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ACCOUNTING POLICIES

The Group’s principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

Basis of preparation

The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS), International Financial Reporting Interpretation Committee (IFRIC) interpretations and those provisions of the Companies Act 2006 applicable to companies reporting under IFRS. The Group financial statements have been prepared under the historical cost convention other than certain assets which are at deemed cost under the transition rules, share based payments which are included at fair value and certain financial instruments which are explained in the relevant section below. A summary of the material Group accounting policies is set out below. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

Going concern

As highlighted in note 23 to the financial statements, the Group meets its day to day working capital requirements through the use of cash balances and overdraft facilities which are due for review on an annual basis. The current economic conditions create uncertainty, particularly over: (a) the level of demand for the Group’s products; (b) the exchange rate between sterling and the US dollar which has consequences for the cost of the Group’s raw materials; and (c) the availability of bank finance in the foreseeable future.

The Group’s forecasts and projections, taking account of reasonable possible changes in trading performance, show that the Group should be able to operate within the level of its current cash balances and debt facilities. These debt facilities consist of term and revolving credit loans, with an average maturity of four years and overdraft facilities scheduled for review, as usual, in April 2017. No matters have been drawn to the Group’s attention by its bankers to suggest that the facilities or the existing overdraft arrangements may not be forthcoming.

Basis of consolidation

The Group’s consolidated financial statements incorporate the financial statements of Wynnstay Group Plc (‘the Company’) and entities controlled by Wynnstay Group Plc (its ‘subsidiaries’) together with the Group’s share of the results of its associates and joint ventures. Subsidiaries are entities controlled by the Group. Control is achieved where the Group is exposed to, or has the rights to, variable returns through its power over the entity. Group inter-company transactions are eliminated in full. Results of subsidiary undertakings acquired are included in the financial statements from the effective date of control. The net assets, both tangible and intangible, of acquired subsidiary undertakings are incorporated into the financial statements on the basis of their fair value as at the effective date of control. All business combinations are accounted for by applying the acquisition method. Subsidiaries are entities where the Group has the power to govern the financial and operating policies, generally accompanied by a share of more than 50% of the voting rights. Subsidiaries are consolidated from the date on which control is assumed by the Group and are included until the date the Group ceases to control them. Associates are entities over which the Group has significant influence but not control, generally accompanied by a share of between 20% and 50% of the voting rights. Joint ventures are entities over which the Group has joint control. Investments in associates and joint ventures are accounted for using the equity method.

Revenue recognition

Revenue represents the invoiced value of sales which fall within Wynnstay Group’s ordinary activities. Revenue is measured at the fair value of the contract net of rebates excluding value added tax and after eliminating sales within the Group.

Agriculture

Revenue from the sale of goods is recognised when the Group has transferred the significant risks and rewards of ownership of goods to the buyer, for example, delivering products into the customer’s possession, and when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group.

Retail

Revenue from the sale of goods is recognised either at the point of sale through the till or when the Group has transferred the significant risks and rewards of ownership of goods to the buyer, for example, delivering products into the customer’s possession. and when the amount of revenue can be measured reliably and when it is probable that the economic benefits associated with the transaction will flow to the Group.

Non-recurring items

Non-recurring items that are material by size and/or by nature are disclosed on the face of the consolidated statement of comprehensive income and within a note to the financial statements as “exceptional items”. Management consider that the separate disclosure of non-recurring items helps provide a better indication of the Group’s underlying business performance.

Financial instruments

Financial assets and liabilities are recognised on the Company and Group’s consolidated balance sheet when the Company and/or Group becomes a party to the contractual provisions of the instrument. The main categories of financial instruments are:

Trade receivables

Trade and other receivables are recognised at fair value, less any impairment losses.

Investments

Investments are initially measured at cost. They are classified as either ‘availablefor- sale’, ‘fair value’, or ‘held to maturity’. Where securities are designated as at ‘fair value’ gains or losses arising from changes in fair value are included in the net profit or loss for the period. For ‘available-forsale’ investments, gains or losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period. Equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured by other means are held at cost.

Interest-bearing borrowings

Interest-bearing bank loans and overdrafts are initially recorded at fair value, net of attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between proceeds and redemption value being recognised in the Group Statement of Consolidated Income over the period of the borrowings on an effective interest basis.

Trade payables

Trade and other payables are recognised at fair value.

Equity Instruments

Equity instruments issued by the Group and/ or Company are recorded at the proceeds received, net of direct issue costs. An equity instrument is any contract that evidences a residual interest in the assets of the Group and/or Company after deducting all of its liabilities.

Derivative Financial Instruments and Hedging

The Group uses derivative financial instruments to hedge its exposure to foreign exchange, and commodity risks arising from day to day activities. The Group does not hold or issue derivative financial instruments for trading purposes, however, if derivatives do not qualify for hedge accounting they are accounted for as such.

Derivative financial instruments are recognised and stated at fair value. Where derivatives do not qualify for hedge accounting, any gains or losses on remeasurement are immediately recognised in the Group Statement of Consolidated Income. Where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge relationship and the item being hedged. In order to qualify for hedge accounting, the Group is required to document from inception the relationship between the item being hedged and the hedging instrument. The Group is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is performed at each period end to ensure that the hedge remains highly effective.

Derivative financial instruments with maturity dates of more than one year from the balance sheet date are disclosed as non-current.

