Carphone Warehouse 2014 Annual Report Download - page 101

Carphone Warehouse Group plc
Annual Report 2014 99
FINANCIAL STATEMENTS
Notes to the Company financial statements
1 ACCOUNTING POLICIES
a) BASIS OF PREPARATION
The Company is incorporated in the United Kingdom. The financial statements have been prepared on a going concern basis (see note  to the
Group financial statements) and in accordance with applicable United Kingdom accounting standards under the historical cost convention,
asmodified by FRS  ‘Financial Instruments: Measurement’.
The Group’s financial statements for the year ended  March  contain a consolidated cash flow statement. Consequently, theCompany
has applied the exemption in FRS  ‘Cash Flow Statements’ not to present its own cash flow statement.
The following principal accounting policies have been applied consistently throughout both years.
b) INVESTMENTS
Investments held in subsidiaries and joint ventures 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 where the Company does not have control or significant influence 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.
c) SHARE-BASED PAYMENTS
Equity settled share-based payments are measured at fair value at the date of grant and expensed over the vesting period, based
onan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 EPS targets)
anda Monte Carlo model for those with external performance criteria (such as TSR 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 date 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 date is recognised in the profit and loss account,
withacorresponding entry in reserves.
If a share-based payment scheme is cancelled, any remaining part of the fair value of the scheme is expensed through the profit and loss
account. If a share-based payment scheme is forfeited, no further expense is recognised and any charges previously recognised through
the profit and loss account are reversed.
Charges also arise on loans that are provided to employees to fund the purchase of shares in the Group as part of long-term incentive
plans, to the extent to which the loans are not, in certain circumstances, repayable; the cost of the relevant part of such loans is expensed
overthe course of the relevant incentive plans.
d) 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 year in which
theyare approved by the Company’s shareholders. Interim and other dividends are recognised in the year in which they are paid.
e) 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 FRS 
has been applied in the both years.
f) LOANS AND OTHER BORROWINGS
Bank fees and legal costs associated with the securing of external financing are capitalised and amortised over the term of the relevant
facility. All other borrowing costs are recognised in the profit and loss account in the period in which they are incurred.
g) PROVISIONS
Provisions are recognised when a legal or constructive obligation exists as a result of past events and it is probable that an outflow
ofresources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions
arediscounted where the time value of money is considered to be material.