Carphone Warehouse 2016 Annual Report Download - page 95

Notes to the Group financial statements
93
1 Accounting policies
a) Basis of preparation
The consolidated financial statements have been prepared on
a going concern basis in accordance with IFRS as adopted
by the EU, IFRS issued by the International Accounting
Standards Board, those parts of the Companies Act 2006
applicable to those companies reporting under IFRS and
Article 4 of the IAS Regulation.
The financial statements have been presented in UK Sterling,
the functional currency of the Company, and on the historical
cost basis except for the revaluation of certain financial
instruments, as explained below. All amounts have been
rounded to the nearest £1 million, unless otherwise stated.
The principal accounting policies adopted are set out below.
On 6 August 2014, the Group completed the merger of Dixons
and Carphone (the ‘Merger’), which was implemented by way
of a scheme of arrangement of Dixons.
Historically, the Group prepared its financial statements to the
Saturday closest to its accounting reference date of 31 March.
Following the Merger, the Group changed its accounting
reference date to 30 April which was the accounting reference
date of Dixons, but continues to draw up accounts to the
nearest Saturday. Accordingly the comparative financial period
is for the 13 months ended 2 May 2015.
The Group’s income statement and segmental analysis identify
separately Headline performance and Non-Headline items.
Headline performance measures reflect adjustments to total
performance measures. The directors consider ‘Headline’
performance measures to be a more accurate reflection of the
ongoing trading performance of the Group and believe that
these measures provide additional useful information for
shareholders on the Group’s performance and are consistent
with how business performance is measured internally.
Headline results are stated before the results of discontinued
operations or exited / to be exited businesses, amortisation of
acquisition intangibles, acquisition related costs, any
exceptional items considered so one-off and material that they
distort underlying performance (such as reorganisation costs,
impairment charges, property rationalisation costs and other
non-recurring charges) and net pension interest costs.
Businesses exited or to be exited are those which the Group
has exited or committed to or commenced to exit through
disposal or closure but do not meet the definition of
discontinued operations as stipulated by IFRS and are material
to the results and operations of the Group.
Non-Headline items in the current and prior period comprise
amortisation of acquisition intangibles, Merger integration and
transaction costs, property rationalisation costs, acquisition
related costs, net interest on defined benefit pension schemes
and discontinued operations (comprising Virgin Mobile France
and Phone House operations in Germany, the Netherlands and
Portugal). A reconciliation of Headline profit and losses to total
profits and losses is shown in note 2. Items excluded from
Headline results can evolve from one financial year to the next
depending on the nature of exceptional items or one-off type
activities described above.
Headline performance measures and Non-Headline
performance measures may not be directly comparable with
other similarly titled measures or ‘adjusted’ revenue or profit
measures used by other companies.
Gains on disposal of non-core businesses in Southern Europe
in the prior period have been included in Headline results net of
restructuring costs. The net impact of these activities totalled
£5 million.
Going concern
The Group’s funding arrangements and processes for
managing its exposure to liquidity risk are set out in notes
18 and 26.
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. 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 of the level of borrowings and
facilities as set out in note 18 to the Group financial statements
and that the Group has a robust policy towards liquidity and
cash flow management.
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.
The principal accounting policies are set out below:
b) Accounting convention and 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 over the investee; is exposed, or has
rights, to variable return from its involvement with the investee;
and has the ability to use its power to affect its returns.
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, which is the date
from which the power to control passes. 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. All intercompany transactions and
balances are eliminated on consolidation.
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