Carphone Warehouse 2015 Annual Report Download - page 89

Dixons Carphone plc Annual Report and Accounts 2014/15
Financial statements
Notes to the Group financial statements
87
1 Accounting policies
a) Basis of preparation
The consolidated financial statements have been prepared on
a going concern basis in accordance with IFRS as adopted
by the EU, IFRS issued by the International Accounting
Standards Board, those parts of the Companies Act 2006
applicable to those companies reporting under IFRS and
Article 4 of the IAS Regulation.
The financial statements have been presented in UK Sterling,
the functional currency of the Company, and on the historical
cost basis except for the revaluation of certain financial
instruments, as explained below. All amounts have been
rounded to the nearest £1 million, unless otherwise stated.
The principal accounting policies adopted are set out below.
As described in note 23, on 6 August 2014, the Group
completed the merger of Dixons and Carphone, which was
implemented by way of a scheme of arrangement of Dixons.
The Company has been renamed Dixons Carphone plc. Under
the terms of the Merger, Dixons Shareholders received 0.155
of a new Dixons Carphone Share in exchange for each Dixons
share. In accordance with the criteria set out in IFRS 3
‘Business Combinations’ it has been determined that
Carphone acquired Dixons.
Certain line item descriptions within the income statement and
balance sheet have been adapted to better represent the
newly merged group and are intended to be presented on this
basis going forwards.
Historically, the Group prepared its financial statements to the
Saturday closest to its accounting reference date of 31 March.
Following the Merger, the Group changed its accounting
reference date to 30 April which was the accounting reference
date of Dixons, but will continue to draw up accounts to the
nearest Saturday. Accordingly the current financial period is for
the 13 months ended 2 May 2015 whilst the comparative
period is for the 12 month period ended 29 March 2014.
The Group’s income statement and segmental analysis identify
separately Headline performance and Non-Headline items.
Headline performance measures reflect adjustments to total
performance measures. The directors consider ‘Headline’
performance measures to be a more accurate reflection of the
ongoing trading performance of the Group and believe that
these measures provide additional useful information for
shareholders on the Group’s performance and are consistent
with how business performance is measured internally.
Headline results are stated before the results of discontinued
operations or exited / to be exited businesses, amortisation of
acquisition intangibles, any exceptional items considered so
one off and material that they distort underlying performance
(such as reorganisation costs, impairment charges and other
non-recurring charges) and net pension interest costs.
Businesses exited or to be exited are those which the Group
has exited or committed to or commenced to exit through
disposal or closure but do not meet the definition of
discontinued operations as stipulated by IFRS and are
material to the results and operations of the Group.
Non-Headline items in the current and prior year comprise
amortisation of acquisition intangibles, Merger integration and
transaction costs, CPW Europe Acquisition related items,
Phone House France operating and closure costs whilst it
formed part of the CPW Europe joint venture, net interest on
defined benefit pension schemes and discontinued operations
(comprising Virgin Mobile France and Phone House operations
in France, Germany, Netherlands and Portugal). A
reconciliation of Headline profit and losses to total profits and
losses is shown in note 2. Items excluded from Headline
results can evolve from one financial year to the next
depending on the nature of exceptional items or one-off type
activities described above and the exclusion of pension
interest is such an item applicable to the 13 months ended
2 May 2015. Headline performance measures and Non-
Headline performance measures may not be directly
comparable with other similarly titled measures or ‘adjusted’
revenue or profit measures used by other companies.
The results for the year ended 29 March 2014 have been
restated to recognise the results of the operations in France,
Germany, Netherlands and Portugal as discontinued
operations. Therefore financial information in the income
statement, cash flows statement and associated notes have
been restated to reflect this classification.
Gains on disposal of non-core businesses in Southern Europe
have been included in Headline results net of restructuring
costs. The net impact of these activities totalled £5 million.
Since the period ended 2 November 2014, the Group applied
adjustments to the fair values of assets and liabilities acquired
through the Merger. These adjustments resulted in the fair
value of identifiable net liabilities acquired reducing from
£656 million to £647 million resulting in a reduction in the
goodwill recognised from £2,638 million to £2,629 million.
Going concern
The Group’s funding arrangements and processes for
managing its exposure to liquidity risk are set out in notes
17 and 25.
In their consideration of going concern, the directors have
reviewed the Group’s future cash forecasts and profit
projections, which are based on market data and past
experience. This review considered the implications of the
Merger and the continuing uncertainty in Greece, including the
effect on forecast cash flows and changes to the Group’s
financing facilities. The directors are of the opinion that the
Group’s forecasts and projections, which take into account
reasonably possible changes in trading performance, show
that the Group is able to operate within its current facilities and
comply with its banking covenants for the foreseeable future.
In arriving at their conclusion that the Group has adequate
financial resources, the directors were mindful of the level of
borrowings and facilities as set out in note 17 to the Group
financial statements and that the Group has a robust policy
towards liquidity and cash flow management.
Accordingly the directors have a reasonable expectation that
the Company and the Group have adequate resources to
continue in operation for the foreseeable future and
consequently the directors continue to apply the going
concern basis in the preparation of the financial statements.