ACCOUNTS - Final Accounts
ACCOUNTS - Final Accounts
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Registered number:
FOR THE YEAR ENDED 31 MAY 2020
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OFFER WATERMAN FINE ART LIMITED
CONTENTS
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OFFER WATERMAN FINE ART LIMITED
COMPANY INFORMATION
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OFFER WATERMAN FINE ART LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2020
The Directors present their annual report and audited accounts of Offer Waterman Fine Art Limited for the year ended 31 May 2020.
Offer Waterman Fine Art Limited, henceforth referred to as the 'Company', is engaged in the retailing of fine art both here in the UK and abroad. There have been no changes in the Company's activities during the current financial reporting period. The Company is a fine art dealership based in Mayfair and deals extensively in Modern, Post War, and Contemporary Art in both the secondary and primary markets. Whilst the main focus of the Company is based in twentieth century international British Masters, the Company also acquires work in the Contemporary, Impressionist and Old Master fields. In addition to its programme of carefully curated exhibitions, the Company participates in a variety of international art fairs in the UK and USA and operates its own publishing wing; creating books and catalogues independently or in partnership with other publishers. The Company is also proud to support various museums, institutions and academic bodies for their exhibition programmes and to foster further learning. In recognition of the high standards of business administration and compliance with all required customs protocols and procedures, the Company continues to hold European Union Authorised Economic Operator (AEO) status bestowed by Her Majesty’s Revenue and Customs during 2017. The Company strives to maintain a healthy and enriching working environment encouraging open and fluid dialogue. Consequently, employees continue to closely identify with the Company and as such put in a strong performance; something which the Board is pleased to report does not go unnoticed and who in turn reciprocate their ongoing appreciation and commitment to its’ employees.
The Company’s financial performance for the year and financial position as at 31 May 2020 are shown on pages 11 to 12 of these financial statements. The results for the year are reported on the basis that all operations undertaken during the year under review are continuing.
Movements in turnover and gross profit cannot considered to be representative of a trend or a result of changes in the manner in which the Company operates. The fluctuating nature of stocks, both in availability and demand, as well as the changing requirements of clients makes it impossible to predict expected turnover and gross profit; however, taking into account actual market and economic activity during the reporting period, the directors are pleased with the reported results for the year. Looking ahead post 31 May 2020, the directors remain confident of continued positive financial performance, market growth and long term success as the Company continues to report strong profits despite the ongoing COVID-19 pandemic and the restrictions on business operations imposed as a result. The cancellation of art fairs and loss of in-person market interaction which would provide the Company with numerous strategic opportunities, as a consequence of national and international restrictions on public gatherings in order to tackle the COVID-19 pandemic, would yield major detriment to turnover; however, the loss of those opportunities have been comfortably mitigated through savings on travel and exhibition expenditure and a raised online profile for the Company and its gallery via digital exhibitions and viewing room presentations undertaken throughout these extremely unusual times. Competition in the art market has and continues to be intense. Given that a principal obstacle of any art dealer is the procurement of art for sale, whether be as agent or as principal, continued investment in the business has enabled the Company to build upon its proven track record of profitability and its ongoing success in identifying, and following through to completion, trading opportunities at the upper echelon of the art market.
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OFFER WATERMAN FINE ART LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Business review (continued)
The Company's principal financial instruments continue to comprise of bank balances, trade receivables and payables and credit facilities provided by financial institutions to the Company. The main purpose of these instruments is to raise funds and to finance the Company's operations. Due to the nature of the financial instruments used by the Company there is no exposure to price risk. Further details regarding the Company's principal risks and uncertainties during the year under review are noted below. The Company does not follow any specific code nor standard practice on the payment of trade payables. The Company's policy is to adhere to agreed terms and conditions and ensure timely payment in accordance with these terms for all suppliers. The strategy of the directors for the future is to continue focus on:
∙Growth of the Company's online presence in order to adapt and embrace those changes in the market that have arisen as a consequence of COVID-19;
∙Development of new, and maintenance of existing, trading relationships;
∙Ensuring a consistent delivery of a high level of quality and added value to its customers and suppliers;
∙Building upon the Company's portfolio of art stocks and trades through an emphasis on the importance
∙of comprehensive research of the market including trends and key events; and
∙Evaluation and targeting of works by artists that are either newly emerging onto the scene or reemerging after a period of absence.
