Annual Report and Accounts 2009

Notes to the Consolidated Financial Statements for the year to 31 December 2009

26. 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 2008 957.1 1,934.2   31.5 3.7 5.6 5.3 46.1
Dividends paid (107.9)  
Transfers to share premium account 4.5  
Share-based payment credit 6.0  
Cash cost of satisfying share options (0.9)  
Actuarial loss net of deferred tax (66.7)  
Deferred tax 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
New share capital subscribed 488.8  
Cancellation and disposal of treasury shares (247.5)  
Issuance of equity instruments   5.5 5.5
Share-based payment credit 1.0  
Actuarial loss as defined benefit
pension schemes
(141.8)  
Deferred tax asset recognised 87.6  
Transfer to retained earnings 488.8 (488.8)  
Exchange differences on translation of overseas operations, net of tax   (5.0) (5.0)
Increase in fair value of hedging derivatives   11.5 11.5
Other financing costs (0.5)  
Net loss for the year (640.4)  
Balance at 31 December 2009 385.5   31.5 29.3 5.6 10.3 76.7

Merger relief reserve

In accordance with Section 612 of the Companies Act 2006 the £488.8m premium on ordinary shares issued as part of the placing and open offer in June 2009 was initially recorded within the merger relief reserve, and subsequently transferred to the retained earnings.

The merger relief reserve is not distributable but can used to:

  • Make a bonus issue of fully paid shares;
  • Transfer to the retained earnings 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 retained earnings.

During 2008 £1,934.2m 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.

Other reserve
As detailed in Note 7, the Group issued 57.8m of warrants with a fair value of £5.5m. The full cost of the warrants was recognised in the Other reserve on their issuance.