Peachtree 2012 Annual Report Download - page 85

Overview
Performance
Governance
Group accounting policies continued
Fully amortised intangible assets which are no longer in use are eliminated
from the balance sheet and presented as a disposal within the notes to the
financial statements.
i Intangible assets – other
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and impairment losses if applicable. Software
assets are amortised on a straight-line basis over their estimated useful lives,
which do not exceed seven years.
j Internally generated intangible assets – research and
development expenditure
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
An internally generated intangible asset arising from the development of
software is recognised only if all of the following conditions are met:
it is probable that the asset will create future economic benefits;
the development costs can be measured reliably;
technical feasibility of completing the intangible asset can be demonstrated;
there is the intention to complete the asset and use or sell it;
there is the ability to use or sell the asset; and
adequate technical, financial and other resources to complete the
development and to use or sell the asset are available.
Internally generated intangible assets are amortised over their estimated
useful lives which is between three to six years on a straight-line basis.
Where no internally generated intangible asset can be recognised,
development expenditure is charged to the income statement in the period
in which it is incurred.
k Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses if applicable. Depreciation on property,
plant and equipment is provided on a straight-line basis down to an asset’s
residual value over its useful economic life as follows:
Freehold buildings – 50 years
Long leasehold buildings and improvements – over period of lease
Plant and equipment – 2 to 7 years
Motor vehicles – 4 years
Office equipment – 5 to 7 years
Freehold land is not depreciated.
Residual values and useful lives are reviewed and adjusted, if appropriate,
at the end of each reporting period.
l Inventories
Inventories are stated at the lower of cost and net realisable value after making
allowances for slow moving or obsolete items.
Cost includes expenditure incurred in acquiring the inventories and bringing
them to their existing location and condition. Cost is calculated using the
first-in-first-out method.
m Cash and cash equivalents
For the purpose of preparation of the Consolidated statement of cash flows
and the Consolidated balance sheet, cash and cash equivalents include cash
at bank and in hand and short-term deposits with an original maturity period of
three months or less. Bank overdrafts that are an integral part of a subsidiary’s
cash management are included in cash and cash equivalents where they have
a legal right of set-off and there is an intention to settle net, against positive
cash balances, otherwise bank overdrafts are classified as borrowings.
n Non-current assets held for sale
Non-current assets (or disposal groups) are classified as assets held for sale
when their carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They are stated at the
lower of carrying amount and fair value less costs to sell. Assets and liabilities
of disposal groups classified as held for sale are shown separately on the face
of the balance sheet.
o Financial assets
The Group classifies its financial assets in the category loans and receivables.
This classification is due to the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at
initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months after
the end of the reporting period. These are classified as non-current assets.
The Group’s loans and receivables comprise trade and other receivables
(excluding prepayments and accrued income) (note p) and cash and cash
equivalents in the balance sheet (note m).
p Trade receivables and trade payables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment.
A provision for impairment of trade receivables is established when there
is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy
or financial reorganisation, and default or delinquency in payments are
considered indicators that the trade receivable is impaired. The amount
of the provision is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted at the original
effective interest rate. The carrying amount of the asset is reduced through
the use of an allowance account, and the amount of the loss is recognised
in the income statement within selling and administrative expenses. When
a trade receivable is uncollectible, it is written-off against the allowance
account for trade receivables. Subsequent recoveries of amounts previously
written-off are credited against selling and administrative expenses in the
income statement.
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
q Income tax
Income tax expense represents the sum of the tax currently payable and
deferred tax.
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit as reported in the Consolidated income
statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that
have been enacted or substantively enacted at the end of the reporting period.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit and are accounted for using
the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference arises from
Financial statements
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The Sage Group plc | Annual Report & Accounts 2012