Experian 2009 Annual Report Download - page 86

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84 Experian Annual Report 2009
2. Basis of preparation and signicant accounting policies (continued)
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedging instruments are recorded in the
Group income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the
hedged risk. The ineffective portion of a fair value hedge is recognised in net nancing costs in the Group income statement.
Cash ow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash ow hedges is
recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately within cost of sales or
operating expenses, as appropriate, in the Group income statement.
Amounts accumulated in equity are recycled in the Group income statement in the period when the hedged item impacts the
Group income statement. However, when the forecast transaction that is hedged results in the recognition of a non-nancial
asset or liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial
measurement of the cost of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is
recognised when the forecast transaction is ultimately recognised in the Group income statement. When a forecast transaction
is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred immediately to the Group
income statement.
Net investment hedges
Any gain or loss on the hedging instrument relating to the effective portion of the hedge of a net investment in an undertaking
whose functional currency is not the US dollar is recognised in equity; the gain or loss relating to the ineffective portion is
recognised immediately in net nancing costs in the Group income statement. Gains and losses accumulated in equity are
included in the Group income statement when the undertaking is disposed of.
Non-hedging derivatives
Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the
Group income statement. Costs in respect of derivatives entered into in connection with social security obligations on employee
share incentive plans, other than those of anancing nature, are charged as an employment cost; other costs and changes in fair
value on such derivatives are charged within nancing fair value remeasurements in the Group income statement.
Derivatives embedded in other nancial instruments or other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of host contracts, and the host contracts are not carried at fair value
with unrealised gains or losses reported in the Group income statement.
Fair value estimation
The fair value of derivative nancial instruments and other nancial assets and liabilities is determined by using market data
and established estimation techniques such as discounted cash ow and option valuation models.
Impairment of non-nancial assets
Assets that are not subject to amortisation are tested annually for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell, and value-in-use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identiable cash ows, which are CGUs.
Trade payables
Trade payables are recognised initially at fair value. Where the time value of money is material, payables are carried at
amortised cost.
Contingent consideration
Where part or all of the amount of purchase consideration is contingent on future events, the cost of the acquisition initially
recorded includes a reasonable estimate of the fair value of the contingent amounts expected to be payable in the future.
The cost of the acquisition is adjusted when revised estimates are made, with corresponding adjustments made to goodwill
until the ultimate outcome is known.
Where part or all of the amount of disposal consideration is contingent on future events, the disposal proceeds initially
recorded include a reasonable estimate of the fair value of the contingent amounts expected to be receivable and payable in
the future. The proceeds are adjusted when revised estimates are made, with corresponding adjustments made to debtors and
creditors as appropriate, and prot and loss on disposal, until the ultimate outcome is known.
Notes to the Group nancial statements continued
Financial statements