Fair Value Hedging

Derivative financial instruments are classified as fair value hedges when they hedge the Group’s exposure to changes in the fair value of a recognised asset or liability. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Group Statement of Comprehensive Income together with any changes in the fair value of the hedged item that is attributable to the hedged risk.

Leases

Leases are classified as finance leases at inception where substantially all of the risks and rewards of ownership are transferred to the Group. Assets classified as finance leases are capitalised on the balance sheet and are depreciated over the expected useful life of the asset. The interest element of the rental obligations is charged to the Group Statement of Comprehensive Income over the period of the lease. Rentals paid under operating leases are charged to the Group Statement of Comprehensive Income on a straight-line basis over the term of the lease. Leasehold land is normally classified as an operating lease. Payments made to acquire leasehold land are included in prepayments at cost and are amortised over the life of the lease. Any incentives to enter into operating leases are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Investment Property

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at fair value.

Any gain or loss arising from the change in fair value is recognised in profit and loss. Rental income from investment property is accounted for on a receivable basis.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and any provision for impairment losses. Depreciation is provided at rates calculated to write off the cost less estimated residual value of fixed assets over their expected useful lives as follows:

Freehold property - 2.5% - 5% per annum straight line

Lease premium - over the period of the lease

Leasehold land and buildings - over the period of the lease

Plant and machinery and office equipment - 10% - 33% per annum straight line

Motor vehicles - 20% - 30% per annum straight line

Goodwill

Goodwill represents the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity at the date of the acquisition. At the date of acquisition, goodwill is allocated to cash generating units for the purpose of impairment testing. Goodwill is recognised as an asset and assessed for impairment annually. Any impairment is recognised immediately in the Group Statement of Comprehensive Income. Once recognised, an impairment of goodwill is not reversed.

Impairment of Assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes an estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is written down to its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use, and is considered for each individual asset. If the asset does not generate cash flows that are largely independent of those from other assets or groups of assets, the recoverable amount of the cash generating unit to which the asset belongs is determined. Discount rates reflecting the asset specific risks and the time value of money are used for the value in use calculation.

Employment Benefit Costs

The Group operates a defined contribution pension scheme. Contributions to this scheme are charged to the Group Statement of Comprehensive Income as they are incurred, in accordance with the rules of the scheme.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Where appropriate, cost is calculated on a specific identification basis. Otherwise inventories are valued using the first-in-firstout method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

Taxation Including Deferred Taxation

The income tax expense represents the sum of the current income tax and deferred income tax. Current income tax is based on the taxable profits for the year. Taxable profit differs from the profit as reported in the Group Statement of Comprehensive Income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability other than a business combination. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when related deferred income tax asset is realised or the deferred income tax liability settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Dividends

Final equity dividends to the shareholders of the Company are recognised in the period that they are approved by the shareholders. Interim equity dividends are recognised in the period that they are paid.

Share-based Payments

The Group issues equity-settled sharebased payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair value is measured by use of a valuation model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The movements in respect of equity-settled share-based payments are recognised in other reserves.

Investments

Investments held as fixed assets are shown at cost less provisions for impairment.

Cash and Cash Equivalents

Cash and cash equivalents, for the purposes of the consolidated cash flow statement, comprise cash at bank and in hand, money market deposits and other short term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are presented in borrowings within current liabilities in the balance sheet.

Foreign Currencies

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate ruling on the date of the transaction. Exchange gains and losses are recognised in the Group Statement of Comprehensive Income.

Employee Share Ownership Trust (“ESOP”)

The Company operates an employee share ownership trust it is accounted for as a separate entity, and therefore the assets, liabilities, income and cost of the ESOP are incorporated into the financial statements of the Group.

Significant Judgments, Key Assumptions and Estimates

Application of certain Group accounting policies requires management to make judgments, assumptions and estimates concerning the future as detailed opposite: Application of the “own use” Exemption

Forward contracts are entered into by the Group to purchase and/or sell grain and other agricultural commodities, and management judge that these forward commodity contracts are entered into for the Groups “own use” rather than as trading instruments when they are entered into. They continue to be held in accordance with the Group’s expected purchase, sale and/or usage requirements.

Valuation of Share-based Payments

The fair value of share-based payments is determined using valuation models and is charged to the Group Statement of Comprehensive Income over the vesting period. Estimations of vesting and satisfaction of performance criteria are required to determine fair value.

Impairment of Goodwill

The carrying value of goodwill must be assessed for impairment annually. This requires an estimation of the value in use of the cash generating units to which goodwill is allocated. Value in use is dependent on estimations of future cash flows from the cash generating unit and the use of an appropriate discount rate to discount those cash flows to their present value.

Provision for Impairment of Trade Receivables

The financial statements include a provision for impairment of trade receivables that is based on management’s estimation of recoverability. There is a risk that the provision will not match the trade receivables that ultimately prove to be irrecoverable.

Provision for Impairment of Inventories

The financial statements include a provision for impairment of inventories that is based on management’s estimation of recoverability. There is a risk that the provision will not match the inventories that ultimately prove to be impaired.

New Standards and Interpretations

The following adopted IFRSs have been issued but have not yet been applied by the Group in these financial statements. With the exception of IFRS 16 leases their adoption is not expected to have a material effect on the financial statements