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Financial statements Notes to the financial statements
b Basis of consolidation
The Consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries). Control exists when the Group has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that
are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the
Consolidated financial statements from the date that control commences until the date that control ceases.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
c Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date control passes of equity instruments issued, of assets given, less liabilities incurred
or assumed, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair
values at the acquisition date.
d Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment losses, measured annually (see page 57).
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the date of transition to IFRS was tested for impairment at the transition date and, subject
to the results of those impairment tests, have been retained at their previous UK GAAP value.
e Other intangible assets
(a) Computer software costs
Acquired computer software licences and software development costs, are capitalised and amortised over the shorter of their
estimated useful lives and the contracted term.
(b) Other intangible assets (arising on business combinations)
Trade names:
Trade names are measured as the present value of any royalty payments saved as a result of ownership of the trade name.
Trade names are amortised over the estimated useful life of the asset, typically 10-20 years.
Customer and supplier contracts and relationships:
Customer and supplier relationships are measured as the present value of cash flows attributable to the relationship after deduction
of appropriate contributory assets charges. The relationship is amortised over its expected useful life, typically 6-12 years.
f Foreign currencies
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated
to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments
during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Nonmonetary
assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional
currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation
are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a
financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are
recognised directly in equity.
g Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated
to euro at exchange rates at the reporting date.
Foreign currency differences are recognised directly in equity. Since 1 November 2004, the Group’s date of transition to IFRSs,
such differences have been recognised in the translation reserve (TR). When a foreign operation is disposed of, in part or in full,
the relevant amount in the TR is transferred to profit or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement
of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation
and are recognised directly in equity in the TR.
Cosalt plc Annual report & financial statements 2008
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