recognised as an expense to the income statement. Fair value has been determined by using IFRS accepted valuation methodologies (see below). The amount expensed to the income statement over the vesting period is determined by reference to the fair value of the options and conditional share awards, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options and conditional share awards that are expected to vest. At each balance sheet date the Group revises its estimates of the number of options and conditional share awards that are expected to vest.The impact of the revision of original estimates, if any, is recognised in the income statement, with a corresponding adjustment to equity, over the remaining vesting period. No adjustment is made for failure to achieve market vesting conditions.

The fair value of options granted under the Executive Share Option Scheme (“ESOS”) and Save As You Earn (“SAYE”) scheme have been calculated using a binomial model taking into account the following inputs:

• the exercise price of the option;
• the life of the option;
• the market price on the date of grant of the option;
• the expected volatility of the share price;
• the dividends expected on the shares; and
• the risk free interest rate for the life of the option.
• The fair value of conditional share awards have been calculated using the market value of the shares on the date of grant adjusted for any non-entitlement to dividends over the vesting period and market based performance conditions such as total shareholder return.

iii Accrued holiday pay
Provision is made at each balance sheet date for holidays accrued but not taken, to the extent that they may be carried forward, calculated at the salary of the relevant employee at that date.

(j) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

(k) Trade and other payables
Trade and other payables are stated at cost.

(l) Borrowings
Bank overdrafts and interest bearing loans are initially measured at fair value and then held at amortised cost. Obligations under finance leases are dealt with in accordance with accounting policy note (o).

(m) Deferred consideration
Deferred consideration arises when settlement of all or any part of the cost of a business combination is deferred. It is stated at fair value at the date of acquisition, which is determined by discounting the amount due to present value at that date. Interest is imputed on the fair value of non interest bearing deferred consideration at the discount rate and expensed within interest payable and similar charges. At each balance sheet date deferred consideration comprises the remaining deferred consideration valued at acquisition plus interest imputed on such amounts from acquisition to the balance sheet date. Where deferred consideration is in the form of shares and the number of shares to be issued is fixed, the fair value is credited to equity under the heading “Shares to be issued”.

(n) Revenue
Revenue from services rendered is recognised in income in proportion to the stage of completion of the transaction at

the balance sheet date. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or associated costs. An expected loss on a contract is recognised immediately in the income statement.

Revenue includes expenses recharged to clients. Such expenses include mileage, accommodation, planning applications, counsels’ fees and fees from sub-consultants charged on at low margin.

Revenue which has been recognised but not invoiced by the balance sheet date is included in trade and other receivables in accrued income. Amounts invoiced in advance are included in trade and other payables within deferred income.

(o) Expenses
i Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense.

ii Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability.The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

iii Interest payable and similar charges
Finance costs comprise interest payable on bank overdrafts and loans, interest imputed on deferred consideration (see accounting policy (m)) and interest on finance leases.

iv Interest receivable
Finance income comprises interest receivable on funds invested.

(p) Income tax
Income tax on the income for the periods presented comprises current and deferred tax. Income tax is recognised in income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on