Carphone Warehouse 2014 Annual Report Download - page 67

Carphone Warehouse Group plc
Annual Report 2014 65
FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES continued
c) FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS continued
The principal exchange rates against UK Sterling used in these financial statements are as follows:
Average Closing
2014 2013 2014 2013
Euro 1.19 1.22 1.21 1.19
Swedish Krona 10.36 10.56 10.82 9.91
d) REVENUE
All revenue is stated net of VAT and other sales-related taxes. The following accounting policies are applied to the various
revenue-generating activities in which the Group is engaged:
— revenue arising on the sale of mobile and other products and services is recognised when the relevant products or services are provided;
— 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. Commission includes a share of customer airtime spend, to the extent that it can be reliably measured
and there are no ongoing service obligations (see ‘Use of critical accounting estimates and assumptions’ in note u). Where the time
value of money has a material impact, an appropriate discount is applied such that revenue is recognised at an amount equal to the
present value of the future consideration received;
— other ongoing revenue is recognised as it is earned over the lives of the relevant customers;
— 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;
— insurance premiums are typically paid either monthly or quarterly in advance. Sales commission paid by third parties is recognised when
theinsurance policies to which it relates are sold, to the extent that it can be reliably measured and there are no ongoing service obligations.
Insurance premium income for the provision of ongoing insurance services is recognised over the lives of the relevant policies;
— revenue from the sale of prepaid credits is deferred until the customer uses the airtime or the credit expires;
— revenue generated from the provision of fixed and mobile network services is recognised as it is earned over the lives of the relevant
customers;
— rental income from investment property is recognised on a straight-line basis over the term of the lease;
— consultancy income is recognised as the services are provided; and
— all other revenue is recognised when the relevant goods or services are provided.
e) 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 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 date is recognised in the income statement,
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 income
statement. If a share-based payment scheme is forfeited, no further expense is recognised and any charges previously recognised through
the income statement are reversed.
Charges also arise on loans that are provided to employees to fund the purchase of shares 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.