Peachtree 2012 Annual Report Download - page 84

Group accounting policies continued
d Segment reporting continued
post-employment benefit obligations, tax liabilities and certain borrowings that
can be attributed to the segment but exclude borrowings that are for general
corporate purposes.
Capital expenditure comprises additions to property, plant and equipment
and intangible assets. The profit measure used by the Executive Committee
is Earnings before interest, tax and adjustments (“EBITA”) which excludes
the effects of amortisation of acquired intangible assets, the amortisation of
software development expenditure and acquisition-related items on a constant
currency basis. The operating segments are reported in a manner which is
consistent with the operating segments produced for internal management
reporting. At 30 September 2012 the Group was organised into geographical
segments based on the location of assets.
e Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of discounts, VAT and other
sales-related taxes.
The Group reports revenue under two revenue categories:
subscription revenues, which are recurring in nature and include combined
software/support contracts, maintenance and support, transaction services
(payment processing) and hosted products; and
software and software-related services revenue, which includes software
licences, sale of professional services, business forms, hardware and training.
Subscription – revenue is recognised on a straight-line basis over the term of
the subscription contract (including non-specified upgrades when included).
Revenue not recognised in the income statement under this policy is classified
as deferred income in the balance sheet.
Software licences – the Group recognises the revenue allocable to software
licences and specified upgrades when all the following conditions have
been satisfied:
the Group has transferred to the buyer the significant risks and rewards of
ownership of the licence;
the Group retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction
will flow to the Group; and
the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
Where appropriate the Group provides a reserve for estimated returns under
the standard acceptance terms at the time the revenue is recorded.
Where software is sold with after-sales service, the consideration is allocated
between the different elements on a relative fair value basis. The revenue
allocated to each element is recognised as outlined above.
Other products (which includes business forms and hardware) – revenue is
recognised as the products are shipped.
Other services (which includes the sale of professional services and training) –
revenue associated with the transaction is recognised by reference to the
stage of completion of the transaction at the end of the reporting period. The
outcome of a transaction can be estimated reliably when all the following
conditions are satisfied:
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction
will flow to the Group;
the state of completion of the transaction at the balance sheet date can
be measured reliably; and
the costs incurred for the transaction and the costs to complete the
transaction can be measured reliably.
f Goodwill
Goodwill arising from the acquisition of a subsidiary represents the excess
of the consideration transferred, the amount of any non-controlling interest
in the acquiree and the acquisition date fair value of the Group’s share of the
identifiable net assets acquired over the fair value of the Group’s share of
the identifiable net assets. In the case of a bargain purchase, when the
consideration is less than the fair value of the net assets of the subsidiary
acquired, the difference is recognised directly in the Consolidated statement
of comprehensive income. Goodwill is carried at cost less accumulated
impairment losses.
Goodwill is allocated to cash-generating units (“CGUs”) expected to benefit
from the synergies of the combination, and the allocation represents the
lowest level at which goodwill is monitored.
Goodwill previously written-off directly to reserves under UK GAAP prior to
1 October 1998 has not been reinstated and is not recycled to the income
statement on the disposal of the business to which it relates. Gains and losses
on disposal of the entity include the carrying amount of the foreign exchange
on the goodwill relating to the entity sold (except for goodwill taken to reserves
prior to the transition to IFRS on 1 October 2004).
g Impairment of assets
Goodwill is allocated to CGUs for the purposes of impairment testing. The
recoverable amount of the CGU to which the goodwill relates is tested annually
for impairment or when events or changes in circumstances indicate that it
might be impaired.
The carrying values of property, plant and equipment, investments measured
using a cost basis and intangible assets other than goodwill are reviewed for
impairment only when events indicate the carrying value may be impaired.
In an impairment test, the recoverable amount of the CGU or asset is
estimated to determine the extent of any impairment loss. The recoverable
amount is the higher of fair value less costs to sell and the value-in-use in the
Group. An impairment loss is recognised to the extent that the carrying value
exceeds the recoverable amount.
In determining CGUs or asset’s value-in-use, estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks specific
to the CGU or asset that have not already been included in the estimate of
future cash flows.
h Intangible assets – arising on business combinations
Intangible assets are recognised when brands, technology and/or customer-
related contractual cash flows exist, along with any other intangibles
acquired on a business combination, and their fair value can therefore
be measured reliably.
Intangible assets arising on business combinations are stated at cost less
accumulated amortisation and impairment losses if applicable.
Amortisation of intangible assets is charged to the income statement on a
straight-line basis over the estimated useful lives of each intangible asset.
Intangible assets are amortised from the date they are available for use.
The estimated useful lives are as follows:
Brand names – 3 to 20 years
Technology/In process R&D (IPR&D) – 3 to 7 years
Customer relationships – 4 to 15 years
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