Carphone Warehouse 2011 Annual Report Download - page 56

52 Carphone Warehouse Group plc Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1 ACCOUNTING POLICIES CONTINUED
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 date 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.
Share-based payment charges are also recognised on loans
that are provided to employees to settle personal tax liabilities;
the cost of such loans is expensed on grant.
Charges also arise on loans that are provided to employees to
fund the purchase of shares in the Group as part of long-term
incentives plans, to the extent to which the loans are not, in
certain circumstances, repayable; the cost of the relevant part
of such loans is expensed over the course of the relevant
incentive plans.
f) Pensions
Contributions to defined contribution schemes are charged to
the income statement as they become payable in accordance
with the rules of the schemes.
g) Dividends
Dividend income is recognised when payment has been received.
Final dividend distributions are recognised as a liability in the
financial statements in the year in which they are approved by
the shareholders. Interim dividends are recognised in the year
in which they are paid.
h) 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.
i) 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.
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 assets and liabilities are offset where there is
a legal right to do so in the relevant jurisdictions.
j) Intangible assets
Goodwill
Goodwill arising on the acquisition of subsidiary undertakings
and businesses, representing the excess of the fair value of the
consideration given over the fair value of the identifiable assets
and liabilities acquired, is recognised initially as an asset at cost
and is subsequently measured at cost less any accumulated
impairment losses. At the acquisition date, goodwill is allocated
to each of the CGUs expected to benefit from the combination
and held in the currency of the operations to which the goodwill
relates. Goodwill is reviewed at least annually for impairment, or
more frequently where there is an indication that goodwill may
be impaired. Impairment is determined by assessing the future
cash flows of the CGUs to which the goodwill relates. Where the
future 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.
Software and licences
Software and licences includes internal infrastructure and
design costs incurred in the development of software for
internal 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,
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.
Software and licences are amortised on a straight-line basis
over their estimated useful economic lives of up to 8 years.
Key money
Key money paid to enter a property is stated at cost, net of
amortisation and any provision for impairment. Amortisation is
provided on key money at rates calculated to write off the cost,
less estimated residual value, on a straight-line basis over 10
years or the lease term if less.
Acquisition intangibles
Acquisition intangibles are amortised over their expected
useful lives of up to 5 years on a straight-line basis. The value
attributed to such assets is based on the future economic
benefit that is expected to be derived from them, calculated as
the present value of future cash flows after a deduction for
contributory assets.