Carphone Warehouse 2011 Annual Report Download - page 58

54 Carphone Warehouse Group plc Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
1 ACCOUNTING POLICIES CONTINUED
Other
Other provisions relate to dilapidations and similar property
costs, and all other provisions, principally being the anticipated
costs of unresolved tax issues and legal disputes, and costs
associated with onerous contracts. All such provisions are
assessed by reference to the best available information at the
balance sheet date.
s) Headline results
Headline results are stated before the amortisation of
acquisition intangibles and any exceptional items that are
considered to be one-off and so material that they require
separate disclosure to avoid distortion of underlying
performance.
t) Use of critical accounting estimates and assumptions
Estimates and assumptions used in the preparation of the
financial statements are continually reviewed and revised as
necessary. Whilst every effort is made to ensure that such
estimates and assumptions are reasonable, by their nature
they are uncertain, and as such changes in estimates and
assumptions may have a material impact.
The principal items in the financial statements where changes
in estimates and assumptions may have a material impact are
as follows:
Recoverable amount of non-current assets
All non-current assets, including goodwill and other intangible
assets, are reviewed for potential impairment using estimates of
the future economic benefits attributable to them. Any estimates
of future economic benefits made in relation to non-current
assets may differ from the benefits that ultimately arise and
materially affect the recoverable value of the asset.
Trade and other receivables
Provisions for irrecoverable receivables are based on extensive
historical evidence and the best available information in
relation to specific issues, but are unavoidably dependent on
future events.
Revenue recognition
Commission receivable within Best Buy Europe depends for
certain transactions on customer behaviour after the point of
sale. Assumptions are therefore required, particularly in
relation to levels of customer default within the contract period,
and minimum levels of customer spend. Such assumptions are
based on extensive historical evidence, and provision is made for
the risk of potential changes in customer behaviour, but they are
nonetheless inherently uncertain.
Current taxation
The complex nature of tax legislation across the tax jurisdictions
in which the Group and its joint ventures operate necessitates
the use of many estimates and assumptions, where the outcome
may differ from that assumed.
Deferred taxation
The extent to which tax losses can be utilised depends on the
extent to which taxable profits are generated in the relevant
jurisdictions in the foreseeable future, and on the tax legislation
then in force, and as such the value of associated deferred tax
assets is uncertain.
Provisions
The Group’s provisions are based on the best information
available to management at the balance sheet date. However,
the future costs assumed are inevitably only estimates, which
may differ from those ultimately incurred.
u) Recent accounting developments
The following standards or interpretations have become
effective during the year ended 31 March 2011 and have the
potential to be relevant to the results or position of the Group:
• IFRS 3 (Revised) ‘Business Combinations’ has amended
certain aspects of acquisition accounting, including requiring
that re-measurements of contingent consideration or
deferred tax assets are recorded in the income statement in
subsequent years and that transaction costs are expensed.
• IAS 27 (Revised) ‘Consolidated and Separate Financial
Statements’ requires the effects of all transactions with
non-controlling interests to be recorded in equity if there is
no change in control.
• IFRIC 16 ‘Hedges of a Net Investment in a Foreign Operation’
clarifies certain matters in relation to net investment
hedging, such that hedges may be held by any entity in a
group, and ensures the appropriate application of IAS 21
to the hedged item.
• ‘Improvements to IFRSs 2009’ has made minor amendments
to a variety of standards.
In addition to these developments, the Group has adopted early
IAS 24 (Amendment) ‘Related Party Disclosures’ which has
amended the definition of a related party. Consequently TalkTalk
is no longer considered a related party of the Group.
The following standards, amendments and interpretations are
not yet approved by the European Union and as such cannot be
adopted early by the Group:
• IFRS 1 (Amendment) ‘First-time Adoption of IFRS’ on
‘Financial Instrument Disclosures’ expected to be effective
for the year ending 31 March 2012.
• IFRS 9 ‘Financial Instruments’ on ‘Classification and
Measurement’ expected to be effective for the year ending
31 March 2014.
• IFRS 10 ‘Consolidated Financial Statements’ expected to be
effective for the year ending 31 March 2014.
• IFRS 11 ‘Joint Arrangements’ expected to be effective for the
year ending 31 March 2014.
• IFRS 12 ‘Disclosure of Interests in Other Entities’ expected to
be effective for the year ending 31 March 2014.
• IFRS 13 ‘Fair Value Measurement’ expected to be effective for
the year ending 31 March 2014.
• IAS 12 (Amendment) ‘Income Taxes’ on ‘Deferred Tax’
expected to be effective for the year ending 31 March 2013.
• IFRIC 19 ‘Extinguishing Financial Liabilities With Equity
Instruments’ expected to be effective for the year ending
31 March 2012.