Carphone Warehouse 2006 Annual Report Download - page 43

Notes to the Financial Statements
provisions of the Companies Act 1985, and therefore comply with Article 4
of the European Union International Accounting Standard regulation.
At the date of authorisation of these financial statements, the following
standards and interpretations, which have not been applied in these financial
statements, were in issue but not yet effective:
•IFRS7 ‘Financial Instruments Disclosures’, and the related amendment
to IAS1 ‘Presentation of financial statements’ on capital disclosures.
•IFRIC4 ‘Determining Whether an Arrangement Contains a Lease’.
•IFRIC8 ‘Scope of IFRS2’.
•IFRIC9 ‘Reassessment of Embedded Derivatives’.
•2005 amendments to IAS21 ‘Net Investment in a Foreign Entity’.
•2005 revisions to IAS39 for fair value options and guarantees.
The Directors anticipate that the adoption of these standards and interpretations
will have no material impact on the financial statements of the Group.
The financial statements have been prepared on the historical cost basis,
except for the revaluation of certain financial instruments. The Group’s
principal accounting policies are set out below.
b) Basis of consolidation
The consolidated financial statements incorporate the results of the Group
to 1 April 2006. The results of subsidiaries acquired or sold during the period
are included from or to the date on which control passed. Intercompany
transactions and balances are eliminated on consolidation.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring accounting policies used into line with those used
by the Group.
c) Foreign currency translation
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. 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
IAS39 has not been applied in either period.
The results of overseas operations are translated at the average foreign
exchange rates for the period, and their balance sheets are translated at the
rates prevailing at the balance sheet date. Goodwill is held in the currency
of the operations to which it relates. Exchange differences arising on the
translation of opening net assets, goodwill and results of overseas operations
are dealt with through the translation reserve. All other exchange differences
are included in the income statement.
The principal exchange rates against Sterling used in these financial
statements are as follows:
Average Average
52 weeks 53 weeks
ended ended Closing Closing
1 April 2006 2 April 2005 1 April 2006 2 April 2005
Euro 1.4644 1.4680 1.4333 1.4573
Swedish Krona 13.6833 13.3756 13.5185 13.3519
Swiss Franc 2.2737 2.2615 2.2668 2.2629
In the event that a foreign operation is sold, the gain or loss on disposal
recognised in the income statement is determined after taking into account the
cumulative currency translation differences that are attributable to the operation.
1 Accounting policies
a) Basis of preparation
The Carphone Warehouse Group PLC (the Company) is a company
incorporated in the United Kingdom.
The consolidated financial statements of The Carphone Warehouse Group
PLC and all of its subsidiaries (the Group) have been prepared in accordance
with International Financial Reporting Standards (IFRS). These financial
statements are the first annual financial statements that the Group has
prepared in accordance with IFRS and consequently the Group has complied
with IFRS1 ‘First-time Adoption of International Financial Reporting Standards’.
The Company continues to apply UK GAAP in the preparation of its individual
financial statements, which are contained on pages 68 to 72.
The Group’s date of transition to IFRS is 28 March 2004 and comparative
information in the financial statements is restated to reflect the Group’s
adoption of IFRS except where otherwise required or permitted by IFRS1.
IFRS1 requires an entity to comply with each IFRS effective at the reporting
date for its first financial statements prepared under IFRS. As a general rule,
IFRS1 requires such standards to be applied retrospectively. However, the
standard allows several optional exemptions from full retrospective application.
The Group has elected to take advantage of the following exemptions:
•The Group has adopted IFRS3 ‘Business Combinations’ to the extent that
it applies to acquisitions post 28 March 2004. Acquisitions before that
date are recorded as under previous accounting rules as the Group has
taken advantage of the exemption allowed in IFRS1 regarding business
combinations recognised before the date of transition to IFRS. All goodwill
and intangible assets will be tested for impairment, as required by IAS36
‘Impairment of Assets’, goodwill on an annual basis and other intangible
assets when there is an indicator of impairment. In addition, the Group has
taken advantage of the exemption allowed in IFRS1 not to apply IAS21
‘The Effects of Changes in Foreign Exchange Rates’ retrospectively to
fair value adjustments and goodwill arising in business combinations that
occurred before the date of transition to IFRS.
•The Group has elected to take advantage of the exemption allowed
in IFRS1 regarding cumulative translation differences. Accordingly, the
cumulative translation differences for all foreign operations are deemed
to be nil at the date of transition to IFRS.
•The Group has elected to apply the exemptions in IAS32 ‘Financial
Instruments: Disclosure and Presentation’ and IAS39 ‘Financial Instruments:
Recognition and Measurement’ allowing the application of these standards
from 3 April 2005 only.
•The Group has elected to take advantage of the exemptions allowed
in IFRS1 regarding IFRS2 ‘Share-based Payment’. The Group has
applied the exemptions for share-based payments granted on or before
7 November 2002.
•The Group has elected to take advantage of the exemptions allowed in
IFRS1 regarding IFRS4 ‘Insurance Contracts’, allowing the application
of this standard from 3 April 2005 only.
The reconciliations required by IFRS1 are set out in note 29. Specifically,
note 29 provides reconciliations of the Group’s net assets as prepared under
UK GAAP to those prepared in accordance with IFRS as at 28 March 2004
(the opening balance sheet as at the date of transition to IFRS) and
2 April 2005 as well as a reconciliation of the Group’s profit prepared
under UK GAAP to that prepared in accordance with IFRS for the period
ended 2 April 2005.
These financial statements have been prepared in accordance with IFRS as
adopted for use in the European Union and as applied in accordance with the
www.cpwplc.com 39
Financial Statements