TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with International Financial Reporting Standards as
adopted by the EU ("IFRS"), IFRIC interpretations and the Companies Act 1985 applicable to Companies
reporting under IFRS.

The financial statements have been prepared on the historical cost basis. The principal accounting policies
adopted are set out below.
Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and enterprises
controlled by the Company (its subsidiaries) made up to 31 December each year. The excess of cost of acquisition
over the fair values of the Group's share of identifiable net assets acquired is recognised as goodwill. Any
deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on
acquisition) is recognised directly in the income statement.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The costs of
an acquisition are measured as the fair value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the
acquisition date irrespective of the extent of any minority interest.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies
used into line with those used by other members of the Group.
All intra-group transactions, balances, and unrealised gains on transactions between group companies are
eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred.

Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the income statement because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible. The Group's liability for
current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction which affects
neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or
the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to
items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

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TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Taxation (cont)
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in
the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the
date of acquisition.
Goodwill on acquisition of subsidiaries is included as a non current asset.
Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is
recognised immediately in the income statement and is not subsequently reversed.
Goodwill is allocated to cash generating units for the purpose of impairment testing.
On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
Revenue recognition
Service revenue is measured at the fair value of the consideration received or receivable and represents
amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT
and other sales related taxes.
Revenue from the sale of goods is recognised when goods are delivered and title has passed.

Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding
liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the
relevant lease.
Benefits received and receivable as an incentive to enter an operating lease are also spread on a straight line
basis over the lease term.

Investments

Investments are included at cost less amounts written off.


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TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Borrowing costs
All borrowing costs are recognised in the income statement in the period in which they are incurred.
Pensions
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Share Based Payments
The Group issues equity-settled share based payments to certain employees and has applied the requirements of
IFRS2 "Share-based payments".

Equity settled share-based payments are measured at fair value at the date of the grant. Fair value is measured
using a Black-Scholes model. The fair value is expensed on a straight line basis over the vesting period, based
on the Group's estimate of shares that will eventually vest.

Foreign currencies
Transactions in currencies other than sterling, the presentational and functional currency of the Company, are
recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in
foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains
and losses arising on retranslation are included in the income statement for the period, except for exchange
differences on non-monetary assets and liabilities, which are recognised directly in equity, where the changes in
fair value are recognised directly in equity.
In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts (see
below for details of the Group's accounting policies in respect of such derivative financial instruments).
On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for
the period. Exchange differences arising, if any, are classified as equity and transferred to the Group's
translation reserve. Such translation differences are recognised as income or as expenses in the period in which
the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate.











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TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative
purposes, are stated in the balance sheet at cost less any subsequent accumulated depreciation.
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-
line method, on the following bases:
Plant and Machinery over 3-10 years
Short Leasehold Property Alterations over the lifetime of the lease

Fixtures, fittings and equipment over 3-10 years

Motor Vehicles over 3-5 years

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Internally-generated intangible assets ­ research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from the Group's business development is recognised only if
all of the following conditions are met:
·
an asset is created that can be identified;
·
it is probable that the asset created will generate future economic benefits; and
·
the development cost of the asset can be measured reliably

Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an
expense in the period in which it is incurred.
Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. (10 to 15
years)
Other intangible assets
Computer Software is stated at cost less any accumulated amortisation. The software is amortised over a period
of 5 years on a straight line basis.
Other intangible assets have been brought in on the acquisition of businesses and capitalised at a fair value.
The intangible assets are amortised over the relevant period, ranging from 2 to 10 years on a straight line basis.
Manufacturing schedules have been brought in on the acquisition of businesses and capitalised at a fair value.
The intangible assets are amortised over 10 years on a straight line basis.

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TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment of property, plant and equipment and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an
indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately,
unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated
as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where
applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Cost is calculated using the weighted average method. Net realisable value
represents the estimated selling price less all estimated costs to completion and costs to be incurred in
marketing, selling and distribution.

Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group has
become a party to the contractual provisions of the instrument.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand less short term bank overdrafts.

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TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Financial instruments (continued)

Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets
of the group after deducting all of its liabilities.

Convertible loan notes
Convertible loan notes are regarded as compound instruments, consisting of a liability component and an
equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing
market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the
convertible loan notes and the fair value assigned to the liability component, representing the embedded
option to convert the liability into equity of the Group, is included in equity.
Issue costs are apportioned between the liability and equity components of the convertible loan notes based on
their relative carrying amounts at the date of issue. The portion relating to the equity component is charged
directly against equity.

Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
Derivative financial instruments and hedge accounting
The Group transacts derivative financial instruments to manage the underlying exposure to foreign exchange
risks. The Group does not transact derivative financial instruments for speculative purposes. Derivative
financial assets are included in the balance sheet at fair value. Changes in fair value are recognised directly in
equity where they qualify for hedge accounting because they have been designated as hedges of future cash
flows, otherwise they are recognised in the income statement as they arise.