The directors have overall responsibility for the Company's systems of internal control and risk management and for reviewing their overall effectiveness; applying an adaptive approach with respect to internal control and operational risk management taking steps to embed changes as areas for improvement are brought to their attention.
The primary risk factors considered by the directors as being the most significant in respect of operational performance are noted below and are not ranked in any particular order: The art market, and its attributable external environment is influenced, albeit not always in the short term, by the overall strength of the international economy and financial markets. Specific macroeconomic and geopolitical factors may yield a material impact on the ability to trade across international borders which could impact the willingness of the market's client base to engage with and buy from the Company. Additionally, profitability may be put at risk by any significant changes to tariffs or customs legislation. Changing trends such as artist popularity and collector preferences which are immensely difficult to predict, will influence demand; and competition, from both auctioneers and other art dealers, will impact the quantity and quality of consignments available to the market as a whole and overall margins generated on sale. Trade in the art market is not highly liquid with the valuation of artworks being inherently subjective and realisable values often varying over time. As a result, the value of artworks held in stocks by the Company is at risk. The failure to authenticate or validate the provenance of artwork acquired and subsequently sold may result in disputes with customers, litigation, financial penalties and, ultimately, adverse effects on the reputation of the Company.
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OFFER WATERMAN FINE ART LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
With the aim of mitigating the aforementioned risks, the Company has a knowledgeable team of employees who. with the advice and guidance of relevant third party professionals when required, keep abreast of any changes or developments. Through a developed understanding of the underlying changes and/or developments identified, Company management will adapt its business operations appropriately as far as feasibly possible.
The performance of the Company is highly dependant on its personnel. Therefore the Company's ongoing ability to attract, motivate and retain key personnel is imperative. The loss of key personnel could impact the Company's ability to operate effectively and/or result in a loss of knowledge and expertise. With the purpose of providing fulfilling careers for all employees through career progression opportunities and remuneration packages which will attract, motivate and retain personnel, the directors monitor remuneration levels and structure, performance and feedback of the Company's employees. The loss or damage of the Company's artworks may result in financial liabilities payable to customers and/or parties holding a part share or stock write offs. The majority of the risk is minimised by the Company through the implementation of insurance policies but there may be certain liabilities retained by the Company and/or not covered under the terms of the insurance policies in place. The activities of the Company are subject to laws and regulations, including, but not limited to, Customs handling of imports and exports, cultural property ownership legislation, anti money laundering compliance and the levy of local taxes. Non compliance may result in personal and/or corporate liability, financial penalties, litigation and trading restrictions. The Company’s credit risk is primarily attributable to its trade receivables which the Company manages through the assessment of the credit risk of current and potential customers and ongoing review and collection of outstanding receivables. Where applicable, the Company will not release items sold until full payment has been received. As of the balance sheet date, there were no actual or potentially significant concentrations of credit risk aware of by the directors of the Company. Liquidity risk is monitored on an ongoing basis as part of the Company's day to day control activities and periodic financial reviews and forecasts with action taken as considered necessary, including the acquisition of commercial credit and bank overdraft facilities as well as the retention of cash balances; thereby ensuring appropriate funding facilities are continually available within the Company. The Company enters into transactions that are denominated in currencies other than its functional currency, primarily the Euro and US Dollar, and is therefore exposed to movements in foreign currency exchange rates. Where exchange rates change between reporting periods, fluctuations in the reported results of the Company's operations may arise that are reflective of currency performance and not indicative of operating performance. The Company will therefore use currency specific bank facilities, where considered financially appropriate, to manage exposure to movements in foreign currency exchange rates. The COVID-19 pandemic has resulted in a varying degree of burden on the operational capability, liquidity and financial stability of companies across the UK and the world as a whole. Further information detailing the directors' considerations of the uncertainty surrounding COVID-19 and its impact on the Company can be found in note 2.3 to the financial statements.
