Carphone Warehouse 2011 Annual Report Download - page 80

76 Carphone Warehouse Group plc Annual Report 2011
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
a) Basis of preparation
The Company was incorporated on 15 December 2009 in the
United Kingdom and it commenced operations on 17 December
2009. This is its first annual report. The financial statements
have been prepared on a going concern basis (see Note 1 of the
Group financial statements) and in accordance with applicable
United Kingdom accounting standards under the historical cost
convention, as modified by FRS 26 ‘Financial Instruments:
Measurement’.
The Group’s financial statements for the period ended 31 March
2011 contain a consolidated cash flow statement. Consequently,
the Company has applied the exemption in FRS 1 ‘Cash Flow
Statements’ not to present its own cash flow statement.
The following principal accounting policies have been applied
consistently throughout the current period.
b) Investments
Investments held in subsidiaries and joint ventures are
recognised at cost, being the fair value of consideration,
acquisition charges associated with the investment and capital
contributions by way of share-based payments, less any
provision for permanent diminution in value.
Investments where the Company does have not have control
or significant influence are treated as available-for-sale and
recorded at fair value. Changes in fair value, together with any
related deferred taxation, are taken directly to reserves, and
recycled to the profit and loss account when the investment is
sold or is determined to be impaired.
c) Share-based payments
Equity settled share-based payments are measured at fair value
at the date of grant and expensed over the vesting period, based
on an 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
EPS targets) and a Monte Carlo model for those with external
performance criteria (such as TSR 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 date is recognised in the profit
and loss account, with a corresponding entry in reserves.
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 profit
and loss account, 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 profit and loss account. If a share-based payment
scheme is forfeited, no further expense is recognised and any
charges previously recognised through the profit and loss
account 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.
d) Dividends
Dividends receivable from the Company’s subsidiaries are
recognised only when they are approved by shareholders.
Final dividend distributions to the Company’s shareholders
are recognised as a liability in the financial statements in the
period in which they are approved by the Company’s
shareholders. Interim dividends are recognised in the period
in which they are paid.
e) 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 FRS 26
has been applied in the period.
f) Loans and other borrowings
Bank fees and legal costs associated with the securing of
external financing are capitalised and amortised over the term
of the relevant facility. All other borrowing costs are recognised
in the profit and loss account in the period in which they are
incurred.
g) Provisions
Provisions are recognised when a legal or constructive
obligation exists as a result of past events and it is probable that
an outflow of resources will be required to settle the obligation
and a reliable estimate can be made of the amount of the
obligation. Provisions are discounted where the time value
of money is considered to be material.