Notes to the company financial statements

1 Principal accounting policies

The financial statements of Rexam PLC are prepared under UK GAAP using the historical cost convention as modified by the revaluation of certain financial instruments and in accordance with applicable accounting standards. As permitted by section 230 of the Companies Act 1985, the profit and loss account is not presented.

Foreign currencies

All exchange differences arising on foreign currencies are taken to the profit and loss account.

Interest

Interest on cash and cash equivalents and borrowings held at amortised cost is recognised in the profit and loss account using the effective interest method. Interest includes exchange differences arising on cash and cash equivalents and borrowings. Interest includes all fair value gains and losses on derivative financial instruments, and corresponding adjustments to hedged items under designated fair value hedging relationships, where they relate to financing activities and are recognised in the profit and loss account.

Retirement benefits

The pension rights of Rexam PLC employees are dealt with through a self administered scheme, the assets of which are held independently of the Group's finances. The scheme is a defined benefit scheme that is funded partly by contributions from members and partly by contributions from Rexam PLC and its subsidiaries at rates advised by independent professionally qualified actuaries. In accordance with FRS17, Rexam PLC accounts for its contributions as though it were a defined contribution scheme. This is because the underlying assets and liabilities of the scheme cover Rexam PLC and a number of its subsidiaries and it cannot be split between each subsidiary on a consistent and reasonable basis, as the scheme has a large number of members who were employed by companies which are no longer in existence or are no longer part of the Group. An actuarial valuation at a Group level on an FRS17 basis has not been performed, but a surplus at 31 December 2008 of 16m (2007: 68m) has been calculated in accordance with IAS19. Further details of the scheme and its accounting surplus can be found in note 24 to the consolidated financial statements.

Share based payment

Rexam PLC operates various share settled share option schemes. The services received from employees are measured by reference to the fair value of the share options. The fair value is calculated at grant date and recognised in the profit and loss account, together with a corresponding increase in shareholders' funds. Share settled share options granted directly to subsidiary company employees are treated as a capital contribution to the subsidiary. The capital contribution is measured by reference to the fair value of the share options and recognised as an increase in the cost of investment with a corresponding increase in shareholders' funds. The recognition of the fair value is based on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest. Vesting conditions, other than market conditions, are not taken into account when estimating the fair value. FRS20 has been applied to share settled share options granted after 7 November 2002. The Rexam Employee Share Trust holds shares in Rexam PLC which are presented in the balance sheet as a deduction from shareholders' funds.

Tangible fixed assets

Tangible fixed assets are stated in the balance sheet at cost less provision for depreciation. Depreciation is calculated to write off the cost, less estimated residual value, of tangible fixed assets over their expected lives by equal annual instalments. Depreciation is provided on all tangible fixed assets. Assumed lives vary according to the class of asset as follows:

Computer hardware and software 2 to 7 years
Fixtures and fittings 4 to 10 years

Investments in subsidiaries

Investments in subsidiaries are stated at cost less provisions for impairment where appropriate.

Dividends

Under FRS21, final ordinary dividends payable to the shareholders of Rexam PLC are recognised in the period that they are approved by the shareholders. Interim ordinary dividends payable are recognised in the period that they are paid. Dividends receivable are recognised when the Company's right to receive payment is established.

Financial instruments

Derivative financial instruments are measured at fair value. Derivative financial instruments used by the Company include interest rate swaps, cross currency swaps, forward foreign exchange contracts and forward aluminium commodity contracts.

Certain derivative financial instruments are designated as hedges in line with the Company's risk management policies. Hedges are classified as follows:

  1. Fair value hedges where they hedge the exposure to changes in the fair value of a recognised asset or liability.
  2. Cash flow hedges where they hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction.

For fair value hedges, any gain or loss from re-measuring the hedging instrument at fair value is recognised in the profit and loss account. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and similarly recognised in the profit and loss account.

For cash flow hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in reserves, with any ineffective portion recognised in the profit and loss account. When hedged cash flows result in the recognition of a non financial asset or liability, the associated gains or losses previously recognised in reserves are included in the initial measurement of the asset or liability. For all other cash flow hedges, the gains or losses that are recognised in reserves are transferred to the profit and loss account in the same period in which the hedged cash flows affect the profit and loss account.

Any gains or losses arising from changes in fair value of derivative financial instruments not designated as hedges are recognised immediately in the profit and loss account.

Borrowings are measured at amortised cost except where they are hedged by an effective fair value hedge, in which case the carrying value is adjusted to reflect the fair value movements associated with the hedged risk.

Debtors are measured at amortised cost less any provision for impairment. Debtors are discounted when the time value of money is considered material.

2 Employee costs and numbers

  2008
£m
2007
£m
Employee costs including directors:    
Wages and salaries 15 18
Social security 2 3
Share based payment 2 2
Retirement benefits 10 10
  29 33

For details of directors' remuneration see the Remuneration Report.

  2008
Number
2007
Number
Average employee numbers 131 130

3 Equity dividends

For details of equity dividends see note 10 to the consolidated financial statements.

4 Tangible assets

  Computer hardware and software
£m
Fixtures and fittings
£m
Total
£m
Cost
At 1 January 2008 13 2 15
Additions 5 5
Disposals (3) (3)
At 31 December 2008 15 2 17
Accumulated depreciation
At 1 January 2008 (6) (1) (7)
Disposals 3 3
Depreciation for the year (2) (2)
At 31 December 2008 (5) (1) (6)
 
Carrying value at 31 December 2008 10 1 11
Cost
At 1 January 2007 13 2 15
Additions 4 4
Disposals (4) (4)
At 31 December 2007 13 2 15
Accumulated depreciation
At 1 January 2007 (8) (1) (9)
Disposals 4 4
Depreciation for the year (2) (2)
At 31 December 2007 (6) (1) (7)
 
Carrying value at 31 December 2007 7 1 8
  Shares
£m
Loans
£m
Total
£m
At 1 January 2008 1,276 3,364 4,640
Exchange differences 687 687
Additions/advances 758 758
Disposals/repayments (385) (385)
At 31 December 2008 1,276 4,424 5,700
 
At 1 January 2007 1,002 2,677 3,679
Exchange differences 55 55
Additions/advances 282 949 1,231
Disposals/repayments (8) (317) (325)
At 31 December 2007 1,276 3,364 4,640

For details of the main subsidiaries of Rexam PLC see note 14 to the consolidated financial statements.

6 Debtors receivable within one year

  2008
£m
2007
£m
Trade debtors 2 4
Due from subsidiaries 2 5
Prepayments 3 2
Collateral deposits 42
Other debtors 2 3
  51 14