bat plc annual report 2007 - Notes on the accounts: Notes 17-20

Sub Navigation

17 Inventories

18 Income tax receivable and payable

Income tax balances shown on the Group Balance Sheet as current assets and current liabilities, while subject to some uncertainty as to the extent and timing of cash flows, are largely expected to be received or paid within 12 months of the balance sheet date for both 2007 and 2006.

19 Cash and cash equivalents

Cash equivalents mainly comprise short term deposits with an original maturity of three months or less. The carrying value of cash and cash equivalents approximates their fair value. The analysis of cash and cash equivalents has been restated so that all amounts accessible on demand or within one day are classified as cash and bank balances. Consequently, the 2006 amounts above for cash and bank balances have been restated from £484 million to £717 million, with a corresponding reduction in cash equivalents.

Cash and cash equivalents are denominated in the functional currency of the subsidiary undertaking or other currencies as shown below:

The currency in which cash and cash equivalents are held, together with the effective interest rates applicable to cash and cash equivalents are as follows:

At 31 December 2007, cash and cash equivalents of £nil (2006: £4 million) were pledged as collateral principally in respect of excise creditors.

In the Group Cash Flow Statement, net cash and cash equivalents are shown after deducting bank overdrafts, as follows:

Cash and cash equivalents include restricted amounts of £54 million (2006: £65 million).

20 Capital and reserves - reconciliation of movement in total equity
 

Use the scrollbar below to view the full content of this table  

Use the scrollbar below to view the full content of this table  

Details relating to the authorised and allotted share capital, and movements therein, are included in note 4.

Share premium account, capital redemption reserves and merger reserves comprise:

The share premium account includes the difference between the value of shares issued and their nominal value. The increase of £5 million (2006: £5 million) relates solely to ordinary shares issued under the Company’s share option schemes. These schemes are described in the Remuneration Report.

On the purchase of own shares as part of the buy-back programme, a transfer is made from retained earnings to the capital redemption reserve equivalent to the nominal value of shares purchased. As described in note 4, in 2006 a technical infringement of the Companies Act 1985 occurred in relation to £100 million of the £500 million shares purchased under the buy-back programme in the table above, which remained in the share capital as at 31 December 2006 shown above and were excluded from the transfer to the capital redemption reserve in that year. As these payments were ratified by the shareholders in 2007, in the table above the share capital is adjusted with a consequent transfer to the capital redemption reserve.

Shareholders’ funds are stated after deducting the cost of treasury shares which include £123 million (2006: £nil) for shares repurchased and not cancelled and £173 million (2006: £197 million) in respect of the cost of own shares held in employee share ownership trusts.

In 1999, shares were issued for the acquisition of the Rothmans International B.V. Group, and the difference between the fair value of shares issued and their nominal value was credited to merger reserves.

Movements in other reserves and retained earnings (which is after deducting treasury shares) shown above comprise:

Use the scrollbar below to view the full content of this table  

Use the scrollbar below to view the full content of this table  

The translation reserve is as explained in the accounting policy on foreign currencies.

The hedging reserve and the available-for-sale reserve are as explained in the accounting policy on financial instruments.

Of the amounts released from the hedging reserve during the year, gains of £5 million (2006: £5 million) and £9 million (2006: £15 million) were reported within revenue and raw materials and consumables respectively, together with a gain of £2 million reported in other operating expenses (2006: £1 million loss) and a gain of £26 million (2006: £4 million loss) reported within net finance costs.

Other reserves comprise:

(a) £483 million which arose in 1998 from merger accounting in a Scheme of Arrangement and Reconstruction whereby British American Tobacco p.l.c. acquired the entire share capital of B.A.T Industries p.l.c. and the share capital of that company’s principal financial services subsidiaries were distributed, so effectively demerging them; and

(b) in the Rothmans transaction noted above, convertible redeemable preference shares were issued as part of the consideration. The discount on these shares was amortised by crediting other reserves and charging retained earnings. The £90 million balance in other reserves comprises the accumulated balance in respect of the preference shares converted during 2004.