Carphone Warehouse 2014 Annual Report Download - page 66

Carphone Warehouse Group plc
Annual Report 2014
64
FINANCIAL STATEMENTS
Notes to the Group financial statements
1 ACCOUNTING POLICIES
a) BASIS OF PREPARATION
The Company is incorporated in England and Wales. The financial statements of the Group have been prepared on a going concern basis
inaccordance with IFRS as applied in accordance with the provisions of the Companies Act  and Article  of the EU IAS Regulation.
Thefinancial statements have been presented in UK Sterling, the functional currency of the Company, on the historical cost basis except for
the revaluation of certain financial instruments, as explained below. All amounts have been rounded to the nearest one million pounds,
unless otherwise stated. The principal accounting policies adopted are set out below.
On  June  the Group completed the CPW Europe Acquisition for a net consideration of £m, at which point CPW Europe became
a% owned subsidiary of the Group. In these financial statements, CPW Europe is treated as a joint venture prior to  June 
andawholly owned subsidiary from  June  onwards.
In prior periods the Group reported to a financial year end of  March. CPW Europe reports to a retail calendar, whereby its year-end date is
normally the Saturday closest to  March. Following the CPW Europe Acquisition the Group is reporting to the same retail calendar as CPW
Europe and has consequently prepared financial statements forthe period from  April  to  March  (the "year ended  March ").
GOING CONCERN
Note  to the financial statements includes the Group’s policies and processes for managing its exposure to liquidity risk.
In their consideration of going concern, the directors have reviewed the Group’s future cash forecasts and profit projections, which are based
onmarket data and past experience. This review considered the implications of the CPW Europe Acquisition during the year, including the effect
on forecast cash flows and changes to the Group’s financing facilities. The directors are of the opinion that the Group’s forecasts and projections,
which take into account reasonably possible changes in trading performance, show that the Group is able to operate within its current facilities
and comply with its banking covenants for the foreseeable future. In arriving at their conclusion that the Group has adequate financial resources,
the directors were mindful that the Group has a robust policy towards liquidity and cash flow management and that it is financed through facilities,
excluding overdrafts repayable on demand, totalling a maximum of £m (of which £m was undrawn at  March ) committed to
April . The Group’s operations are financed by these committed facilities (further described in note ), retained profits and equity.
Accordingly the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for
theforeseeable future and consequently the directors continue to apply the going concern basis in the preparation of the financial statements.
JOINT VENTURES
Where necessary, adjustments are made to the financial statements of the Group’s joint ventures to bring accounting policies used intoline
with those used by the Group. The accounting policies below also relate to those applied to the Group’s joint ventures.
b) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(itssubsidiaries). Control is achieved where the Company has the power to govern the financial andoperating policies of an investee entity
so as to obtain benefits from its activities.
The results of subsidiaries and joint ventures acquired or sold during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used into line with those used by the Group. Intercompany transactions and
balances between subsidiaries are eliminated on consolidation.
c) FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
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 IAS  ‘Financial Instruments:
Recognition and Measurement’ has been applied by marking to market the relevant financial instruments at the balance sheet date and
recognising the gain or loss in reserves in respect of cash flow hedges, and through profit or loss inrespect of fair value hedges.
The results of overseas operations are translated at the average foreign exchange rates for the year, and their balance sheets are translated at
the rates prevailing at the balance sheet date. Goodwill is held in the currency of the operation to which it relates. Exchange differences arising on
the translation of net assets, goodwill and results of overseas operations are recognised in the translation reserve. All other exchange differences
are included in profit or loss in the year in which they arise except as follows:
— where the Group designates financial instruments held for the purpose of hedging the foreign currency exposures that result frommaterial
transactions undertaken in foreign currencies as cash flow hedges, hedge accounting as defined by IAS  ‘Financial Instruments: Recognition
and Measurement’ is applied. The effective portion of changes in the fair value of financial instruments that are designated as cash flow
hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised in profit or loss.
In the event that a foreign operation is disposed of, the gain or loss on disposal recognised in profit or loss is determined after taking into
account the cumulative currency translation differences that are attributable to the operation.