140 / 280
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
CONTINUED
For the year ended 31 May 2014
138
BLUE LABEL INTEGRATED ANNUAL REPORT 2014
2.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS (continued)
(d) Valuation of intangible assets acquired as part of a business combination (continued)
These valuations are based on information at the time of the acquisition and the expectations and
assumptions that have been deemed reasonable by the Group’s management. The risk exists that the
underlying assumptions or events associated with such assets will not occur as projected. For these reasons,
among others, the actual cash flows may vary from forecasts of future cash flows.
(e) Assessment of principal versus agent
Details of whether Blue Label Telecoms acts as a principal or an agent in certain of its transactions is set out
in the Revenue recognition note. This assessment requires an analysis of whether Blue Label Telecoms carries
inventory risk and the customer’s credit risk, whether Blue Label Telecoms has the latitude to establish
pricing and whether Blue Label Telecoms has the primary responsibility for providing the goods or services to
the customer.
(f)
Purchased starter pack bases and postpaid starter pack bases
The relative size of the Group’s purchased starter pack bases and postpaid starter pack bases makes the
judgements surrounding the estimated useful lives and residual values critical to the Group’s financial
position and performance. Useful lives are reviewed on an annual basis with the effects of any changes in
estimate accounted for on a prospective basis. The residual values of these assets are assumed to be zero.
The current useful life of these bases is estimated to be seven to 10 years, based on management’s estimates
and taking into account historical experience as well as future events which may impact the useful lives.
(g) Assessment of investment in joint ventures for impairment
The Group tests annually whether investment in joint ventures has suffered any impairment, in accordance
with the accounting policy. The recoverable amounts of the investment in joint ventures has been determined
based on value-in-use calculations. These calculations require the use of estimates. Refer to note 6 for details
on these estimates.
(h) Applicability of IFRS 10 – Consolidated Financial Statements
The Group has assessed the requirements of IFRS 10 against shareholder and management agreements and
concluded that it does not change the reporting on subsidiary companies that are consolidated.
(i)
Assessment of investments for impairment
The Company tests annually whether investments have suffered any impairment, in accordance with the
accounting policy. The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. These calculations require the use of estimates. Refer to note 6 of the Company
financial statements for details on these estimates.