Carphone Warehouse 2007 Annual Report Download - page 41

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Notes to the Financial Statements
1 Accounting policies
a) Basis of preparation
The Carphone Warehouse Group PLC (“the Company”) is incorporated in the
United Kingdom.
The consolidated financial statements of the Company and all of its subsidiaries
(“the Group”) have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as adopted for use in the European Union and as
applied in accordance with the provisions of the Companies Act 1985. These
financial statements therefore comply with Article 4 of the European Union
International Accounting Standard regulation. The Company continues to apply
United Kingdom GAAP in the preparation of its individual financial statements,
which are contained on pages 67 to 71.
The details of the elections made on conversion to IFRS were set out in the
1 April 2006 Annual Report.
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. The Group
will adopt these pronouncements for the period ending 29 March 2008.
•IFRS8 ‘Operating Segments’, which, subject to its endorsement by
the European Union, the Group will adopt for the period ending
28 March 2009.
•IFRIC8 ‘Scope of IFRS2’, which the Group will adopt for the period ending
29 March 2008.
•IFRIC9 ‘Reassessment of Embedded Derivatives’, which the Group will
adopt for the period ending 29 March 2008.
•IFRIC10 ‘Interim Financial Reporting and Impairment’, which, subject to its
endorsement by the European Union, the Group will adopt for the period
ending 29 March 2008.
•IFRIC12 ‘Service Concession Arrangements’, which, subject to its
endorsement by the European Union, the Group will adopt for
the period ending 28 March 2009.
The Directors anticipate that the adoption of these standards and interpretations
will have no material impact on the Group’s results or financial position, but IFRS8
may affect the disclosure of information in the Group’s financial statements.
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
31 March 2007. 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. Material
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 ‘Financial Instruments: Recognition and
Measurement’ has been applied in the current period by marking to market the
relevant financial instruments at the balance sheet date and recognising the
gain or loss in reserves in respect of cash flow hedges, and through the
income statement in respect of fair value hedges.
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 52 weeks
ended ended Closing Closing
31 March 1 April 31 March 1 April
2007 2006 2007 2006
Euro 1.4748 1.4644 1.4735 1.4333
South African Rand 13.3742 n/a 14.2247 n/a
Swedish Krona 13.6029 13.6833 13.7611 13.5185
Swiss Franc 2.3434 2.2737 2.3945 2.2668
United States Dollar 1.9018 n/a 1.9614 n/a
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.
d) Revenue
Revenue is stated net of VAT and other sales related taxes. The following
accounting policies are applied to each business segment:
Distribution:
Distribution revenue comprises revenue generated from the sale of mobile
communication products and services, commission receivable on sales less
provision for promotional offers and network operator performance penalties,
ongoing revenue (share of customer airtime spend, and customer revenue and
retention bonuses) and insurance premiums.
•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.
•Volume bonuses are recognised when the conditions on which they
are earned have been met.
•Ongoing revenue is recognised as it is earned over the lives of the
relevant customers.
•Insurance premiums are typically paid quarterly in advance. Initial
administration fees, which are specified in the contract, are recognised
at the point of sale. Insurance premium income is recognised over the
lives of the relevant policies.
•All other revenue is recognised when the relevant goods or services
are provided.
Telecoms Services:
Telecoms Services revenue comprises revenue generated from facilities
management, revenue from mobile and fixed network services and ongoing
revenue. All such revenue is recognised as it is earned over the lives of the
relevant customers. Revenue from other products and services associated
with Telecoms Services is recognised when such products and services
are provided.
Dealer:
Dealer revenue comprises revenue generated from the sale of mobile hardware
and is recognised when sales are made.
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Financial Statements