Carphone Warehouse 2006 Annual Report Download - page 70

Notes to the Financial Statements continued
30 Adoption of IAS32 and IAS39
The Group has chosen to adopt IAS32 ‘Financial Instruments: Disclosure and Presentation’ and IAS39 ‘Financial Instruments: Recognition and Measurement’
prospectively from 3 April 2005, in accordance with the transitional provisions. As a result, the relevant comparative information for the 53 weeks ended
2 April 2005 does not reflect the impact of these standards.
The adoption of IAS39 causes a reduction in shareholders’ equity of £7.7m as at 3 April 2005, made up of the following amounts shown net of taxation:
Note £’000
Fair value of current asset investments and forward currency contracts a 1,760
Fair value of non-current asset investments b (2,294)
Financial liabilities c (7,207)
Reduction in shareholders’ equity (7,741)
a) Fair value of current asset investments and forward currency contracts
Under UK GAAP, current asset investments were recorded at the lower of cost and realisable value. Under IAS32 and IAS39, the Group’s current asset investments
are categorised as available-for-sale and recorded at fair value. Changes in fair value, together with any related deferred tax, are taken directly to reserves and
recycled to the income statement when investments are sold or determined to be impaired. The impact of revaluing the Group’s current asset investments
at 3 April 2005, net of deferred tax, is an increase in reserves of £1.9m.
In addition, under IAS32 and IAS39 the Group’s forward currency contracts are recognised in the financial statements at fair value, based on contracted exchange
rates. Under UK GAAP contracts were valued at the exchange rate prevailing at the balance sheet date. Changes in fair value, together with any related deferred tax,
are taken to the income statement. The impact of fair valuing forward currency contracts at 3 April 2005, net of deferred tax, is a reduction in reserves of £0.1m.
b) Fair value of non-current asset investments
Under UK GAAP, non-current asset investments were held at cost less any provision for permanent diminution in value. Under IFRS, the Group’s non-current
asset investments are categorised as available-for-sale and recorded at fair value. Fair value at 3 April 2005 has been determined using European Venture Capital
Association guidelines and results in a reduction in reserves of £2.3m. This diminution in value is not considered to be permanent. Changes in fair value, together
with any related deferred tax, are taken directly to reserves.
c) Financial liabilities
IAS39 requires financial liabilities to be maintained in the balance sheet until they are legally extinguished, unlike UK GAAP, which required a provision to the
extent that it was considered probable that there would be an outflow of economic benefit. Liabilities of £7.2m have been reinstated to reflect this requirement
at 3 April 2005.
31 Related party transactions
During the reporting period G Roux de Bezieux, a Director of the Company, held 5% of the issued share capital of Omer Telecom SAS, a subsidiary
of the Group.
32 Post balance sheet events
On 3 April 2006, the Group signed a joint venture agreement with Virgin Group Investments Limited (Virgin) to operate a nationwide mobile virtual network operator
(MVNO) in France. The MVNO will operate under the Virgin Mobile brand, using the Orange network. The Group and Virgin will each own and fund 48.5% of the
joint venture, with management owning and funding 3.0%. The assets and customers of Omer Telecom SAS, the Group’s existing MVNO operations in France, will
be included within the joint venture.
The Carphone Warehouse Group PLC Annual Report 2006
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