Financial statements Accounting Policies continued For the 52 weeks ended 26 June 2021 EXPENSES Social security contributions payable in connection with the Financial income and expenses grant of the share options are considered an integral part Financial income and expenses comprise interest payable on of the grant itself, and the charge will be treated as a cash- borrowings calculated using the effective interest method, settled transaction. interest receivable on funds invested and related foreign exchange gains and losses. FOREIGN CURRENCIES Transactions in foreign currencies are recorded at the Retirement benefits prevailing rate at the date of the transaction. Monetary The Group operates a defined contribution pension plan assets and liabilities denominated in foreign currency are using a third-party provider. Obligations for the contributions translated at the rates ruling at the Consolidated Statement to this plan are recognised as an expense in the Consolidated of Financial Position date. Resulting exchange gains or losses Income Statement as incurred. are recognised in the Consolidated Income Statement for the period in financial income and expenses, except when Share-based payments deferred as qualifying cash flow hedges. The Group operates a number of equity-settled, share-based TAXATION compensation plans, under which the entity receives services Tax on the profit or loss for the period comprises current from employees as consideration for equity instruments and deferred tax. Tax is recognised in the Consolidated (options) of the Group. The fairvalue of the employee Income Statement except to the extent that it relates to items services received in exchange for the grant of the options is recognised directly in equity, in which case it is recognised in recognised as an expense. The total amount to be expensed equity. is determined by reference to the fair value of the options granted: • Including any market performance condition (for example, Current tax represents the expected tax payable on the an entity’s share price); taxable income for the period, using tax rates enacted or substantively enacted at the Consolidated Statement of • Excluding the impact of any service and non-market Financial Position date, together with any adjustment totax performance vesting conditions (for example, profitability, payable in respect of previous periods. sales growth targets and remaining an employee of the entity over a specified time period); and Deferred tax is provided using the Statement of Financial • Including the impact of any non-vesting conditions (for Position liability method, providing for temporary differences example, the requirement for employees to save). between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for Non-market performance and service conditions are taxation purposes. Deferred tax is determined using tax rates included in assumptions about the number of options that (and laws) that have been enacted or substantively enacted are expected to vest. The total expense is recognised over at the Consolidated Statement of Financial Position date and the vesting period, which is the period over which all of the are expected to apply when the related deferred tax asset is specified vesting conditions are to be satisfied. realised or the deferred tax liability is settled. In addition, in some circumstances employees may provide A deferred tax asset is recognised only to the extent that it is services in advance of the grant date and therefore the probable that future taxable profits will be available against grant date fair value is estimated for the purposes of which the asset can be recognised. recognising the expense during the period between service commencement period and grant date. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets At the end of each reporting period, the Group revises its against current tax liabilities and when they relate to income estimates of the number of options that are expected to vest taxes levied by the same taxation authority on either the based on the non-market vesting conditions. It recognises taxable entity or different taxable entities where there is an the impact of the revision to original estimates, if any, in intention to settle the balances on a net basis. the Consolidated Income Statement, with a corresponding adjustment to equity. DIVIDENDS Dividends are recognised as a liability in the period in which When options are exercised, the Company either issues new they are approved such that the Company is obligated to pay shares, or uses treasury shares purchased for this purpose. the dividend. For new issued shares, the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and the share premium account. 192 DUNELM GROUP PLC ANNUAL REPORT & ACCOUNTS 2021