Carphone Warehouse 2015 Annual Report Download - page 140

Dixons Carphone plc Annual Report and Accounts 2014/15
Financial statements
Notes to the Company financial statements
138
C1 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’.
Historically, the Company has prepared its financial statements to the Saturday closest to its accounting reference date of
31 March. Following the Dixons Retail Merger, which is described further in note 23 to the Group financial statements, the
Company has changed its accounting reference date to 30 April which was the pre-existing accounting reference date of Dixons
Retail plc, but will continue to draw up accounts to the nearest Saturday and accordingly the financial period is for the 13 months
ended 2 May 2015. The comparative period is for the year ended 29 March 2014.
The Company has applied the exemption available in FRS 1 ‘Cash Flow Statements’ not to present its own cash flow statement.
The following principal accounting policies have been applied consistently throughout both financial 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.
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 year in
which they are approved by the Company’s shareholders. Interim and other dividends are recognised in the year 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 both years.
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.