Experian 2009 Annual Report Download - page 36

34 Experian Annual Report 2009
Accounting policies, estimates
and assumptions
The principal accounting policies used
by the Group are shown in note 2 to
the Group nancial statements. These
include details of critical estimates and
assumptions, the most signicant of
which relate to tax, pension benets,
goodwill and nancial instruments.
The estimates made in respect of
the Group’s tax assets and liabilities
include the consideration of
transactions in the ordinary course
of business for which the ultimate tax
determination is uncertain.
The recognition of pension assets
and obligations involves the selection
of appropriate actuarial assumptions
and changes therein may impact on
the amounts disclosed in the Group
balance sheet and the Group income
statement. At 31 March 2009 the
Group has a net pension liability of
US$58m (2008: asset of US$132m). This
consists of a decit in the Experian
dened benet plan of US$19m (2008:
surplus of US$182m) and other pension
obligations of US$39m (2008: US$50m).
Further details of the dened benet
plan are included in note 28 to the
Group nancial statements.
Goodwill is allocated to cash
generating units. The assumptions
used in the cash ow projections
underpinning the impairment testing
of goodwill include assumptions in
respect of protability and future
growth, together with pre-tax discount
rates specic to the geographical
segments in which the Group operates.
These assumptions are set out in
further detail on page 88.
The assumptions in respect of the
valuation of the put option associated
with the remaining 30% stake of Serasa
Experian are set out in note 25(d) to the
Group nancial statements.
Financial risk management
The risks and uncertainties that are
specic to Experian’s business model
together with more general risks
are set out on pages 28 and 29. As
indicated therein, the Group’s nancial
risk management focuses on the
unpredictability of nancial markets
and seeks to minimise potential
adverse effects on the Group’s nancial
performance.
The Group seeks to reduce its
exposures to foreign exchange,
interest rate and other nancial risks
and full disclosures in respect of such
risks, as required by IFRS 7 ‘Financial
Instruments: Disclosures’, are included
within the notes to the Group nancial
statements.
Business review
Financial review continued
Foreign exchange risk
The Group’s reported prot can be
signicantly affected by currency
movements. In the year ended 31 March
2009 approximately 33% of the Group’s
EBIT from continuing operations was
earned in currencies other than the US
dollar, of which approximately 19% was
attributable to sterling and 8% to the
Brazilian real.
The Group is exposed to foreign
exchange risk from future commercial
transactions, recognised assets and
liabilities and investments in, and loans
between, entities with different functional
currencies. The Group manages such
risk, primarily within entities whose
functional currencies are sterling,
by borrowing in the relevant foreign
currencies and by using forward foreign
exchange contracts. The principal
transaction exposures are to the US
dollar and the euro. There have been
no signicant transaction exposures in
respect of the Brazilian real.
The Group has investments in entities
with other functional currencies,
whose net assets are exposed to
foreign exchange translation risk. In
order to reduce the impact of currency
uctuations on the value of such
entities, the Group has a policy of
borrowing in US dollars and euros, as
well as in sterling, and of entering into
forward foreign exchange contracts in
the relevant currencies.