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AVESCO GROUP PLC ANNUAL REPORT 2011 www.avesco.com


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2011


e) Tradenames Acquired tradenames 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.


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 and are not subject to amortisation 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 in 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.


Impairment in respect of intangible assets other than goodwill are reviewed for possible reversal of the impairment at each reporting date. 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.


Regular purchases and sales of investments are recognised on trade date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus, in the case of all financial assets not carried at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or where they have been transferred and the Group has also transferred substantially all risks and rewards of ownership. Available for sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.


Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement for the period in which they arise. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within other comprehensive income in the period in which they arise.


Changes in the fair value of monetary securities denominated in a foreign currency and classified as available for sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss, while translation differences on non-monetary securities are recognised in equity. Changes in the fair value of monetary securities classified as available for sale are recognised in equity.


When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as ‘gains and losses from investment securities’.


The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models.


The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the


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