Marks and Spencer 2006 Annual Report Download - page 75

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73Marks and Spencer Group plc
13 INTANGIBLE ASSETS
Computer
software
Computer under
Goodwill Brands software development Total
£m £m £m £m £m
At 3 April 2004
Cost or valuation – – 44.5 2.5 47.0
Accumulated amortisation – – (14.6) – (14.6)
Net book value – – 29.9 2.5 32.4
Year ended 2 April 2005
Opening net book value – – 29.9 2.5 32.4
Additions1, 2 69.5 80.0 0.8 10.1 160.4
Transfers – – 7.0 (7.0) –
Disposal of subsidiary – – (14.1) – (14.1)
Amortisation charge3– (2.7) (10.6) – (13.3)
Closing net book value 69.5 77.3 13.0 5.6 165.4
At 2 April 2005
Cost or valuation 69.5 80.0 32.8 5.6 187.9
Accumulated amortisation – (2.7) (19.8) – (22.5)
Net book value 69.5 77.3 13.0 5.6 165.4
Year ended 1 April 2006
Opening net book value 69.5 77.3 13.0 5.6 165.4
Additions – – 0.2 10.7 10.9
Transfers – – 9.5 (9.5) –
Disposals – – – (0.1) (0.1)
Amortisation charge – (5.3) (7.4) – (12.7)
Closing net book value 69.5 72.0 15.3 6.7 163.5
At 1 April 2006
Cost or valuation 69.5 80.0 42.3 6.7 198.5
Accumulated amortisation – (8.0) (27.0) – (35.0)
Net book value 69.5 72.0 15.3 6.7 163.5
1On 4 October 2004, the Group acquired the per una group of companies for a total consideration of £125.9m. The net assets acquired included £1.4m of assets offset
by £1.0m of liabilities. There were no fair value adjustments. The Group adopted acquisition accounting for the acquisition of the per una group of companies.
Per Una Group Limited was a newly formed entity into which the net assets and liabilities acquired were transferred immediately prior to the acquisition date. As
separate accounts were not maintained for this entity in the period prior to the acquisition date, separate figures for profit after tax were not available. Based on the
available information, the profit before tax attributable to the acquired business in the year to 31 March 2004 and in the six months prior to acquisition was
approximately £17m and £15m respectively. These pre-acquisition figures for the acquired business have been adjusted to reflect the post-acquisition structure for
the per una group. In the six months prior to acquisition, the value of goods purchased from the acquired business was £85.2m.
2‘
Additions’ includes £0.8m in respect of discontinued operations.
3‘Amortisation charge’ includes £1.9m in respect of discontinued operations.
Computer software and software under development are internally generated. Computer software is amortised on a straight-line
basis over a period of three to five years.
Brands consist of the per una brand which was acquired in October 2004 and which is being amortised on a straight-line basis
over a period of 15 years.
Goodwill is not amortised but the Group tests goodwill annually for impairment with the recoverable amount being determined from
value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rate, growth rates
and changes in income and costs.
The Group prepares discounted cash flow forecasts based on financial forecasts approved by management covering a three-year
period, which takes account of both past performance and expectations for future market developments. Cash flows beyond this
three-year period are extrapolated using a growth rate of 2.0%, which does not exceed the long-term average growth rate for retail
businesses in the UK. Management estimates the discount rate using a pre-tax rate that reflects current market assessments
of the time value of money and the risks specific to retail businesses. A pre-tax discount rate of 9.5% has been used.