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OFFER WATERMAN FINE ART LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Given the straightforward and individual nature of the business, the directors consider turnover, gross and operating profit, net asset position and cash flow as the relevant financial key performance indicators sufficient to ensure an appropriate understanding to the true underlying financial performance and position of the Company.
Details of these financial key performance indicators for the current and preceding financial reporting periods can be found on pages 11 to 15 of these financial statements.
The directors do not consider, in the context of the art market, that there are any consistent non-financial key performance indicators which would assist in ensuring a sufficient understanding of the Company's underlying performance not already determinable from information available elsewhere.
This report was approved by the board and signed on its behalf.
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OFFER WATERMAN FINE ART LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MAY 2020
The directors present their report and the financial statements for the year ended 31 May 2020.
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;
∙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 profit for the year, after taxation, amounted to £708,471 (2019 - £2,253,360).
Interim dividends paid by the Company in the year amounted to £115,000 (2019: £1,500,000).
The directors do not recommend payment of a final dividend in respect of the financial performance for the year ended 31 May 2020.
The directors who served during the year were:
The directors are not expecting to make any significant changes in the nature of the business in the near future and will continue to explore opportunities, where they may present themselves, to grow organically.
The Company's principal risks and uncertainties and key performance indicators are set out in the strategic report.
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OFFER WATERMAN FINE ART LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
Each of the persons who are directors at the time when this directors' report is approved has confirmed that:
As of the date upon which this report was approved, there have been no significant events apart from the uncertainties pertaining to COVID-19 affecting the Company since the balance sheet date to delineate.
The auditors, Nyman Libson Paul 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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OFFER WATERMAN FINE ART LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF OFFER WATERMAN FINE ART LIMITED
We have audited the financial statements of Offer Waterman Fine Art Limited (the 'Company') for the year ended 31 May 2020, which comprise the statement of comprehensive income, the balance sheet, 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.
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OFFER WATERMAN FINE ART LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF OFFER WATERMAN FINE ART LIMITED (CONTINUED)
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.
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:
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OFFER WATERMAN FINE ART LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF OFFER WATERMAN FINE ART LIMITED (CONTINUED)
As explained more fully in the directors' responsibilities statement set out on page 6, 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.
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
124 Finchley Road
NW3 5JS
20 May 2021
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OFFER WATERMAN FINE ART LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2020
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OFFER WATERMAN FINE ART LIMITED
REGISTERED NUMBER: 03203503
BALANCE SHEET
AS AT 31 MAY 2020
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 17 to 32 form part of these financial statements.
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OFFER WATERMAN FINE ART LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2020
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OFFER WATERMAN FINE ART LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2020
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OFFER WATERMAN FINE ART LIMITED
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2020
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OFFER WATERMAN FINE ART LIMITED
ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 MAY 2020
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
Offer Waterman Fine Art Limited (the "Company") is a private company limited by share capital, incorporated under the UK Companies Act 1985 and domiciled in England.
The address of the Company's registered office and principal place of business is 17 St. George Street, Mayfair, London, W1S 1FJ. The nature of the Company's operations and its principal activities are set in the strategic report on pages 2 to 5.
2.Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all reporting periods presented, unless otherwise stated.
The financial statements of Offer Waterman Fine Art Limited 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 conformity with Financial Reporting Standard 102 requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. Details of those estimates and/or judgments made in applying the Company's accounting policies towards the preparation of these financial statements that may be considered as yielding a significant risk of a material adjustment being made to the carrying amounts of assets and/or liabilities reported in the balance sheet during the next financial reporting period are disclosed in note 3 to the financial statements.
