AVESCOGROUPPLC ANNUAL REPORT 2009 33
www.avesco.com
Group takes into account are the expected rate of technological developments, expected market requirements for the equipment and the intensity at which the
assets are expected to be used.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
2.7 Intangible assets
a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired
subsidiary/associate at the acquisition date. Goodwill on acquisition of subsidiaries is included in goodwill and intangible assets. Goodwill on acquisition of
associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash generating units that are expected
to benefit from the business combination in which the goodwill arose.
In accordance with IFRS 3 ‘Business Combinations’, any excess of acquirer’s interest in the fair value of acquiree’s identifiable net assets is immediately
recognised in the income statement.
b) Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are
amortised over their useful economic lives (3 to 10 years).
Costs associated with developing and maintaining computer software programmes are recognised as an expense when incurred, subject to the
capitalisation criteria of IAS 38.
c) Customer relationships
Acquired customer relationships are recognised where their fair value can be reliably measured. These assets are considered to have finite lives and are
amortised on a straight-line basis over their estimated useful economic lives.
d) Customer contracts
Acquired customer contracts are recognised where their fair value can be reliably measured. These assets are considered to have finite lives and are
amortised on a straight-line basis over their estimated useful economic lives.
e) Tradenames
Acquired tradenames are recognised where their fair value can be reliably measured. These assets are considered to have finite lives and are amortised on
a straight-line basis over their estimated useful economic lives.
f) Start up costs
All costs relating to the start up of new operations are recognised in the income statement as incurred.
g) Website costs
The Group uses websites principally for marketing purposes rather than directly for generating revenue. Accordingly all website costs are recognised in the
income statement as incurred.
2.8 Impairment of non current assets
The carrying amount of the Group’s non current assets are reviewed at each balance sheet date to determine whether there is any indication of impairment.
Assets that have an indefinite economic life are not subject to amortisation and are tested annually for impairment.
If an indicator of a possible impairment is noted, the need for any asset impairment provision is assessed by comparing the carrying value of the asset against
the higher of fair value less costs to sell or value in use (recoverable amount). An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount. Impairment losses are recognised operating expenses in the income statement. For the purposes of assessing impairment, the
assets are grouped at the lowest levels for which they have separately identifiable cash flows (cash generating units).
Impairment losses recognised in the income statement in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash-generating units (Groups of units) and then, to reduce the carrying amount of the other assets of the unit (Group of units) on a pro rata basis.
2.9 Financial assets
The Group classifies financial assets into the following categories: fair value through profit or loss, loans and receivables and available for sale. The classification
depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and
re-evaluates this at every reporting date.
a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for
the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category
are classified as current assets.
b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that
the Group intends to sell in the short term or that it has designated as at fair value through profit or loss or available for sale. They are included in current
assets, except for maturities greater than 12 months after the balance sheet date, which are classified as non current assets. The Group’s loans and
receivables comprise ‘trade and other receivables’ and cash and cash equivalents.
c) Available for sale financial assets
Available for sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories.
They are included in non-current assets unless management intends to dispose of them within 12 months of the balance sheet date.
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