Carphone Warehouse 2016 Annual Report Download - page 98

Notes to the Group financial statements
96
Benefits received and receivable as an incentive to enter into
operating leases are amortised through the income statement
over the period of the lease.
i) Taxation
Current tax
Current tax, is provided at amounts expected to be paid
or recovered using the prevailing tax rates and laws that
have been enacted or substantially enacted by the balance
sheet date and adjusted for any tax payable in respect of
previous years.
Deferred tax
Deferred tax liabilities are recognised for all temporary
differences between the carrying amount of an asset or liability
in the balance sheet and the tax base value and represent tax
payable in future periods. Deferred tax assets are recognised
to the extent that it is probable that taxable profits will be
available against which deductible temporary differences
can be utilised.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except
where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. No
provision is made for tax which would have been payable on
the distribution of retained profits of overseas subsidiaries or
associated undertakings where it has been determined that
these profits will not be distributed in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Current and deferred tax is
recognised in the income statement except where it relates to
an item recognised directly in reserves, in which case it is
recognised directly in reserves.
Deferred tax is measured at the average tax rates that are
expected to apply in the years in which the timing differences
are expected to reverse, based on tax rates and laws that
have been enacted, or substantially enacted by the balance
sheet date.
Deferred tax assets and liabilities are offset against each other
when they relate to income taxes levied by the same tax
jurisdiction and when the Group intends to settle its current
tax assets and liabilities on a net basis. Deferred tax balances
are not discounted.
j) Goodwill
On acquisition of a subsidiary or associate, the fair value of the
consideration is allocated between the identifiable net tangible
and intangible assets and liabilities on a fair value basis, with
any excess consideration representing goodwill. At the
acquisition date, goodwill is allocated to each Cash Generating
Unit (CGU) expected to benefit from the combination and held
in the currency of the operations to which the goodwill relates.
Goodwill is not amortised, but is reviewed annually for
impairment, or more frequently where there is an indication
that goodwill may be impaired. Impairment is assessed by
measuring the future cash flows of the CGUs to which the
goodwill relates. Where the future discounted cash flows are
less than the carrying value of goodwill, an impairment charge
is recognised in the income statement.
On disposal of subsidiary undertakings and businesses, the
relevant goodwill is included in the calculation of the profit or
loss on disposal.
k) Intangible assets
Acquisition intangibles
Acquisition intangibles comprise brand names and customer
relationships purchased as part of acquisitions of businesses
and are capitalised and amortised over their useful economic
lives on a straight line basis. These intangible assets are stated
at cost less accumulated amortisation and, where appropriate,
provision for impairment in value or estimated loss on disposal.
Amortisation is provided to write off the cost of assets on a
straight line basis on the following bases:
Brands 7% to 20% per annum
Customer relationships 13% to 50% per annum
Software and licences
Software and licences include costs incurred to acquire the
assets as well as internal infrastructure and design costs
incurred in the development of software in order to bring the
assets into use.
Internally generated software is recognised as an intangible
asset only if it can be separately identified, it is probable that
the asset will generate future economic benefits which exceed
one year, and the development cost can be measured reliably.
Where these conditions are not met, development expenditure
is recognised as an expense in the year in which it is incurred.
Costs associated with developing or maintaining computer
software are recognised as an expense as incurred unless they
increase the future economic benefits of the asset, in which
case they are capitalised.
The expenditure capitalised includes the cost of materials,
direct labour and an appropriate proportion of overheads.
Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset
to which it relates.
Software is stated at cost less accumulated amortisation and,
where appropriate, provision for impairment in value or
estimated loss on disposal. Amortisation is provided to write
off the cost of assets on a straight line basis between three
and eight years.
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