Carphone Warehouse 2008 Annual Report Download - page 89

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www.cpwplc.com 77
Notes to the Company Financial Statements
1 Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
applicable United Kingdom accounting standards under the historical cost
convention, as modified by FRS26 ‘Financial Instruments: Measurement’.
The following principal accounting policies have been applied consistently
throughout the current and preceding period.
The Carphone Warehouse Group PLC consolidated financial statements
for the period ended 29 March 2008 contain a consolidated statement
of cash flows. Consequently, the Company has applied the exemption in
FRS1 ‘Cash Flow Statements’ not to present its own cash flow statement.
Investments
Investments held in Group companies are recognised at cost, being
the fair value of consideration, acquisition charges associated with the
investment and capital contributions by way of share-based payments,
less any provision for permanent diminution in value.
Investments held in non-Group companies are treated as available-for-sale
and recorded at fair value. Changes in fair value, together with any related
deferred taxation, are taken directly to reserves, and recycled to the
profit and loss account when the investment is sold or is determined
to be impaired.
Share-based payments
The Company issues equity settled share-based payments to certain
employees in the Group. Equity settled share-based payments are
measured at fair value at the date of grant, and expensed over the vesting
period, based on the Company’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 profit and loss account, 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 profit and loss account, with a corresponding
entry in reserves.
Share-based payments issued by the Company to its subsidiary
undertakings are treated as additions to investments based on the
fair value of the grant, spread over the relevant vesting period, with a
corresponding entry in reserves. Where the Company recharges the
cost of share-based payments to its subsidiary undertakings the
investment is reduced accordingly.
Dividends
Dividends receivable from the Company’s subsidiaries are recognised
only when they are approved by shareholders.
Final dividend distributions to the Company’s shareholders are recognised
as a liability in the financial statements in the period in which they are
approved by the Company’s shareholders. Interim dividends are recognised
in the period in which they are paid.
Foreign currency translation
Material transactions in foreign currencies are hedged using forward
purchases or sales of the relevant currencies and are recognised in the
financial statements at the exchange rates thus obtained. Unhedged
transactions are recorded at the exchange rate on the date of the
transaction. Material monetary assets and liabilities denominated in foreign
currencies are hedged, mainly using forward foreign exchange contracts
to create matching liabilities and assets, and are retranslated at each
balance sheet date. Hedge accounting as defined by FRS26 has been
applied in the period.
Financial guarantees
The Company has guaranteed certain commitments given by subsidiary
undertakings. The fair value of any such guarantees is amortised
through the profit and loss account on a straight-line basis over the
guarantee period.
Financial Statements