Government grants
Government grants towards staff re-training costs are recognised as income over the periods necessary to
match them with the related costs and are deducted in reporting the related expense.
Government grants relating to property, plant and equipment are treated as deferred income and released
to profit and loss over the expected useful lives of the assets concerned.

Segmental reporting
A business segment is a group of assets and operations that provide a product or service and that is
subject to risks and returns that are different from other business segments. A geographic segment is a
group of assets and operations that provide a product or service within a particular economic environment
and that is subject to risks and returns that are different from segments operating in different economic
environments.

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TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances. The resulting accounting estimates and assumptions will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Goodwill
The recoverable amount of cash generating units are determined on value in use calculations. These
calculations require the use of estimates, including management's expectations of future revenue growth,
operating costs and profit margins for each cash generating unit and a discount rate in order to calculate present
value.

Intangible assets
Amortisation of intangible assets is charged to the income statement on a straight line basis over the useful
economic lives of each intangible asset. The Directors review the assumptions made at the time of acquisitions
in the light of current evidence in the market, and estimated useful economic lives and revisited the carrying
value of each intangible asset. Significant changes in the carrying values assessed are charged through the
income statement as an impairment.

Trade receivables
The Group regularly assesses the recoverability of its trade receivables based on a range of factors including
the age of the receivable, creditworthiness of the customer, any credits required to release payments, and
changes in that customer's access to credit to fund their purchases. When determining the recoverability of an
account the Group makes estimations as to the financial condition of each customer, their importance in
providing a route to market, any debt collection strategy in place and their ability to subsequently make
payment or provide other future revenue benefits.

Inventories
In accordance with IAS2 the group regularly reviews its inventory to ensure it is carried at the lower of cost or
net realisable value. The management constantly reviews slow moving and obsolete items arising from
changes in the product mix demanded by customers, reductions in overall volumes, supplier failures and
strategic resourcing decisions. Obsolescence provisions are calculated based on current market values and
future sales of inventories. In situations where market demand changes, significantly altering production
volumes, inventories are reviewed to ensure that components have a realistic likelihood of being used in
current models in a reasonable timeframe. If this review identifies significant levels of obsolete inventory, this
obsolescence is charged to the income statement as an impairment.
Adoption of International accounting standards
IFRS 2 (Amendment) "Share-based payment" (effective for periods commencing on or after 1 January
2009).
This amendment clarifies that vesting conditions are service conditions and performance conditions
only and that all cancellations, whether by the entity or by other parties, should receive the same accounting
treatment. Management do not believe that the impact of the change in disclosure will be significant
IFRS 3 (Revised) "Business combinations" (effective for business combinations occurring in accounting
periods beginning on or after 1 July 2009).
This standard continues to apply the acquisition method to
business combinations. However, it introduces a number of changes that will impact the amount of goodwill
recognised, the reported results in the period that an acquisition occurs, and future reported results. The Group
will apply this standard from 1 Jan 2010 as applicable.
IFRS 8 `Operating Segments' (effective for periods commencing on or after 1 January 2009). IFRS 8 introduces new disclosure requirements for segmental information and supersedes IAS 14 "Segmental
Reporting". Management do not believe that the impact of the change in disclosure will be significant.

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TANFIELD GROUP PLC
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CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
IAS 1 (Revised) "Presentation of financial statements" (effective for annual periods beginning on or
after 1 January 2009).
The new standard separates owner and non-owner changes in equity. The statement of
changes in equity will include only details of transactions with owners, with non-owner changes in equity
presented as a single line. In addition, the Standard introduces the statement of comprehensive income which
presents all items of recognised income and expense, either in one single statement, or in two linked
statements. The Group will apply this revision to IAS 1 from 1 January 2009 and is currently evaluating
whether it will present one or two statements.
IAS 23 (Amendment) "Borrowing costs" (effective for annual periods beginning on or after 1 January
2009).
This amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of that asset, removing the option to
immediately expense those borrowing costs. The group currently has no borrowing costs.
IFRS 1 (Amendment) "First-time adoption of IFRSs" and IAS 27 (Amendment) "Consolidated and
Separate Financial Statements" (effective for annual periods beginning on or after 1 January 2009).
The amendments to IFRS 1 allows an entity to determine the cost of investments in subsidiaries, jointly controlled
entities or associates in its opening IFRS financial statements in accordance with IAS 27 or using a deemed
cost. The amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled entity or associate
to be recognised in the income statement in the separate financial statements. The Group will apply these
amendments from 1 January 2009. This will have no impact on the Company as the financial statements are
already prepared under IFRS.