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BLUE LABEL INTEGRATED ANNUAL REPORT 2014
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
CONTINUED
For the year ended 31 May 2014
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible assets (continued)
(e) Research and development (continued)
Research expenditure is recognised as an expense as incurred. Other development expenditures that do not
meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent
period. Capitalised development costs are recorded as intangible assets and amortised from the point at
which the asset is available for use (i.e. when it is in the location and condition necessary for it to be capable
of operating in the manner intended by management) on a straight-line basis over its useful life (five to 10
years). Direct costs include the product development employee costs and an appropriate portion of relevant
overheads. Costs associated with the maintenance of existing products are expensed as incurred.
(f)
Purchased starter pack bases and postpaid bases
Purchased starter pack bases represent the right to earn future revenue from starter packs already distributed
and are initially recognised at the cost to the Group. Starter pack bases have a finite life and are subsequently
carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over
their estimated useful lives (seven years).
Purchased postpaid bases represent the right to earn revenue from the cellular network in respect of
contracts forming part of the acquired base. Postpaid bases have a finite life and are subsequently carried
at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over their
estimated useful lives (10 years). Where the Group is entitled to a warranty refund on the initial cost of
a base, this is disclosed as a reduction in the cost of the asset.
(g) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the
net identifiable assets of the acquired subsidiary, associate or jointly controlled entity at the date of
acquisition. Goodwill is attributable to synergies that the Group expects to derive from the transaction. If the
cost of acquisition is less than the net assets of the subsidiary acquired, the difference is recognised directly in
the statement of comprehensive income. Goodwill on the acquisition of subsidiaries is included in “goodwill”
in the statement of financial position. Goodwill on acquisitions of associates and joint ventures is included in
“Investments in and loans to associates and joint ventures”.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Impairment is
determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.
Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment
is recognised.
Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the entity sold.