ANNUAL REPORT 2011 AVESCO GROUP PLC
www.avesco.com
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(iii) all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When control of a foreign operation is disposed of, the cumulative amount of the exchange differences deferred in the separate component of equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as the foreign entity’s assets and liabilities and are translated at the closing rate.
2.6 Property, plant and equipment
Property, plant and equipment is held at cost. The cost of property, plant and equipment includes those costs which are directly attributable to purchasing the assets and bringing them into working condition. The Group does not capitalise internal costs as part of the cost of property, plant and equipment. The Group capitalises interest on borrowing costs used to fund a qualifying asset in line with IAS 23 (revised) ‘Borrowing Costs’. No assets have met the criteria for a qualifying asset in the current or prior year.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Operating expenses’ in the income statement.
Depreciation of property, plant and equipment is calculated at rates estimated to write off the cost to residual value using the straight line method over the following estimated useful economic lives:
Freehold land
Freehold and long leasehold buildings Short leasehold buildings Hire stock
Other plant and equipment
Not depreciated 30 – 50 years
Remaining period of lease 2 – 10 years 3 – 10 years
The Group reviews its depreciation rates regularly to take account of any changes in circumstances. When setting useful economic lives, the principal factors the 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.
Hire stock comprises a wide range of assets which are available to hire to customers and includes items such as LED screens, cameras, lighting equipment, audio and IT equipment. The appropriate depreciation rate is chosen for each asset within the range defined above.
Depreciation of hire stock is charged in ‘Cost of sales’ and the remaining depreciation is charged to ‘Operating expenses’ unless it directly relates to provision of services to a customer.
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 (Revised) ‘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 ‘Intangible Assets’.
c) Customer relationships Acquired customer relationships are recognised where their fair value can be reliably measured. These assets are carried at cost less accumulated amortisation and 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 carried at cost less accumulated amortisation and are considered to have finite lives and are amortised on a straight-line basis over their estimated useful economic lives.
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