Financial Statements

Notes to the Consolidated Financial Statementsfor the year to 31 December 2008

28. Reserves

Retained earnings
£m
Merger
relief reserve
£m
Capital redemption
reserve
Translation reserve
£m
Share-based payment tax reserve
£m
Other
£m
Total other reserves
£m
Balance at 1 January 2007 1,214.3 31.5 (19.1) 8.2 6.3 26.9
Dividends paid (117.3)
Transfers to share premium account 0.7
Share-based payment credit 0.6
Cash cost of satisfying share options (8.9)
Replacement options granted on acquisition of George Wimpey Plc 2.9
Premium on ordinary shares issued to acquire George Wimpey plc 1,934.2
Actuarial gains net of deferred tax 61.7
Transfer to retained earnings 1.0 (1.0) (1.0)
Net loss for the year (197.9)
Exchange differences on translation of overseas operations, net of tax 22.0 22.0
Increase in fair value of hedging derivatives 0.8 0.8
Decrease for the year (2.6) (2.6)
Balance at 31 December 2007 957.1 1,934.2 31.5 3.7 5.6 5.3 46.1
Dividend paid (107.9)
Transfer to share premium account 4.5
Share-based payment credit 6.0
Cash cost of satisfying share options (0.9)
Actuarial losses net of deferred tax (66.7)
Deferred tax asset write off (47.2)
Transfer to retained earnings 1,934.7 (1,934.2) (0.5) (0.5)
Exchange differences on translation of overseas operations, net of tax 50.3 50.3
Decrease in fair value of hedging derivatives (31.2) (31.2)
Net loss for the year (1,841.3)
Balance at 31 December 2008 838.3 31.5 22.8 5.6 4.8 64.7

Merger relief reserve

In accordance with Section 131 of the Companies Act 1985, the premium on ordinary shares issued on the merger with George Wimpey Plc was recorded as a merger relief reserve. The reserve is not distributable but can be used to:

  • Make a bonus issue of fully paid shares;
  • Transfer to the profit and loss account reserve an amount equal to the amount that has become realised by virtue of either:
    The disposal of the related investment; or
    An amount written off the related investment and charged against the profit and loss account.

During the year, £1,934.2m (2007: nil) was transferred to retained earnings to offset the write down charged to the profit and loss account of the investment to which the reserve related.

Other reserves

Capital redemption reserve

The capital redemption reserve arose on the historical redemption of parent Company shares, and is not distributable.

Translation reserve

Translation reserve consists of exchange differences arising on the translation of overseas operations. It also includes changes in fair values of hedging derivatives where such instruments are designated and effective as hedges of investment in overseas operations.

Share-based payment tax reserve

As explained in the statement of accounting policies, an expense is recorded in the Group's income statement over the period from the grant date to the vesting date of share options granted to employees. As there is a temporary difference between the accounting and tax bases, a deferred tax asset is recorded. The deferred tax asset arising is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the Company's share price at the balance sheet date) with the cumulative amount of the expense recorded in the income statement. If the amount of estimated future tax deduction exceeds the cumulative amount of the remuneration expense at the statutory tax rate, the excess is recorded directly in equity, in this share-based payment tax reserve.