Annual Report and Accounts 2012 - Speedy Hire plc

Financial statements 61
1 Accounting policies continued
Income tax
Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity in which case it is
recognised in equity. Income tax comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the
year, using tax rates substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are
not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities affecting neither accounting nor
taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
IAS12 ‘Income Taxes’ does not require all temporary differences to be provided for. In particular, the Group does not provide for deferred tax
on undistributed earnings of subsidiaries where the Group is able to control the timing of the distribution and the temporary difference
created is not expected to reverse in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
Segment reporting
The Group determines and presents operating segments based on the information that internally is provided to the Group Board, which
is the Group’s ‘chief operating decision-maker’.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s
operating results are reviewed regularly by the Group Board to make decisions about resources to be allocated to the segment and assess
its performance, and for which discrete financial information is available.
Segment results that are reported to the Group Board include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters) and head
office expenses.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets
other than goodwill.
Intangible assets
As part of its transition to IFRS, the Group elected to restate only those business combinations that occurred on or after 1 April 2004.
In respect of acquisitions prior to 1 April 2004, goodwill represents the amount recognised under the Group’s previous accounting
framework, UK GAAP, less subsequent impairments.
> > Goodwill
All business combinations are accounted for by applying the purchase method. In respect of acquisitions since 1 April 2004 and before
1 April 2010, goodwill represents the difference between the cost of acquisition and the fair value of the identifiable assets, liabilities and
contingent liabilities acquired.
For acquisitions on or after 1 April 2010, the Group measures goodwill at the acquisition date as: the fair value of the consideration
transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus, if the business combination is achieved
in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately
in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts are generally recognised in profit or loss. Costs related to the acquisition, other than those associated with the issue of
debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent
consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not
remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent
consideration are recognised in profit or loss.
Goodwill is stated after any accumulated impairment losses, and is included as an intangible asset. It is allocated to cash-generating
units and is tested annually for impairment and at each reporting date to the extent that there are any indicators of impairment.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Speedy Hire Plc Annual Report and Accounts 2012
Financial statements