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Chapter 5: Annual Accounts

Notes to the accounts

1. Accounting Policies

The financial statements have been prepared in accordance with the Resource Accounting Manual issued by HM Treasury. The particular accounting policies adopted by SCS are described below. They have been applied consistently in dealing with items considered material in relation to the accounts.

1.1 Basis of Accounting

These accounts have been prepared in accordance with the historical cost convention modified to account for the revaluation of fixed assets at their value to the agency by reference to their current costs.

1.2 Tangible Fixed Assets

Land & buildings

All of the freehold properties were valued as at 31 March 2004 by Colliers Conrad Ritblat Erdman (Chartered Surveyors). All of the valuations have been undertaken on the under-noted basis in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. All owner occupied courthouses are considered to be specialised operational properties and valuations are therefore on the basis of Depreciated Replacement Cost (DRC). The open market value of these properties is substantially lower.

The sources of information and assumptions made in producing the various valuations are set out in the Valuation Certificate, which is not published within the Annual Report and Accounts. The valuation figures incorporated in the accounts are the aggregate of separate valuations of parts of the portfolio, not a valuation or apportioned valuation of the portfolio valued as a whole.

Departmental estate is treated as an asset of the Agency, although legal ownership rests with the Scottish Ministers. This reflects the Agency’s position as the principal beneficial user of the property.

Other tangible assets have been stated at current cost as at 31 March 2004 using the National Statistics price indices for current cost accounting to take account of specific price changes.

Internally developed software is valued at cost.

The threshold for capitalisation of tangible fixed assets is £5,000. Assets (excluding buildings) that are purchased in a single transaction are grouped together and capitalised if the cost is above £5,000.

1.3 Depreciation

Depreciation is provided on a straight-line basis at rates calculated to write off
the revalued cost, less estimated residual value, of each asset as follows:

Building Structure - up to 100 years
Fixed Fittings - up to 50 years
Air treatment/ventilation - up to 20 years
Electrical - up to 35 years
Other Building Components - up to 30 years
Computers - 3 years
Computer Software - up to 10 years
Loose Furniture, fittings & equipment - 10 years

Freehold land is not depreciated.

1.4 Operating Income

The Agency is not a trading organisation. Income comprises primarily court fees for civil cases that are normally paid in advance. No adjustment has been made where fees have been paid in advance for pending cases. Fines are collected by the courts and are paid over to the Scottish Consolidated Fund. These are not accounted for as part of the income of the Agency.

1.5 Value Added Tax

Irrecoverable VAT is charged to the Income and Expenditure Account in the year in which it is incurred, apart from that which is capitalised as part of asset values. Recoverable VAT is deducted from the expenditure to which it relates.

1.6 Capital charge

A charge, reflecting the cost of capital utilised by SCS is included in operating costs. The charge is calculated at the Government’s standard rate of 3.5% (2002/3 – 6%) in real terms on all net assets.

1.7 Operating Leases

Rentals payable under operating leases are charged to the Income and Expenditure Account on a straight-line basis over the term of the lease.

1.8 Notional charges

Certain central costs and overheads (auditor’s remuneration and elements of cost of capital) are charged on a notional basis to Scottish Court Service and they are charged to the Income and Expenditure account and credited as a movement on the general fund.

1.9 Foreign currency transactions

Transactions that are denominated in a foreign currency are translated into sterling at the exchange rate ruling on the date of each transaction, except where rates do not fluctuate significantly, in which case an average rate for a period is used.