The capitalisation of development expenditure is a change in accounting policy in 2012, which has been authorised by the Board following consideration and recommendation by the Audit Committee. This change has been prompted by the upcoming changes in the accounting standards regime, which will result in Nominet adopting International Financial Reporting Standards (EU) in future years. IFRS (EU) requires the capitalisation of development costs where certain criteria are satisfied, this treatment also being permitted by current UK accounting standards. The treatment adopted in the 2012 financial statements is a change in accounting policy and will be disclosed as such.
The application of this change in accounting policy has been reviewed by the company's external auditors, who have concluded that the application is compliant with both the current UK accounting standards and IFRS (EU), and in addition presents a true and fair view for users of the financial statements. The 2012 financial statements will be distributed to members along with the Notice of AGM.
The level of the donation to Nominet Trust is considered and approved each financial year by the Board. The Board consider a number of factors in determining the donation, including both the current cash position and the projected cashflow of the business in future years. As the development costs have already generated a cash outflow, the change in the treatment of development costs does not impact on the cash position of the business and is not therefore material to the calculation of any donation to the Trust.