Carphone Warehouse 2009 Annual Report Download - page 51

www.cpwplc.com 47
Financial Statements
For schemes with external performance criteria, the number of
options expected to vest is adjusted only for expectations of
leavers prior to vesting. The movement in cumulative expense
since the previous balance sheet is recognised in the income
statement, with a corresponding entry in reserves.
If a share-based payment scheme is cancelled, any
remaining part of the fair value of the scheme is expensed
through the income statement. If a share-based payment
scheme is forfeited, no further expense is recognised and
any charges previously recognised through the income
statement are reversed.
g) Pensions
Contributions to dened contribution schemes are charged to
the income statement as they become payable in accordance
with the rules of the schemes.
h) Dividends
Dividend income is recognised when payment has been
received. Final dividend distributions are recognised as a
liability in the nancial statements in the period in which they
are approved by the Group’s shareholders. Interim dividends
are recognised in the year in which they are paid.
i) Leases
Rental payments under operating leases are charged to the
income statement on a straight-line basis over the period of
the lease.
Lease incentives and rent-free periods are amortised through
the income statement over the period of the lease.
Gains or losses from sale and leaseback transactions are
deferred over the life of the new lease to the extent that the
rentals are considered to be above or below market rentals.
The remaining gain or loss is recognised within operating
expenses in the period in which the sale is completed.
j) Taxation
Current tax, including UK corporation tax and overseas tax,
is provided at amounts expected to be paid or recovered using
the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is provided in full on temporary differences
between the carrying amount of an asset or liability in the
balance sheet and its tax base.
Deferred tax liabilities represent tax payable in future periods in
respect of taxable temporary differences. Deferred tax assets
represent tax recoverable in future periods in respect of
deductible temporary differences, and the carry-forward of
unused tax losses and credits. Deferred tax is determined
using the tax rates that have been enacted or substantively
enacted at the balance sheet date and are expected to apply
when the deferred tax asset is realised or the deferred tax
liability is settled.
Deferred tax is provided on the unremitted earnings of
overseas subsidiaries, except where the timing of the
reversal of the temporary difference can be controlled and
it is probable that the temporary difference will not reverse in
the foreseeable future.
e) Revenue and supplier bonuses
Revenue is stated net of VAT and other sales-related taxes.
The following accounting policies are applied to the Group’s
revenue streams:
▪ Revenue generated from the provision of xed and mobile
network services is recognised as it is earned over the lives
of the relevant customers.
▪ Revenue arising on the sale of mobile and other products
and services is recognised when the relevant products or
services are provided.
▪ 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, net of any provision for
promotional offers and network operator performance
penalties. Commission includes the Group’s share of
customer airtime spend, to the extent that it can be reliably
measured and there are no ongoing service obligations.
▪ Other ongoing revenue, including customer retention and
customer spend bonuses, is recognised as it is earned over
the lives of the relevant customers.
▪ Volume bonuses receivable from network operators are
recognised when the conditions on which they are earned
have been met.
▪ Volume bonuses received from suppliers of products are
recognised as an offset to product cost when the conditions
on which they are earned have been met, and are
recognised within cost of sales when the products to which
the volume bonus relates have been sold.
▪ Insurance premiums are typically paid monthly or quarterly
in advance. Initial administration fees, which are specied
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.
f) Share-based payments
The Group issues equity settled share-based payments to
certain employees. Equity settled share-based payments are
measured at fair value at the date of grant, and expensed over
the vesting period, based on the Group’s estimate of the
number of shares that will eventually vest.
Fair value is measured by use of a Binomial model for share-
based payments with internal performance criteria (such as
Earnings Per Share targets) and a Monte Carlo model for those
with external performance criteria (such as Total Shareholder
Return targets).
For schemes with internal performance criteria, the number of
options expected to vest is recalculated at each balance sheet
date, based on expectations of performance against target
and of leavers prior to vesting. The movement in cumulative
expense since the previous balance sheet is recognised in the
income statement, with a corresponding entry in reserves.