204 BAE Systems Annual Report 2017 Notes to the Company accounts 1. Preparation Basis of preparation The Company intends to continue to prepare its financial statements The financial statements of BAE Systems plc have been prepared on in accordance with FRS 101. a going concern basis, as discussed in the Directors’ report on page 81, In accordance with Section 408(3) of the Companies Act 2006, the and in accordance with Financial Reporting Standard (FRS) 101, ReducedCompany is exempt from the requirement to present its own income Disclosure Framework, issued in September 2015. The amendments tostatement. The amount of profit for the year of the Company is FRS 101 (2015/16 cycle), issued in July 2016, and FRS 101 (2016/17 cycle), disclosed in the Company statement of comprehensive income. issued in July 2017, have no impact on the Company. In preparing these financial statements, the Company applies the The financial statements have been prepared under the historical cost recognition, measurement and disclosure requirements of International convention, as modified by the revaluation of relevant financial assets Financial Reporting Standards (IFRS) as adopted by the EU (EU-adopted and financial liabilities (including derivative instruments). IFRS), but makes amendments where necessary in order to comply withSignificant accounting policies the Companies Act 2006 and has set out below where advantage of The significant accounting policies applied in the preparation of the FRS 101 disclosure exemptions has been taken: these individual financial statements are set out below. These policies – the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2, have been applied consistently to all the years presented, unless Share-based Payment; otherwise stated. – the requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), Investments in subsidiary undertakings and participating interests B64(j), to B64(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and Fixed asset investments in shares in subsidiary undertakings and B67 of IFRS 3, Business Combinations; participating interests are stated at cost less provision for impairment. – the requirements of paragraph 33(c) of IFRS 5, Non-current Assets Other significant accounting policies Held for Sale and Discontinued Operations; Other significant accounting policies are consistent with the Group – the requirements of IFRS 7, Financial Instruments: Disclosures; accounts and the table below references where they are disclosed. – the requirements of paragraphs 91 to 99 of IFRS 13, Fair Value Significant accounting policy Page Measurement; Loans and overdrafts 172 – the requirement in paragraph 38 of IAS 1, Presentation of Financial Retirement benefits 174 Statements, to present comparative information in respect of: paragraph 79(a)(iv) of IAS 1; paragraph 73(e) of IAS 16, Property, Provisions 184 Plant and Equipment; paragraph 118(e) of IAS 38, Intangible Assets; Prior year restatement and paragraphs 76 and 79(d) of IAS 40, Investment Property; The Company has restated comparatives for the year ended – the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 31 December 2016 to recognise a £250m increase in investments 40A, 40B, 40C, 40D, 111 and 134 to 136 of IAS 1, Presentation of in subsidiary undertakings and a corresponding increase in Financial Statements; non-distributable retained earnings, representing the cost of the – the requirements of IAS 7, Statement of Cash Flows; Free and Matching elements of the Share Incentive Plan awarded to – the requirements of paragraphs 30 and 31 of IAS 8, Accounting employees of subsidiary undertakings. The Company had previously Policies, Changes in Accounting Estimates and Errors; recognised the cost of these awards in the income statement, with – the requirements of paragraphs 17 and 18A of IAS 24, Related Party a corresponding credit in equity. Accordingly, investments and Disclosures; non-distributable retained earnings at 1 January 2016 have increased by £220m and profit for the year ended 31 December 2016 has – the requirements in IAS 24, Related Party Disclosures, to disclose increased by £30m. related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and – the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and 135(c) to 135(e) of IAS 36, Impairment of Assets. 2. Investments in subsidiary undertakings and participating interests £m Cost At 1 January 20171 8,413 Additions 45 At 31 December 2017 8,458 Impairment provisions At 1 January 2017 14 Impairment charge 5 At 31 December 2017 19 Net carrying value At 31 December 2017 8,439 At 31 December 20161 8,399 1. Restated to recognise an increase in investments in subsidiary undertakings representing the cost of the Free and Matching elements of the Share Incentive Plan awarded to employees of subsidiary undertakings.