AS AT 30 JUNE 2011
56
Notes to the Financial Statements (continued)
1. Summary of signifcant accounting policies
(continued)
The efective portion of changes in the fair value of
derivatives that are designated and qualify as cash fow
hedges is recognised in other comprehensive income and
accumulated in reserves in equity. The gain or loss relating
to the inefective portion is recognised immediately in proft
or loss within other income or other expense.
Amounts accumulated in equity are reclassifed to proft
or loss in the periods when the hedged item afects proft
or loss (for instance when the forecast sale that is hedged
takes place). The gain or loss relating to the efective portion
of interest rate swaps hedging variable rate borrowings is
recognised in proft or loss within “fnance costs”. However,
when the forecast transaction that is hedged results in the
recognition of a non-fnancial asset (for example, inventory
or fxed assets) the gains and losses previously deferred in
equity are reclassifed from equity and included in the initial
measurement of the cost of the asset. The deferred amounts
are ultimately recognised in proft or loss as cost of goods
sold in the case of inventory, or as depreciation
or impairment in the case of fxed assets.
When a hedging instrument expires or is sold or terminated,
or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity
at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in proft or loss.
When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is
immediately reclassifed to proft or loss.
q. Inventories
i. Rental equipment
Rental equipment is carried at the lower of cost and net
realisable value and comprises returned rental equipment
and items remaining on rental after the end of the
contractual rental period.
ii. Mobile broadband stock
Mobile broadband stock is stated at the lower of cost and
net realisable value.
r. Plant and equipment
Plant and equipment is stated at historical cost less
depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Cost
may also include transfers from equity of any gains/
losses on qualifying cash fow hedges of foreign currency
purchases of plant and equipment.
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 benefts
associated with the item will fow to the Group and the
cost of the item can be measured reliably. All repairs and
maintenance are charged to the income statement during
the reporting period in which they are incurred.
Depreciation is calculated using the diminishing value
method to allocate their cost or revalue amounts, net of their
residual values, over their estimated useful lives, as follows:
Depreciable assets
Depreciation rate
Plant and equipment
20–40%
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount of the asset disposed.
These are included in the income statement.
s. Intangibles
i. Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net
identifable assets of the acquired subsidiary at the date
of acquisition. Goodwill on acquisitions of subsidiaries is
included in intangible assets. Goodwill is not amortised.
Instead, goodwill is tested for impairment annually or
more frequently if events or changes in circumstances
indicate that it might be impaired, and is 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.
ii. Software
Costs incurred on software development projects (relating
to the design and testing of new or improved software
products) are recognised as intangible assets when it is
probable that the project will be a success, considering its
commercial and technical feasibility, and its costs can be
measured reliably. The expenditure capitalised comprises
all directly attributable costs, including direct labour. Other
development expenditures that do not meet these criteria
are recognised as an expense as incurred. Capitalised
development costs are recorded as an intangible asset and
amortised from the point at which the asset is ready for use
over its useful life, which is assessed at 2.5 to 5 years.