annual report 2012 - Pumpkin Patch investor relations

pumpkin patch limited & subsidiaries NOTES TO THE financial statements 31 july 2012pumpkin patch limited & subsidiaries NOTES TO THE financial statements 31 july 20122 summary of significant accounting policies continuedgenerate economic benefits exceeding costs beyond one year, are recognised as intangibleassets. Direct costs include the software development employee costs.Computer software development costs recognised as assets are amortised over theirestimated useful lives (three to five years).(s) Trade and other payablesTrade and other payables are initially recognised at fair value and subsequently atamortised costs.These amounts represent liabilities for goods and services provided to the Group priorto the end of financial year which are unpaid. The amounts are unsecured and areusually paid within 30 days of recognition.(t) BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowingsare subsequently measured at amortised cost. Any difference between the proceeds (net oftransaction costs) and the redemption amount is recognised in the Income Statement over theperiod of the borrowings using the effective interest method.Borrowings are classified as current liabilities unless the Group has an unconditionalright to defer settlement of the liability for at least 12 months after the balance sheet date.The classification of borrowings reflects the underlying bank facility agreement.(u) ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation asa result of past events, it is probable that an outflow of resources will be required to settle theobligation, and the amount has been reliably estimated. Provisions are not recognised forfuture operating losses.(v) Employee benefits(i) Wages and salaries, annual leave and sick leaveLiabilities for wages and salaries, including non monetary benefits, annual leave andaccumulating sick leave expected to be settled within 12 months of the reporting date arerecognised in the provision for employee benefits in respect of employees’ services up to thereporting date and are measured at the amounts expected to be paid when the liabilities aresettled. Liabilities for non accumulating sick leave are recognised when the leave is taken andmeasured at the rates paid or payable.(ii) Long service leaveThe liability for long service leave is recognised in the provision for employee benefits andmeasured as the present value of expected future payments to be made in respect of servicesprovided by employees up to the reporting date. Consideration is given to experience ofemployee departures and periods of service.(iii) Employee share based paymentsThe Group operates an equity settled, share based compensation plan. The fair value ofthe instruments granted is recognised as an employee expense in the Income Statement witha corresponding increase in the share based payments reserve. The total amount to beexpensed over the vesting period is determined by reference to the fair value of the instrumentsgranted, excluding the impact of any non market vesting conditions (for example, profitabilityand sales growth targets). Non market vesting conditions are included in assumptions aboutthe number of instruments that are expected to become exercisable. At each balance sheetdate, the entity revises its estimates of the number of instruments that are expected to becomeexercisable. It recognises the impact of the revision of original estimates, if any, in the IncomeStatement, and a corresponding adjustment to equity over the remaining vesting period.When instruments are exercised the amount in the share based payment reserve relating tothose options, together with the exercise price paid by the employee, is transferred toshare capital.(w) Share capitalOrdinary shares are classified as capital.Incremental costs directly attributable to the issue of new shares or instruments are shown inequity as a deduction, net of tax, from the proceeds.Where any Group company purchases or controls the Company’s equity share capital(treasury stock), the consideration paid, including any directly attributable incremental costs(net of income taxes), is deducted from equity attributable to the Group’s equity holders untilthe shares are cancelled or reissued. Where such shares are subsequently reissued, anyconsideration received (net of any directly attributable incremental transaction costs and therelated income tax effects) is included in equity attributable to the Group’s equity holders.(x) DividendsProvision is made for the amount of any dividend declared on or before the end of thefinancial year but not distributed at balance date.(y) Earnings per shareBasic earnings per share is calculated by dividing the profit attributable to equity holders of thecompany, by the weighted average number of ordinary shares on issue during the year.Diluted earnings per share is calculated by dividing the profit by the weighted average numberof ordinary shares on issue during the year adjusted to include the potential dilutive effect as aresult of the issue of share options.57