ACCOUNTS - Final Accounts
ACCOUNTS - Final Accounts
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Registered number:
For the Year Ended
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Cosatto Limited
Company Information
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Cosatto Limited
Contents
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Cosatto Limited
Strategic report
For the Year Ended 31 August 2018
The Directors present the Strategic Report for the year ended 31 August 2018.
Against the backdrop of the wider retail climate difficulties, the nursery retail sector is also witnessing significant change which has adversely affected business performance in the year.
The loss of an export distributor, the administration and eventual closure of Toys R Us stores, combined with the outcome of the Mothercare’s Company Voluntary Agreement (CVA) proposals resulting in store closures and the restructuring of the Mothercare business resulted in a decline in turnover from £14.265m to £10.791m. Despite the reduction in turnover, Gross Profit was maintained at 49%. The Directors have taken various steps to reduce the cost base and to resize the business for the lower levels of turnover. In the year, Administrative Expenses were reduced from £5.424m to £4.476m. Operating Profit reduced from £542k to a £1k loss. At the same time, new product development continued with several new products coming to the market in early 2019. These new products, plus a design collaboration with Paloma Faith and a focus on export growth provide opportunities for the successful development of the business. The poor trading has caused various challenges, largely because of the overstocked position resulting from the decline in sales. The company’s bankers have been and continue to be supportive as the business works its way through these challenges. Despite a disappointing year and the future uncertainty surrounding the eventual outcome of Brexit, the Directors are confident that the underlying business remains strong.
The company finances its operations through a mixture of retained profits and where necessary through borrowings facilities to fund expansion and capital expenditure.
The management’s objectives are to: - Retain sufficient liquid funds to enable it to meet its day to day obligations as they fall due whilst maximising returns on funds; and - minimise the company's exposure to fluctuating interest rates when seeking new borrowings; and - match the repayment schedule of any external borrowings with expected future cash flows expected to arise from the company's trading activities and - minimise the company exposure to fluctuating exchange rates by entering into forward foreign exchange contracts.
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Cosatto Limited
Strategic report (continued)
For the Year Ended 31 August 2018
The company's financial key performance indicators are as follows:
2018 2017 Turnover growth -24.3% 0.6% Margin 49.6% 49.4% Working capital days 145 181 Profit per employee £-1.25k £8k
Other key performance indicators measured by the company are as follows:
- Product Return Rates. - Employee Engagement Scores. - Customer Feedback Scores. - Social Media Following.
This report was approved by the board and signed on its behalf.
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Cosatto Limited
Directors' report
For the Year Ended 31 August 2018
The directors present their report and the financial statements for the year ended 31 August 2018.
The directors are responsible for preparing the strategic report, the directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgments and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The loss for the year, after taxation, amounted to £78,000 (2017 - profit £380 thousand).
The directors do not recommend the payment of a final dividend (2017 - £nil).
The directors who served during the year were:
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Cosatto Limited
Directors' report (continued)
For the Year Ended 31 August 2018
The financial statements have been prepared on a going concern basis. The directors have prepared forecasts for a period of at least 12 months from the date of approval of these financial statements. The Company’s bankers continue to be supportive as indicated by the fact that the Company has recently agreed renewal of its facilities for a further twelve months from the date of approval of these financial statements. The Company is half-way through its three year invoice discounting facility agreed.
The forecasts indicate that the company will be able to operate within the terms of the agreed facilities for the foreseeable future. If the actual level of sales were to fall significantly below the level assumed in the forecasts then the Company may not be able to take full advantage of the invoice discounting facility available. In this case additional or alternative funding may be required.
Each of the persons who are directors at the time when this directors' report is approved has confirmed that:
There have been no significant events affecting the Company since the year end.
The auditors, Hurst & Company Accountants LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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Cosatto Limited
Independent Auditors' Report to the Shareholders of Cosatto Limited
We have audited the financial statements of Cosatto Limited (the 'Company') for the year ended 31 August 2018, which comprise the statement of comprehensive income, the statement of financial position, the statement of cash flows, the statement of changes in equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
∙the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
∙the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditors' report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
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Cosatto Limited
Independent Auditors' Report to the Shareholders of Cosatto Limited (continued)
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
As explained more fully in the directors' responsibilities statement on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.
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Cosatto Limited
Independent Auditors' Report to the Shareholders of Cosatto Limited (continued)
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditors
Lancashire Gate
21 Tiviot Dale
Stockport
Cheshire
SK1 1TD
23 May 2019
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Cosatto Limited
Statement of comprehensive income
For the Year Ended 31 August 2018
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Cosatto Limited
Registered number: 06529629
Statement of financial position
As at
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 12 to 30 form part of these financial statements.
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Cosatto Limited
Statement of changes in equity
For the Year Ended 31 August 2018
Statement of changes in equity
For the Year Ended 31 August 2017
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Cosatto Limited
Statement of cash flows
For the Year Ended 31 August 2018
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
Cosatto Limited is a private Company limited by members capital incorporated in England. The address of the registered office and principal place of business is Bentinck Mill, Bentinck Street, Farnworth, Bolton, BL4 7EP.
The nature of the Company's operation and its principal activity is that of development, marketing and distribution of children's nursery related products.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
The financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of these financial statements, the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future. The directors have prepared forecasts for a period of at least 12 months from the date of approval of these financial statements.
