Experian 2011 Annual Report Download - page 101

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Financial statements 99
5. Signicant accounting policies (continued)
On consolidation, exchange differences arising from the translation of the net investment in Group undertakings whose functional currencies
are not the US dollar, and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other
comprehensive income to the extent that such hedges are effective. Tax charges and credits attributable to those exchange differences are taken
directly to other comprehensive income. When such an undertaking is sold, these exchange differences are recognised in the Group income
statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of such entities are treated as
assets and liabilities of the entities and are translated into US dollars at the closing exchange rate.
(c) Goodwill
Goodwill is stated at cost less any impairment, where cost is the excess of the fair value of the consideration payable for an acquisition over
the fair value of the Group’s share of identiable net assets of a subsidiary or associate acquired at the date of acquisition. Fair values are
attributed to the identiable assets, liabilities and contingent liabilities that existed at the date of acquisition, reecting their condition at that
date. Adjustments are made where necessary to align the accounting policies of acquired businesses with those of the Group. Goodwill is not
amortised but is tested annually for impairment. An impairment charge is recognised for any amount by which the carrying value of goodwill
exceeds its recoverable amount.
Goodwill on acquisitions of subsidiaries is separately recognised in the Group balance sheet. Goodwill on acquisitions of associates is included
in the carrying amount of the investment. Goodwill is allocated to cash generating units (‘CGUs’) and monitored for internal management
purposes by operating segment. The allocation is made to those CGUs or groups of CGUs that are expected to benet from the business
combination in which the goodwill arose. Where the recoverable amount of the CGU is less than its carrying amount, including goodwill, an
impairment charge is recognised in the Group income statement.
Gains and losses on the disposal of an undertaking include the carrying amount of goodwill relating to the undertaking sold, allocated where
necessary on the basis of relative fair value.
(d) Other intangible assets
Intangible assets acquired as part of a business combination are capitalised at fair value separately from goodwill, if those assets are
identiable, separable or arise from legal rights and their fair value can be measured reliably. Other intangible assets are capitalised at cost.
Certain costs incurred in the developmental phase of an internal project are capitalised as intangible assets provided that a number of criteria
are satised. These include the technical feasibility of completing the asset so that it is available for use or sale, the availability of adequate
resources to complete the development and to use or sell the asset and how the asset will generate probable future economic benet.
The cost of such intangible assets with nite useful economic or contractual lives is amortised over those lives. The carrying values of intangible
assets are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. If
impaired, the carrying values are written down to the higher of fair value less costs to sell, and value-in-use which is determined by reference to
projected future income streams using assumptions in respect of protability and growth.
Research expenditure is charged in the Group income statement in the year in which it is incurred.
Acquisition intangibles
Customer and advertiser relationships
Contractual and non-contractual customer and advertiser relationships acquired as part of a business combination are capitalised at fair value
on acquisition and amortised on a straight line basis over three to eighteen years, based on management’s estimates of the average lives of such
relationships. In view of the relative signicance of such assets, customer and advertiser relationships are now reported separately within note 21.
Trademarks and licences
Trademarks and licences acquired as part of a business combination are capitalised at fair value on acquisition and are amortised on a straight
line basis over their contractual lives, up to a maximum period of twenty years.
Trade names
Legally protected or otherwise separable trade names acquired as part of a business combination are capitalised at fair value on acquisition and
amortised on a straight line basis over three to fourteen years, based on management’s expectations to retain trade names within the business.
Completed technology
Completed technology acquired as part of a business combination is capitalised at fair value on acquisition and amortised on a straight line
basis over three to eight years, based on the expected life of the asset.
Databases and computer software
Databases
Capitalised databases comprise the fair value of databases acquired as part of a business combination or the data purchase and data capture
costs of internally developed databases. Databases are held at cost and are amortised on a straight line basis over three to seven years.
Computer software
Acquired computer software licences for internal use are capitalised on the basis of the costs incurred to acquire and bring into use the specic
software. These costs are amortised on a straight line basis over three to ten years.
Costs that are directly associated with the production of identiable and unique software products controlled by the Group, and that will
generate economic benets beyond one year, are recognised as intangible assets. These internally generated software costs are amortised on a
straight line basis over three to ten years.