Advanced Computer Software Group plc Annual report 2013

3 Significant accounting policies continuedEmployee benefitsDefined contribution plansObligations for contributions to defined contribution pension plans are recognised as an expense in the incomestatement as incurred.Short term benefitsShort term employee benefit obligations are measured on an undiscounted basis and are expensed as the relatedservice is provided. A provision is recognised for the amount expected to be paid under short term cash bonus orprofit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of pastservice provided by the employee and the obligation can be estimated reliably.Share-based payment transactionsShare-based payment arrangements in which the Group receives goods or services as consideration for its ownequity instruments are accounted for as equity-settled share-based payment transactions.The grant date fair value of options granted to employees is recognised as an employee expense, with acorresponding increase in equity, over the period in which the employees become unconditionally entitled to theoptions. The fair value of the options granted is measured using an option valuation model, taking into account theterms and conditions upon which the options were granted. The amount recognised as an expense is adjusted toreflect the actual number of share options that vest except where forfeiture is due only to share prices not achievingthe threshold for vesting.Overview Business review Governance FinancialsCritical accounting estimates and judgementsRevenue recognitionRevenue for arrangements that involve significant modification or customisation of the software may be recognisedbased on achievement of contract-specific milestones. The Group determines the stage of completion based on anassessment of direct labour costs incurred to date as a percentage of total estimated project costs required tocomplete the project.If collectability is not reasonably assured at the outset of a contract, the Group defers revenue and only recognisesrevenue on receipt of the cash and to the extent that it has discharged its obligations under the contract.Impairment of goodwillThe Group is required to test goodwill for potential impairment on an annual basis. The recoverable amount isdetermined based on value in use calculations which require the estimation of future cashflows and the selectionof a discount rate. Actual outcomes of this calculation may vary. Further information including the carrying valueis given in note 12.Acquired intangible assetsOn acquisition of a business, the Group is required to value the assets acquired and recognise intangible assets onthe balance sheet. The valuation of these assets relies on various assumptions, including future revenue and costsderived from those assets and the selection of an appropriate discount rate in order to calculate the present valueof those cashflows. Further information including the carrying value of intangibles acquired is given in note 12.Useful lives of intangible assets and property, plant and equipmentIntangible assets, property and plant and equipment are amortised or depreciated over their useful lives. These usefullives are based on management’s estimates of the period which the assets will generate revenue. These estimates areperiodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in thecarrying value and amounts charged to the consolidated income statement in specific periods.Advanced Computer Software Group plcAnnual Report 201345