In determining the appropriate basis of preparation of the financial statements, the directors are required to consider whether the Company can continue in operational existence for the foreseeable future.
Coronavirus (COVID-19) On 30 January 2020 the World Health Organisation declared COVID-19 to be a global health emergency. Subsequent to this, governments around the world began taking measures to respond to the outbreak including the implementation of 'lockdown' and social distancing protocols, closure of nonessential services, including art galleries, and restrictions on local and international travel. The economic impact of the COVID-19 pandemic will depend on the outcome of factors and developments outside of the Company's control; the inherent uncertainty of which means the Company's future financial performance is not possible to predict with an appropriate level of accuracy. As means of minimising the overall impact of COVID-19 on the Company's operations, the directors have implemented a variety of measures including, but not limited to, the following:
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
2.Accounting policies (continued)
∙Negotiation of increased bank overdraft facilities and rent concessions on ongoing operating lease commitments: and
∙Utilising a variety of government assistance schemes made available as a result of COVID-19, including business rates holidays, deferral of VAT and PAYE payments and the Coronavirus Job Retention Scheme.
To maintain a continued provision of services to its clients during these difficult times, the directors have:
∙Endeavoured to minimise redundancies and ensure staff are able to work remotely;
∙Built extensively upon existing customers and supplier relationships;
∙Invested in the Company's website and online presence;
∙Held online exhibitions and viewing rooms; and
∙Implemented appointment only and restricted gallery openings in line with the safety guidelines issued by HM Government.
As at the time of signing of these financial statements, COVID-19 continued to be an ongoing global threat with governmental measures to combat the pandemic remaining in place. The directors have considered the impact on the Company of the current lockdown ongoing as of the date these financial statements were approved and of a possible extension to the current lockdown or a subsequent fourth 'lockdown' being enforced by HM Government. The directors are satisfied that the Company would have adequate financial resources to remain a going concern and are of the opinion that such instances will not result in such a detrimental impact that the Company would become insolvent and illiquid and consequently unable to discharge its liabilities as they should fall due. Financial performance and position to date The Company continues to be profitable and hold a stable net asset position. The directors are not aware of any factors that would result a change in the observed financial performance and position going forward. In preparing these financial statements the directors, having reviewed the financial performance and position of the Company as well as the observed impact of COVID-19 on day-to-day operations of the Company up to the date these financial statements were approved, are of the opinion that based on current and expected operational performance there is a reasonable expectation that the Company shall have adequate financial resources available at its disposal to continue in operational existence. While there will always remain inherent uncertainty, the directors have no reason to believe that a material uncertainty exists, either as a result of COVID-19 or any other factor; connected or not, that may cast significant doubt about the ability of the Company to continue as a going concern and therefore consider it both appropriate to continue to adopt the going concern basis in preparing the Company's financial statements and to not recognise any adjustments in the financial statements that would arise if the going concern basis were to become no longer appropriate.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
2.Accounting policies (continued)
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the "functional currency").
The functional currency of the Company and the currency in which the financial statements are presented (the "presentational currency") is 'Pounds Sterling' (£) rounded to the nearest single unit of currency.
Foreign currencies are translated into the functional (and presentational) currency using the exchange rates prevailing at the date of the respective transaction or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account as part of total comprehensive income.
Turnover comprises revenue recognised by the Company in respect of the sale of fine art and the recharge of restoration, framing and other costs in connection with fine art supplied during the year; with amounts recognised in full upon issue of an invoice at the time of agreement of sale and measured at the fair value of consideration receivable, excluding discounts, rebates, value added tax and other sales taxes.
Operating leases, net of benefits receivable as an incentive, are charged to the profit and loss account on a straight line basis over the lease term.
All borrowing costs are recognised in profit or loss during the reporting period in which they are incurred.
