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The Group exercises judgement when applying accounting policies and standards relevant to employee benefits. Scottish Enterprise operates the Scottish Enterprise Pension & Life Assurance Scheme for colleagues which provides benefits in the form of a guaranteed level of pension payable for life and a judgement has been made to account for this on a defined benefit basis under IAS 19 Employee Benefits. This judgement arises from the Group's obligations to make pension contributions which are independently determined by an actuary, on the basis of triennial valuations.

IAS 19 limits the measurement of a net defined benefit asset to the lower of the surplus in the defined benefit plan and the asset ceiling, defined as the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. The Group has made the judgement, after reviewing the scheme's Trust Deed, that it has an unconditional right to refund of surplus on wind-up of the scheme and as a result recognises the full surplus in the scheme.

The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost or income for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of retirement benefit obligations.

The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the retirement benefit obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related retirement benefit obligations.

The Group also determines the appropriate rate for salary inflation based on consideration of inflation and long-term assumptions in respect of salary increases.

Other key assumptions for retirement benefit obligations are based in part on current market conditions. Additional information is disclosed in Note 11, which includes a table setting out the potential sensitivity of change in assumptions of the retirement benefit obligation. A firm of consulting actuaries is engaged to provide the Group with expert advice about the assumptions to be applied.