Radiocommunications Agency Annual Report and Accounts 95/96

Accounts for the year 1995/1996

Notes to the Accounts

1. Accounting Policies

(a) Accounting Convention
   The accounts are prepared under the historical cost convention modified to include the revaluation of fixed assets to their value to the business by reference to current costs.

(b) Without limiting the information given, the accounts meet:

(i) the accounting and disclosure requirements of the Companies Acts;

(ii) best commercial accounting practices including accounting and financial reporting standards issued or adopted by the Accounting Standards Board; and

(iii) any disclosure and accounting requirements which the Treasury may issue from time to time in respect of accounts which are required to give a true and fair view.

(i) Income from licenses issued under the Wireless Telegraphy Act 1949 is recognised on the issue of a new licence, or on the renewal date.

(ii) Income from Government Departments is recognised on invoice date, provided that this is not earlier than the date from which the licence is provided.

(iii) Fees for the examination of Radio Officers are recognised on receipt.

(iv) Type approval testing and type approval certification fees are recognised on completion of the work.

(i) The threshold above which items are recorded as fixed assets is reviewed each year for all categories of asset.

(ii) The cost of time spent in constructing assets (including computer systems) is capitalised only where a clearly defined asset is created which will generate quantifiable income or cost savings over its anticipated useful life.

(iii) Depreciation is provided on a straight line method to write off the cost or valuation less any residual value of each asset evenly over its anticipated useful life as follows:

All assets, except for assets under construction, computer equipment and buildings, are revalued monthly by reference to a series of indices published by the Central Statistical Office. Computer equipment which is not revalued by reference to an index is recorded at a valuation reflecting its current replacement cost. Assets under construction are recorded at cost.

A sample of all assets, including computer equipment, is regularly checked and the book value of each asset is compared with an estimate of its current replacement cost. Where the difference is significant, the asset valuation is adjusted to reflect the estimate of its current replacement cost. The change in valuation is transferred to the revaluation reserve, as is the related backlog depreciation.

(e) Research and Development
Research and development expenditure is written off as incurred.

(f) Consumable Stores
The Agency has no significant stocks. Expenditure on consumable items such as fuel oil, stationery and small items held as spares or for repairs is written off as incurred.

(g) VAT
Most of the Agency's supplies are outside the scope of VAT. Input tax is not normally recoverable on inputs relating to such supplies. However, under Treasury directions, certain contracted-out services are eligible for recovery of VAT and the Agency recovers this quarterly in arrears. The remaining irrecoverable VAT is charged to the Income and Expenditure Account in the year in which it is incurred, except that which is capitalised as part of asset values.

(h) Cash
The Agency does not operate a bank account. Receipts are credited to the Agency's Vote account and remitted to the DTI's account at the Bank of England. Payments are made from the same account. The excess cash receipts for the year are surrendered to the DTI and debited directly to the Agency's General Reserve in accordance with Treasury guidance.

(i) Early Retirement Scheme
The DTI operates an Early Retirement Scheme which gives retirement benefits to certain qualifying employees, including those at its On-Vote Agencies. These benefits conform to the rules of The Principal Civil Service Pension Scheme. Since the DTI accepts full liability for the costs of these benefits until the normal retirement age of the employees retired under the Early Retirement Scheme, the Agency does not provide in its accounts for the cost of future pension payments under the Scheme.

(j) Notional charges
In accordance with Treasury guidance, notional items are charged to the Income and Expenditure Account as follows:

(i) Interest on capital employed (see note 6).

(ii) A notional insurance charge based on a formula advised from time to time by the Treasury.

(iii) A notional audit fee.

(k) Insurance
In accordance with Treasury guidance, the Agency does not generally purchase commercial insurance (but see also (j) (ii) above). Instead, it self-insures from its own resources for minor uninsured losses, but looks to the DTI as its insurer for major uninsured losses. Where the DTI meets material uninsured revenue losses on the Agency's behalf, the losses are accounted for as exceptional costs and the recoveries from the DTI as income in the Agency's accounts. Capital funding from the DTI for uninsured losses is accounted for initially as deferred income and is then credited to income over the lives of the related assets so as to match the depreciation charges on those assets each year.

(l) Operating leases
Rentals due under operating leases are charged over the lease term on a straight line basis or on the basis of actual rentals payable where this fairly reflects usage.

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