Carphone Warehouse 2016 Annual Report Download - page 97

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• For MVNO operations where the Group is the principal,
revenue is recognised in the period in which the
telecommunication service, such as airtime or data, is
provided;
• revenue from the sale of prepaid credits is deferred until the
customer uses the airtime or the credit expires; and
• revenue generated from the provision of fixed and mobile
network services is recognised as it is earned over the lives
of the relevant customers.
e) Discontinued operations and assets and liabilities
held for sale
A discontinued operation is a component of the Group which
represents a significant separate line of business, either
through its activity or geographical area of operation, which
has been sold, is held for sale or has been closed.
Where the sale of a component of the Group is considered
highly probable and the business is available for immediate
sale in its present condition, it is classified as held for sale.
Such classification assumes the expectation that the sale will
complete within one year from the date of classification. Assets
and liabilities held for sale are measured at the lower of
carrying amount and fair value less costs to sell. Once
classified as held for sale, intangible assets and property, plant
& equipment are no longer amortised or depreciated.
f) Share-based payments
Equity settled share-based payments are measured at fair
value at the date of grant, and expensed on a straight line
basis over the vesting period, based on an estimate of the
number of shares that will eventually vest.
Where share-based payments are subject only to service
conditions or internal performance criteria (such as EPS
targets), fair value is measured using either a Binomial model
or a Black Scholes model. Where share-based payments have
external performance criteria (such as TSR targets) a Monte
Carlo model is used to measure fair value.
For all schemes, the number of options expected to vest is
recalculated at each balance sheet date, based on
expectations of leavers prior to vesting. For schemes with
internal performance criteria, the number of options expected
to vest is also adjusted based on expectations of performance
against target. No adjustment is made for expected
performance against external performance criteria. The
movement in cumulative expense since the previous balance
sheet date is recognised in the income statement, with a
corresponding entry in reserves.
Charges also arise on loans that are provided to employees
to fund the purchase of shares 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.
g) Retirement benefit obligations
Company contributions to defined contribution pension
schemes and contributions made to state pension schemes for
certain overseas employees are charged to the income
statement on an accruals basis when employees have
rendered service entitling them to the contributions.
For defined benefit pension schemes, the difference between
the market value of the assets and the present value of the
accrued pension liabilities is shown as an asset or liability in the
consolidated balance sheet. The calculation of the present
value is determined using the projected unit credit method.
Actuarial gains and losses arising from changes in actuarial
assumptions together with experience adjustments and actual
return on assets are recognised in the consolidated statement
of comprehensive income and expense as they arise. Such
amounts are not reclassified to the income statement in
subsequent years.
Defined benefit costs recognised in the income statement
comprise mainly net interest expense or income with such
interest being recognised within finance costs. Net interest is
calculated by applying the discount rate to the net defined
benefit liability or asset taking into account any changes in the
net defined benefit obligation during the year as a result of
contribution or benefit payments.
h) Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. The determination of the classification
of property leases is made by reference to the land and
buildings elements separately. All leases not classified as
finance leases are classified as operating leases.
The Group as a lessor
Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating
lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
The Group as a lessee
Finance leases
Assets held under finance leases are capitalised at their fair
value on acquisition or, if lower, at the present value of the
minimum lease payments, each determined at the inception of
the lease and depreciated over their estimated useful lives or
the lease term if shorter. The corresponding obligation to the
lessor is included in the balance sheet as a liability. Lease
payments are apportioned between finance charges and
reduction of the lease obligation. Finance charges are charged
to the income statement over the term of the lease in
proportion to the capital element outstanding.
Operating leases
Rental payments under operating leases are charged to the
income statement on a straight-line basis over the period of
the lease. Contingent rentals arising under operating leases
are recognised as an expense in the period in which they
are incurred.
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