Carphone Warehouse 2008 Annual Report Download - page 58

46The Carphone Warehouse Group PLC Annual Report 2008
c) Foreign currency translation and financial instruments (continued)
The principal exchange rates against Sterling used in these financial
statements are as follows:
Average Closing
52 weeks 52 weeks
ended ended
29 March 31 March 29 March 31 March
2008 2007 2008 2007
Euro 1.41 1.47 1.26 1.47
South African Rand 14.35 13.37 16.08 14.22
Swedish Krona 13.19 13.60 11.85 13.76
Swiss Franc 2.32 2.34 1.99 2.39
United States Dollar 2.01 1.90 1.99 1.96
In the event that a foreign operation is sold, the gain or loss on disposal
recognised in the income statement is determined after taking into account
the cumulative currency translation differences that are attributable to
the operation.
d) Revenue
Revenue is stated net of VAT and other sales-related taxes.
The following accounting policies are applied to the Group’s
revenue streams:
• Revenue arising on the sale of mobile and other products and services
is recognised when the relevant products or services are provided;
• Revenue generated from the provision of fixed and mobile network services
is recognised as it is earned over the lives of the relevant customers;
• Commission receivable on sales, being commission which is contractually
committed and for which there are no ongoing performance criteria, is
recognised when the sales to which the commission relates are made,
net of any provision for promotional offers and network operator
performance penalties;
• Volume bonuses receivable from network operators are recognised
when the conditions on which they are earned have been met;
• Volume bonuses received from suppliers of products are recognised
as an offset to product cost when the conditions on which they are
earned have been met, and are recognised within cost of sales when
the products to which the volume bonuses relate have been sold;
• Ongoing revenue (share of customer airtime spend, and customer
revenue and retention bonuses) is recognised as it is earned over
the lives of the relevant customers;
• Insurance premiums are typically paid quarterly in advance.
Administration fees paid by insurance customers, which cover sales and
agency administration costs, are recognised as received. Insurance
premium income is recognised over the lives of the relevant policies; and
• All other revenue is recognised when the relevant goods or services
are provided.
e) Share-based payments
The Group issues equity settled share-based payments to certain
employees. Equity settled share-based payments are measured at fair
value at the date of grant, and expensed over the vesting period, based
on the Group’s estimate of the number of shares that will eventually vest.
Fair value is measured by use of a Binomial model for share-based
payments with internal performance criteria (such as Earnings Per Share
targets) and a Monte Carlo model for those with external performance
criteria (such as Total Shareholder Return targets).
For schemes with internal performance criteria, the number of options
expected to vest is recalculated at each balance sheet date, based on
expectations of performance against target and of leavers prior to vesting.
The movement in cumulative expense since the previous balance sheet
is recognised in the income statement, with a corresponding entry
in reserves.
For schemes with external performance criteria, the number of options
expected to vest is adjusted only for expectations of leavers prior to
vesting. The movement in cumulative expense since the previous balance
sheet is recognised in the income statement, with a corresponding entry
in reserves.
f) Pensions
Contributions to defined contribution schemes are charged to the
income statement as they become payable in accordance with the
rules of the schemes.
g) Dividends
Dividend income is recognised when payment has been received.
Final dividend distributions are recognised as a liability in the financial
statements in the period in which they are approved by the Group’s
shareholders. Interim dividends are recognised in the period in which
they are paid.
h) Leases
Rental payments under operating leases are charged to the income
statement on a straight-line basis over the period of the lease.
Lease incentives and rent-free periods are amortised through the income
statement over the period of the lease.
Gains or losses from sale and leaseback transactions are deferred over
the life of the new lease to the extent that the rentals are considered to be
above or below market rentals. The remaining gain or loss is recognised
within operating expenses in the period in which the sale is completed.
i) Taxation
Current tax, including UK corporation tax and overseas tax, is provided
at amounts expected to be paid or recovered using the tax rates and
laws that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is provided in full on temporary differences between the
carrying amount of an asset or liability in the balance sheet and its tax base.
Deferred tax liabilities represent tax payable in future periods in respect
of taxable temporary differences. Deferred tax assets represent tax
recoverable in future periods in respect of deductible temporary
differences, and the carry-forward of unused tax losses and credits.
Deferred tax is determined using the tax rates that have been enacted
or substantively enacted at the balance sheet date and are expected to
apply when the deferred tax asset is realised or the deferred tax liability
is settled.
Deferred tax is provided on the unremitted earnings of overseas
subsidiaries, except where the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can be
utilised. Current and deferred tax is recognised in the income statement
except where it relates to an item recognised directly in reserves, in which
case it is recognised directly in reserves.
Deferred tax assets and liabilities are offset where there is a legal right
to do so in the relevant jurisdictions.
Notes to the Financial Statements continued