Annual Report and Accounts 2012 - Speedy Hire plc

62 Financial statements
Notes to the financial statements
continued
1 Accounting policies continued
Intangible assets continued
> > Other intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation and impairment
losses (note 12).
Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.
> > Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful economic lives of identified
intangible assets. Intangible assets excluding goodwill are amortised from the date that they are available for use. For a number of its
acquisitions, the Group has identified intangible assets in respect of sole supply contracts, customer lists, brands and non-compete
agreements. The values of these intangibles are recognised as part of the identifiable assets, liabilities and contingent liabilities
acquired. The useful lives are estimated as follows:
Sole supply contracts – over the unexpired period of the contracts, up to five years
Customer lists – over the period of agreement, up to 10 years
Brand – over the period of use in the business, up to four years
Non-compete agreements – over the period of the agreement, up to five years.
Impairments
The carrying amounts of the Group’s non-financial assets, other than inventory and deferred tax, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated,
being the higher of net realisable value and value in use, and if there is an impairment loss then this loss is recognised such that the
carrying amount is reduced accordingly.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying amount of the other assets in the unit (or group of units) on a pro-rata basis.
Own shares held by Employee Benefits Trust
Transactions of the Company-sponsored Employee Benefits Trust are treated as being those of the Company and are therefore reflected on
the Company and Group financial statements. In particular, the Trust’s purchases of shares in the Company are debited directly to equity.
Inventories
Inventories are stated at the lower of cost and net realisable value using FIFO, or in the case of ex-hire equipment assets at the lower of cost
less accumulated depreciation and impairment at the date of transfer to inventory or net realisable value. Cost comprises direct materials
and, where appropriate, overheads that have been incurred in bringing the inventory to its present location and condition. Net realisable
value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Assets classified as held for sale
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather
than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, or components of
a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter, generally the assets, or disposal group,
are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is first
allocated to goodwill, and then to remaining assets and liabilities, on a pro-rata basis, except that no loss is allocated to inventories,
financial assets, deferred tax assets or employee benefit assets which continue to be measured in accordance with the Group’s accounting
policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in
profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure to interest rate risks arising from financing activities. In accordance
with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes; however derivatives
that do not qualify for hedge accounting are accounted for as trading instruments and the movement in fair value is recognised in the
income statement.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent
to initial recognition, changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised
directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised
in profit or loss.
Speedy Hire Plc Annual Report and Accounts 2012