The Company operates a defined contribution pension plan for its employees. A defined contribution pension plan is one under which the Company pays fixed contributions to a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts falling due but not paid are shown as part of other creditors in the balance sheet. The assets of the pension plan are held separately from the Company in independently administered funds.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
2.Accounting policies (continued)
COVID-19 related grants are government grants receivable in light of the ongoing COVID-19 pandemic. Amounts recognised in profit or loss reflect grants receivable under the Coronavirus Job Retention Scheme (“CJRS”).
Under the CJRS, grant income may be claimed in respect of certain costs to the Company of furloughed employees. CJRS income is recognised in profit or loss in the same period in which the related costs are incurred to the extent there is reasonable certainty that the grant will be received.
Exceptional items are items that are unusual because of their size, nature or incidence and which the directors consider should be disclosed separately to enable a full understanding of the Company's results.
Interest payable and receivable are recognised in profit or loss in accordance with the terms of the underlying transaction.
Current taxation is calculated using tax rates and on the basis of tax laws enacted or substantively enacted at the balance sheet date in the UK where the Company operates and generates taxable income. The directors of the Company will periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and will establish provisions, where appropriate, on the basis of amounts expected to be payable at the balance sheet date. Deferred taxation is recognised on temporary differences arising between the tax bases of assets and liabilities and their respective carrying amounts in the financial statements. Deferred taxation is calculated using tax rates and on the basis of tax laws enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax asset/liability is realised/settled. Deferred tax assets are recognised only to the extent that it is sufficiently probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the respective deferred tax assets and liabilities relate to current taxation levied by the same tax authority.
Tangible fixed assets are recognised under the cost model and stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended upon acquisition.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
2.Accounting policies (continued)
Depreciation is provided on the following basis:
Depreciation of a tangible fixed asset commences once the asset is available for use.
The residual value and depreciation basis of tangible fixed assets are reviewed, and adjusted prospectively where deemed appropriate, if there is an indication of a significant change since the last balance sheet date. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Stocks are stated at the lower of cost and net realisable value. At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less any additional costs expected to be incurred in order to complete the sale with the overall difference (i.e. the impairment loss) recognised immediately in profit or loss.
Stocks that have been previously impaired are reviewed at each reporting date to assess whether there is any indication that the impairment losses recognised in prior financial reporting periods may no longer exist or may have decreased. The value of impairment reversed will be such that the resulting carrying amount is less than or equal to the value had no impairment been recognised in prior financial reporting periods. The Company may hold and sell stocks on behalf of third parties where the related risks and rewards of ownership are not held by the Company. Such stocks are not included in the Company's balance sheet. Certain stocks are held jointly with third parties. Such stocks are included in the balance sheet at the value of the Company's share. Where such jointly held stocks are sold by the Company, the Company reflects the sale in profit or loss as if the item sold was held 100% by the Company with a corresponding charge in cost of sales to reflect the share of turnover and stock value in respect of third party holdings.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
2.Accounting policies (continued)
The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities; with said financial assets and liabilities classified in accordance with the substance of the underlying contractual obligations rather than its legal form.
Financial assets and liabilities are recognised in the balance sheet upon becoming party to the contractual provisions of the instrument. Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or the financial asset is transferred along with substantially all the risks and rewards of ownership of the asset to another party. Financial liabilities are derecognised only when the Company’s obligations are discharged, cancelled or expired. The measurement of specific financial assets, financial liabilities and equity is as outlined below: Debtors and creditors Debtors, excluding deferred taxation (see note 2.13), and creditors deemed to be short term in nature are initially measured at transaction price (i.e fair value) and subsequently held, at transaction price less provision for impairment of assets. The Company held no debtors or creditors deemed not to be short term in nature during the current or preceding financial reporting periods. Cash balances Cash balances are reported by the Company as being financial instruments classified as short term receivables and are represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours and subject to an insignificant risk of changes in value. Cash balances are held at floating interest rates linked to UK bank rates. Equity and dividends Ordinary share capital, shown in equity, is initially measured and subsequently held at its nominal value. Where the transaction price for issued shares exceeds their nominal value, the difference is shown under equity in a share premium account with any directly attributable transaction costs associated with the issuing of said shares deducted from a share premium account. Equity dividends are recognised in the reporting period in which they become legally payable upon approval by the Company's shareholders.
