Financial Statements 2011 - Investing In Africa

Notes To The Financial Statements (Continued)
As at 31 december 2011
3) Summary of significant accounting policies (continued)
s) Intangible assets
I. Goodwill
Goodwill arises on business combinations through acquisition of subsidiaries when the cost of acquisition exceeds the
fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired. If the Group’s
interest in the fair value of the identifiable assets, liabilities and contingent liabilities of an acquired business is greater
than the cost to acquire, the excess is recognised immediately in profit or loss.
Goodwill is allocated to cash-generating units for the purpose of impairment testing, which is undertaken at the lowest
level at which goodwill is monitored for internal management purposes. Impairment testing is performed at least
annually, and whenever there is an indication that the cash-generating unit may be impaired, by comparing the present
value of the expected future cash flows from a business with the carrying value of its net assets, including attributable
goodwill. Goodwill is stated at cost less accumulated impairment losses which are charged to profit or loss.
II. Computer software
Acquired computer software and related licences are stated at cost less accumulated amortisation. Subsequent
expenditure on software products is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is expensed as incurred. Where software is not an integral part
of the related hardware it is recognised as an intangible asset.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from
the date that it is available for use. The estimate useful life of software is three to five years.
III. License
Separately acquired licences in business combination are initially recognised at their fair value at the acquisition date
(which is regarded as cost). Licences with an indefinite useful life are not amortised and are reviewed at each reporting
date to determine whether events and circumstances continue to support an indefinite useful life assessment of the
asset. Where the Group re-assesses the useful life of an intangible asset as finite rather than indefinite, the asset may
be considered to be impaired. The Group tests the asset for impairment annually and whenever there is an indication that
the intangible asset may be impaired by comparing it’s recoverable amount, with the carrying amount and recognising
any excess of the carrying amount over the recoverable amount as an impairment.
t) Legal and other claims
Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of past
events; it is probable that an outflow 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 outflow 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 outflow with respect
to any one item included in the same class of obligations may be small.
u) Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
v) Statutory credit risk reserve
IAS 39 requires the Group to recognise an impairment loss when there is objective evidence that loans and receivables
are impaired. However, prudential guidelines issued by banking regulators require the Group to set aside amounts for
impairment losses on loans and receivables based on their guidelines. Extra losses over and above those already recognised
under IAS 39 are accumulated under statutory reserves through appropriations of revenue reserves.
NIC Bank Limited • Annual Report & Financial Statements 2011 • 53