Annual Report and Accounts 2016


John Lewis Partnership plc


119


3 Operating assets and liabilities


In this section This section shows the assets used in generating the Partnership’s performance and related future commitments. This includes intangible assets and property, plant and equipment, as well as commitments for future expenditure which will be used to help generate our performance in future years. Assets held for sale are included within this section as they relate to current assets which have previously been used in delivering our results.


3.1 Intangible assets


Our balance sheet contains non-physical assets in relation to computer software which are used to support our business and the generation of our profits.


This note shows the cost of the assets, which is the amount we initially paid for them, and details any additions and disposals during the year. Additionally, the note shows amortisation, which is an expense in the income statement to reflect the usage of these assets. Amortisation is calculated by estimating how many years we expect to use the assets, which is also known as the useful life. The amortisation charge reduces the initial value of the assets over time spread evenly over their useful lives.


Each year we review the value of our assets to ensure that their expected future value in use in the business has not fallen below their amortised value. This might occur where there has been a system replacement in the year. If an asset’s expected value in use falls below its amortised value, this is reflected through an additional impairment expense, which reduces profit.


Accounting policy


Intangible assets: Intangible assets, comprising both purchased and internally developed computer software, are carried at cost less accumulated amortisation and impairments. The cost of internally developed software, including all directly attributable costs necessary to create, produce and prepare the software for use, is capitalised where the development meets the criteria for capitalisation required by IAS 38. Internally developed software assets that are not yet in use are reviewed at each reporting date to ensure that the development still meets the criteria for capitalisation, and is not expected to become impaired or abortive. Once available for use, the purchased or internally developed software is amortised on a straight-line basis over its useful economic life, which is deemed to be between three and ten years. The assets’ useful lives are reviewed and adjusted if appropriate at each balance sheet date.


Critical accounting estimates and judgements


Amortisation: Amortisation is recorded to write down non-current assets to their residual values over their estimated useful lives. The selection and review of these residual values and estimated useful lives requires the exercise of management judgement.


It’s Your Results


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