Carphone Warehouse 2012 Annual Report Download - page 85

Carphone Warehouse Group plc Annual Report 2012 81
1Accounting policies
a) Basis of preparation
The Company is incorporated in the United Kingdom. The financial statements have been prepared on a going concern basis (see note1
to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 2012 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 Company was incorporated on 17 December 2009 and the comparative information in these financial statements reflects the period
from this date to 31 March 2010.
The following principal accounting policies have been applied consistently throughout both periods.
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 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 incentive 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 and other 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.
NOTES TO THE COMPANy FINANCIAL STATEMENTS
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