Carphone Warehouse 2014 Annual Report Download - page 41

Audit Committee report
1. CONSIDERATION OF ACCOUNTING AND FINANCIAL
REPORTING MATTERS
The Committee is responsible for reviewing the appropriateness of
the half-year and
annual financial statements in conjunction with both
senior management
and the external auditors. During the year ended
29 March 2014 consideration was given tothe following matters:
+the suitability of the Group’s accounting policies and practices;
+compliance with financial reporting and governance standards;
+areas where significant levels of judgement have been applied
oritems which have been discussed with the external auditors;
+whether the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides sufficient information
necessary for shareholders and other users of the accounts to
assess the Group’s performance, business model and strategy; and
+updated accounting and corporate governance regulations
including changes to the UK Corporate Governance Code.
To assist with discharging these responsibilities, the Committee
considers documents prepared by management and reports
received from the external auditors on the outcomes of their annual
auditprocedures.
The primary areas of judgement considered by the Committee
inrelation to the 2013–14 financial statements, and how these
wereaddressed, areset out in the following table:
SIGNIFICANT ISSUES
AND AREAS OF JUDGEMENT HOW THE ISSUE WAS ADDRESSED BY THE COMMITTEE
Revenue recognition As set out in note 1 to the Group financial statements, the Group assessed revenue
recognition as a critical accounting policy, particularly in relation to the recognition
ofnetwork commissions receivable.
The Committee assessed the accounting policies applied in relation to revenue recognition
and concluded that they remain appropriate. The Committee also assessed the key
judgements made in respect of revenue recognition with reference to contractual terms,
the Group’s historical experience ofcustomer behaviour and information received from third
parties. This involved challenging the assumptions used by management in its calculations,
whilst taking into consideration the guidance contained within IAS 18 ‘Revenue’.
The Committee was satisfied with the methodology and assumptions used.
Acquisition accounting The CPW Europe Acquisition required a comprehensive exercise to establish the fair
value of the identifiable assets and liabilities of CPW Europe, as set out in note 23
totheGroup financial statements.
This valuation exercise included consideration of external valuations and calculations
which incorporated management judgement.
The Committee challenged the methodologies used in the valuation of the net assets
acquired and the outcomes of these valuations and is comfortable with the fair values
that have been recognised.
Impairment of acquisition-related
intangibles
Following the completion of the CPW Europe Acquisition, the Group recognised
separately identifiable intangible assets of £125m and goodwill of £484m.
As set out within the Group’s accounting policies, the carrying value of these assets is
reviewed at least annually and more frequently if there is an indication of impairment.
The Committee considered the judgements made in relation to the valuation model
inputs and the methodology used. It also reviewed a sensitivity analysis regarding the
impact of reasonably possible changes in the key assumptions applied. The Committee
was satisfied that the carrying value remains appropriate. Key assumptions are set out
in note 10 to the Group financial statements.
Carphone Warehouse Group plc
Annual Report 2014 39
CORPORATE GOVERNANCE