Peachtree 2013 Annual Report Download - page 102

Group accounting policies continued
100 The Sage Group plc | Annual Report & Accounts 2013
Group accounting policies continued
Other products (which include business forms and hardware) – revenue
is recognised as the products are shipped.
Other services (which include 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.
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.
Goodwill is carried at cost less accumulated impairment losses.
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).
Impairment of assets
Goodwill is allocated to cash-generating units (“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.
Goodwill is allocated to CGUs expected to benefit from the synergies of
the combination, and the allocation represents the lowest level at which
goodwill is monitored.
The carrying values of property, plant and equipment, investments
measured using a cost basis and intangible assets other than goodwill
are reviewed for impairment whenever events indicate that the carrying
value may not be recoverable.
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.
Intangible assets
Intangible assets arising on business combinations are stated
at fair value less accumulated amortisation and impairment losses.
The main intangible assets recognised are brands, technology and
customer relationships.
Amortisation is charged to the income statement on a straight-line basis
over their estimated useful lives.
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
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.
Internally generated software development costs are expensed as
incurred. Expenditure on research activities is recognised as an
expense in the period in which it is incurred.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. 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.
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.
Taxation
The taxation charge for year represents the sum of the tax currently
payable and deferred tax and is recognised in the income statement
and statement of comprehensive income according to the accounting
treatment of the related transaction
Current tax payable or receivable is based on the taxable income for
the period and any adjustment in respect of prior period. Current tax
is calculated using tax rates that have been enacted or substantively
enacted at the end of the reporting period.
Deferred tax arises due to certain temporary differences between the
carrying amounts of assets and liabilities in the financial statements
and the corresponding tax bases. 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 goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries, except where the Group is able
to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset realised based
on tax rates that have been enacted or substantively enacted at the
end of the reporting period.
Tax assets and liabilities are offset when there is a legally
enforceable right.
100 The Sage Group plc | Annual Report & Accounts 2013