The Company’s bankers continue to be supportive as indicated by the fact that the Company has recently agreed renewal of its facilities for a further twelve months from the date of approval of these financial statements. The Company is half-way through its three year invoice discounting facility agreed. The directors have prepared forecasts for a 12 month period from the date of approval of these financial statements. The forecasts indicate that the Company will be able to operate within the terms of the agreed facilities for the foreseeable future. Given the uncertain economic outlook and challenging retail environment, the company’s end markets are expected to remain very challenging over the next 12 months. These conditions make forecasting extremely difficult and there is the possibility that the company’s actual trading performance during the coming year may be different from management’s expectations. If the actual level of sales were to fall significantly below the level assumed in the forecasts then the Company may not be able to take full advantage of the invoice discounting facility available. In this case additional or alternative funding may be required. Taking all factors into account, including the uncertainties referred to above, the directors believe that it is appropriate to prepare the financial statements on a going concern basis.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
2.Accounting policies (continued)
Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income except when deferred in other comprehensive income as qualifying cash flow hedges.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when all of the following conditions are satisfied:
Rentals income from operating leases is credited to the statement of comprehensive income on a straight line basis over the term of the relevant lease.
Rentals paid under operating leases are charged to the statement of comprehensive income on a straight line basis over the lease term.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
2.Accounting policies (continued)
Finance costs are charged to the statement of comprehensive income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in the statement of comprehensive income when they fall due. Amounts not paid are shown in accruals as a liability in the statement of financial position. The assets of the plan are held separately from the Company in independently administered funds.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the statement of financial position date, except that:
Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
Goodwill
Goodwill represents the difference between amounts paid on the cost of a business combination and the acquirer’s interest in the fair value of its identifiable assets and liabilities of the acquiree at the date of acquisition. Subsequent to initial recognition, Goodwill is measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is amortised on a straight line basis to the statement of comprehensive income over its useful economic life which is 20 years.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
2.Accounting policies (continued)
At each reporting date the Company assesses whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is determined which is the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying amount exceeds the recoverable amount.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the statement of comprehensive income.
Investments in unlisted Company shares, whose market value can be reliably determined, are remeasured to market value at each balance sheet date. Gains and losses on remeasurement are recognised in the statement of comprehensive income for the period. Where market value cannot be reliably determined, such investments are stated at historic cost less impairment.
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a weighted average basis.
At each reporting date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
2.Accounting policies (continued)
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
In the statement of cash flows, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Company's cash management.
Short term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to the statement of comprehensive income in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the statement of financial position date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the statement of financial position.
The Company enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors and loans from banks and other third parties.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the statement of comprehensive income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
2.Accounting policies (continued)
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the reporting date.
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or income as appropriate. The Company has applied hedge accounting for interest rate and foreign exchange derivatives.
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
The preparation of the financial statements requires the Directors to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimates means that actual outcomes could differ from those estimates. The following material judgements have had the most significant effect on amounts recognised in the financial statements.
Derivatives The Company has entered into forward currency contracts to manage its exposure to foreign exchange cash flow risk on its overseas purchases. These derivatives are measured at fair value at each balance sheet date, and where material, these are recognised in the financial statements. The fair value is measured as the mark to market value, being the difference between the change in value of the hedged item and the change in value of the hedging instrument. To the extent the hedge is effective, movements in fair value are recognised in comprehensive income and presented within a fair value hedging reserve. Any ineffective portions of these movements are also recognised in profit or loss for the period. As at 31 August 2018, the fair value of such derivatives is immaterial. Warranty provision The Company offers customers purchasing goods a 4 year guarantee if they register the guarantee within 28 days of the purchase. The Company reviews its warranty provision on a regular basis. A warranty provision is made based on historical data regarding credit notes raised by the Company. At the year end, the warranty provision totalled £68,000 (2017: £171,000). Provision for impairment loss on trade debtors The Directors of the Company exercises significant judgement in providing for impairment loss on trade debtors. At the year end, the value of trade debtors totalled £1,546,000 (2017: £2,075,000). Provision for obsolete and slow moving stocks The Company reviews its stock to assess loss on account of obsolescence on a regular basis. In determining whether provision for obsolescence should be recorded in the profit or loss, the company makes judgements as to whether there is any observable data indicating that there is any future salability of the product and the estimated net realisable value for such product. Accordingly, provision for impairment is made where the net realisable value is less than the cost based on best estimates by the management. The provision for obsolescence of stock is based on the ageing and historical sales pattern. At the year end, the value of stock totalled £3,424,000 (2017: £2,699,000). Property Valuation The Directors of the Company exercise significant judgement in assessing that the property valuation has not changed from the date it was valued to the balance sheet date. The value of the property at the year end totalled £770,000 (2017: £788,000). Other estimates and judgements The Directors of the Company also exercise significant judgement in estimating the useful life of tangible and intangible fixed assets. Should these estimates vary, the profit or loss and balance sheet of the following years could be impacted.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
Analysis of turnover by country of destination:
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
The main rate of corporation tax stands at 19% for the 2018 and 2019 tax years. This will be further reduced to 17% for the tax year starting on 1 April 2020.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
Page 23
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
15.Tangible fixed assets (continued)
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
Page 26
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
Page 27
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
Profit and loss account
The profit and loss account includes all current and prior period retained profits and losses.
The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £35,000 (2017 - £36,000). Contributions totalling £3,000 (2017 -£3,000) were payable to the fund at the reporting date.
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Cosatto Limited
Notes to the financial statements
For the Year Ended 31 August 2018
The Company is controlled by A S Kluge, by way of his 100% interest in the voting share capital of the Company.
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