57
FLEXIGROUP LIMITED FINANCIAL REPORT 2011
iii. Contractual payments for access rights
Payments to dealers or dealer groups that result in the
Group acquiring a preference to supply services are
capitalised as intangible assets, and amortisation
commences from the start of the supply service period.
The carrying value is tested for impairment annually or
more frequently if events or changes in circumstances
indicate it might be impaired. The amount disclosed as the
balance of access rights in note 17 is amortised over the
period from April 2011 to April 2015.
iv. Merchant relationships
Merchant relationships acquired as part of a business
combination are recognised separately from goodwill.
The assets are measured at fair value at the date of
acquisition less accumulated amortisation and impairment
losses. Amortisation is calculated based on the timing of the
projected cash fows of the relationships, generally 5 years.
v. Credit software
Credit software assets acquired as part of a business
combination represent software to assist in the assessment
of the credit worthiness of customers. The assets are
measured at fair value at the date of acquisition less
accumulated amortisation and impairment losses.
Amortisation is calculated based on the expected useful
life of the software, generally 4 years.
t. Impairment of assets
Goodwill and intangible assets that have an indefnite useful
life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. Other
assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell and value
in use. For the purpose of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifable cash infows which are largely independent of
the cash infows from other assets or groups of assets (cash
generating units). Non-fnancial assets other than goodwill
that sufered an impairment are reviewed for possible
reversal of the impairment at each reporting date.
u. Trade and other payables
These amounts represent liabilities for goods and services
provided to the Group prior to the fnancial year which are
unpaid. The amounts are unsecured and are usually paid
within 30 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due
within 12 months from the reporting date. They are recognised
initially at their fair value and subsequently measured at
amortised cost using the efective interest method.
v. Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any diference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the income statement over the
period of the borrowings using the efective interest method.
Fees paid on the establishment of loan facilities, which are
not an incremental cost relating to the actual draw-down of
the facility, are recognised as prepayments and amortised
on a straight-line basis over the term of the facility.
Borrowings are removed from the balance sheet when the
obligation specifed in the contract is discharged, cancelled
or expired. The diference between the carrying amount of
a fnancial liability that has been extinguished or transferred
to another party and the consideration paid, including
any non-cash assets transferred or liabilities assumed,
is recognised in other income or other expenses.
Where the terms of a fnancial liability are renegotiated
and the entity issues equity instruments to a creditor
to extinguish all or part of the liability (debt for equity
swap), a gain or loss is recognised in proft or loss, which is
measured as the diference between the carrying amount
of the fnancial liability and the fair value of the equity
instruments issued.
Borrowings are classifed as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
w. Borrowing costs
Borrowing costs are expensed.
x. Provisions
Provisions for legal claims and service warranties are
recognised when the Group has a present legal or
constructive obligation as a result of past events if it is
probable that an outfow of resources will be required
to settle the obligation, and the amount has been reliably
estimated. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the
likelihood that an outfow will be required in settlement
is determined by considering the class of obligations as a
whole. A provision is recognised even if the likelihood of an
outfow with respect to any one item included in the same
class of obligations may be small.
Provisions are measured at the present value of
management’s best estimate of the expenditure required to
settle the present obligation at the balance sheet date. The
discount rate used to determine the present value refects
current market assessments of the value of money and the
risks specifc to the liability. The increase in the provision due
to the passage of time is recognised as interest expense.