeteners which operates in competition to sugar throughout Europe. Following the disposal of five European starch plants in October 2007, the Group carried out an impairment review in respect of the remaining cash generating units at 31 March 2010. The recoverable amount was based on value in use, calculated based on estimated future cash flows using management’s internal forecasts of future margins for the next five years. The pre-tax discount rate used was 11% (2009 – 11%) and a zero growth rate assumed in perpetuity. Taking all factors into account management concluded that no further impairment or reversal of previous impairments was required.

(b) Other impairment reviews

Following a detailed analysis of end markets, in light of costs of around £70 million to complete and commission the plant in Fort Dodge, Iowa, and factoring in the risks associated with future returns from operating the plant, the Group has concluded that the plant is highly unlikely to be completed or commissioned in the foreseeable future. As a result, the facility has been mothballed. An impairment review has been carried out and as a result an impairment charge of £209 million against assets under construction (as part of the impairment charge of £217 million) has been recognised as an exceptional item. This exceptional item relates to the Food & Industrial Ingredients, Americas segment. The recoverable amount has been based on value in use, calculated using the expected cash flow approach, weighted for the potential timings of completion and commissioning the plant, and using management’s internal forecasts of future cash flows for five years, a pre-tax discount rate of 11% and a zero growth rate assumed in perpetuity.

Following a review of its portfolio of research and development projects, the Group decided to write down assets relating to operations in the Food & Industrial Ingredients, Americas segment resulting in an impairment write-down of £20 million being recognised in exceptional items.

The Group has carried out a further review of its sugar refining operation in Israel as a result of the deterioration of the margins driven by record high sugar prices and a surplus of EU beet sugar being exported into the Israel domestic market. The recoverable amount was based on value in use, calculated based on management’s internal forecasts of future cash flows for the remainder of the operation’s contractual life and a pre-tax discount rate of 13% (2009 – 13%). An impairment of £11 million (2009 – £9 million) was recognised in exceptional items in the year.

In the year ended 31 March 2009, the decision to mothball the McIntosh, Alabama, plant resulted in an impairment charge of £97 million being recognised.

Leased assets

Included in property, plant and equipment is plant and machinery held under finance leases with a net book value of £13 million (2009 – £16 million). During the year ended 31 March 2010, there were no additions recognised on the inception of finance leases (2009 – £1 million) and no impairment losses (2009 – £10 million) relating to leased assets of the Sucralose facility in McIntosh, Alabama.