In the application of the Company's accounting policies, the directors are required to apply judgment and make estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other available sources based on historical experience and other factors that are considered to be relevant. Consequently, actual results may differ from that originally estimated.
In the opinion of the directors, the following judgments, estimates and/or assumptions made in applying the principal accounting policies, outlined in note 2 of these financial statements, towards the preparation of these financial statements may be considered as having a significant risk of causing a material adjustment to the carrying amount of assets and/or liabilities carried forward as at the balance sheet date where by which the actual future outcome observed may differ from that originally determined and reported.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
3.Judgments in applying accounting policies (continued)
Depreciation of tangible assets
The useful lives of assets and residual values of tangible assets are estimated by the directors based on general consensus taking into account a number of factors such as technological innovation, product life cycles, maintenance programs and projected disposal values. Impairment of stocks When assessing stock impairment, the directors consider the nature and condition of stocks held; and taking into account current and expected market activity, the likelihood of future sale and whether the current carrying value exceeds the expected net sales value. Impairment of trade receivables When assessing the recoverable value of trade receivables, the directors consider a variety of factors including the ageing profile of the debt, historical and market experience with the customer and the quality of communications to date with the debtor.
The whole of the turnover is attributable to to the sale of fine art and the recharge of restoration, framing and other costs in connection with fine art supplied during the year as disclosed in note 2.5 to the financial statements.
In the opinion of the directors, the disclosure of the geographical split of turnover would be seriously prejudicial to the commercial interests of the Company and, in accordance with the Companies Act 2006, have not disclosed the geographical split of turnover as part of these financial statements.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
Page 24
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
The directors, as reported in the directors' report, are recognised as being those individuals that make up the key management personnel of the Company and whom together hold joint responsibility for planning, directing and controlling the activities of the Company.
Remuneration payable to key management personnel during the reporting period were as disclosed in note 10 of the financial statements. Dividends paid to key management personnel during the reporting period amounted to £115,000 (2019: £1,500,000).
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
Page 26
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
14.Taxation (continued)
As part of the Finance Act 2020, which received Royal Assent on 22 July 2020, the change to the main rate of UK corporation tax enacted by Finance (No.2) Act 2015 from 19% to 18% and effective as of 1 April 2020 was withdrawn. The main rate of UK corporation tax therefore remained at 19%, as it has been since 1 April 2017 and is expected to remain as such until 1 April 2023 when the main rate of UK corporation tax is expected to increase from 19% to 25% as outlined in the 2020 Budget to Parliament delivered by the Chancellor of the Exchequer on 11 March 2020.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
Page 28
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
The Company held no financial instruments during either the current or preceding financial reporting periods that would require specific disclosure under sections 11 or 12 of Financial Reporting Standard 102 and paragraph 36 of Schedule 1 to the Companies Act 2006.
The total interest income and expenditure in respect of financial assets and liabilities not held at fair value through profit or loss (i.e. re-measured to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date with any financial movement recognised immediately in profit or loss) is as disclosed in the statement of comprehensive income on page 11 of the financial statements.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
Profit and loss account
Specific movements during the financial reporting period are as disclosed in the statement of changes in equity on page 13 of the financial statements.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
The pension cost charge represents contributions payable by the Company towards defined benefit pension schemes and amounted to £7,243 for the year ended 31 May 2020 (2019: £5,037).
Employee and employer contributions totalling £1,089 (2019: £1,468) were outstanding at the balance sheet date and are included in creditors falling due within one year.
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OFFER WATERMAN FINE ART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
The Company was under the joint control of its directors throughout the reporting period to date.
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