Dave Forsey Chief Executive 19 July 2012 - Sports Direct International

74 / FINANCIAL STATEMENTS AND NOTES
notes to the Financial Statements
For the 53 weeks ended 29 April 2012
1. Accounting policies Continued
Impairment is measured by comparing the carrying amount of the
intangible asset as part of the cash generating unit (CGU) with the
recoverable amount of the CGU, that is, the higher of its fair value
less costs to sell and its value in use. Value in use is calculated by
discounting the expected future cash flows, using a discount rate
based on an estimate of the rate that the market would expect on
an investment of comparable risk.
Amortisation is provided on brands, trade marks and licences with
a definite life over their useful economic lives of 10 to 15 years and
is accounted for within the selling, distribution and administrative
expenses category within the income statement.
Property, plant and equipment
Property, plant and equipment are stated at historical cost
less depreciation less any recognised impairment losses. Cost
includes expenditure that is directly attributable to the acquisition
or construction of these items. Subsequent costs are included in
the asset’s carrying amount only when it is probable that future
economic benefits associated with the item will flow to the Group
and the costs can be measured reliably. All other costs, including
repairs and maintenance costs, are charged to the income
statement in the period in which they are incurred.
Depreciation is provided on all property, plant and equipment other
than freehold land and is calculated on a reducing balance basis or
straight-line basis, whichever is deemed by the directors to be more
appropriate, to allocate cost less assessed residual value, other
than assets in the course of construction, over the estimated useful
lives, as follows:
Freehold buildings 2% per annum straight line
Leasehold property
Plant and
equipment
over the term of
the lease
between 5% and
33% per annum
straight line
reducing balance
The assets’ useful lives and residual values are reviewed and, if
appropriate, adjusted at each balance sheet date.
The gain or loss arising on disposal or scrapping of an asset is
determined as the difference between the sales proceeds, net
of selling costs, and the carrying amount of the asset and is
recognised in the income statement.
Impairment of assets other than goodwill and intangible
assets with an indefinite life
At each balance sheet date, the directors review the carrying
amounts of the Group’s tangible and intangible assets, other than
goodwill and intangible assets with an indefinite life, to determine
whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of
the impairment loss, if any. Where the asset does not generate cash
flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs.
Recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount.
An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation decrease.
Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged pro
rata to the other assets in the cash-generating unit.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior periods.
A reversal of an impairment loss is recognised in the income
statement immediately.
Revenue recognition
Revenue is measured at the fair value of the consideration received
or receivable and represents amounts receivable for goods and
services provided in the normal course of business, net of discounts
and sales related taxes.
In the case of goods sold through retail stores and the internet,
revenue is recognised when goods are sold to the customer, less
provision for returns. Accumulated experience is used to estimate
and provide for such returns at the time of the sale. Retail sales are
usually in cash, by debit card or by credit card.
In the case of income generated from trade marks and licences,
revenue is recognised on an accruals basis in accordance with the
relevant agreements or on a transactional basis when revenue is
linked to sale or purchase volumes.
Revenue from property related transactions is recognised when the
relevant service is provided.
Exceptional items
The Group presents as exceptional items on the face of the income
statement those significant items of income and expense which,
because of their size, nature and infrequency of the events giving
rise to them, merit separate presentation to allow shareholders to
understand better the elements of financial performance in the year,
so as to facilitate comparison with prior periods to assess trends in
financial performance more readily.
Interest income
Interest is income reported on an accrual basis using the effective
interest method.