Financial Statements

3. New accounting pronouncements

The following new and amended standards have been adopted by the Group in the financial year beginning 3 May 2010:

  • IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates', and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period, beginning on or after, 1 July 2009. The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the Group Statement of Comprehensive Income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs are expensed;

    The revised standard was applied to the acquisition of SuperGroup Europe BVBA on 3 February 2011. The determination of goodwill excludes the deferred contingent consideration to be adjusted to fair value, with any gain or loss recorded in the statement of comprehensive income. Contingent consideration of £10.3m has been recognised at fair value at 3 February 2011. Acquisition-related costs of £0.7m have been recognised in the consolidated statement of comprehensive income, which previously would have been included in the consideration for the business combination; and
  • improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010. There is no material impact on the Group in the period.

The following standards, amendments and interpretations to existing standards are effective but not relevant to the Group for the financial year beginning 3 May 2010:

  • IFRIC 17, 'Distribution of non-cash assets to owners' (effective for annual periods commencing on or after 1 July 2009). This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends;
  • IFRS 5, 'Non-current assets held for sale and discontinued operations' has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. This is not currently applicable to the Group, as it has not made any non-cash distributions;
  • IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 31 October 2009. This is not relevant for the Group, as it has not received any assets from customers;
  • 'Additional exemptions for first-time adopters' (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer;
  • 'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. The amendment should be applied for annual periods commencing on or after 1 February 2010. This is not relevant to the Group, as it has not made any rights issues;
  • IFRIC 9, 'Reassessment of embedded derivatives and IAS 39, Financial instruments: Recognition and measurement', effective 1 July 2009. This amendment to IFRIC 9 requires an entity to assess whether an embedded derivative should be separated from a host contract when the entity reclassifies a hybrid financial asset out of the 'fair value through profit or loss' category. This assessment is to be made based on circumstances that existed on the later of the date the entity first became a party to the contract and the date of any contract amendments that significantly change the cash flows of the contract. If the entity is unable to make this assessment, the hybrid instrument must remain classified as at fair value through profit or loss in its entirety. This is not relevant to the Group, as it does not have any hybrid financial assets;
  • IFRIC 16, 'Hedges of a net investment in a foreign operation', effective 1 July 2009. This amendment states that, in a hedge of a net investment in a foreign operation, qualifying hedging instruments may be held by any entity or entities within the Group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements of IAS 39 that relate to a net investment hedge are satisfied. In particular, the Group should clearly document its hedging strategy because of the possibility of different designations at different levels of the Group. IAS 38 (amendment), 'Intangible assets', effective 1 January 2010. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. This is not currently applicable to the Group, as it has not hedged a net investment in a foreign operation;
  • IAS 1 (amendment), 'Presentation of financial statements'. The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. This is not relevant to the Group, as it does not have any liabilities which will potentially be settled by the issue of equity;
  • IAS 36 (amendment), 'Impairment of assets', effective 1 January 2010. The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by paragraph 5 of IFRS 8, 'Operating segments' (that is, before the aggregation of segments with similar economic characteristics);
  • IFRS 2 (amendments), 'Group cash-settled share-based payment transactions', effective form 1 January 2010. In addition to incorporating IFRIC 8, 'Scope of IFRS 2', and IFRIC 11, 'IFRS 2 – Group and treasury share transactions', the amendments expand on the guidance in IFRIC 11 to address the classification of Group arrangements that were not covered by that interpretation; and
  • IFRS 5 (amendment), 'Non-current assets held for sale and discontinued operations'. The amendment clarifies that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1.

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 3 May 2010:

  • IFRS 9, 'Financial instruments', issued in December 2009. This addresses the classification and measurement of financial assets. The standard is not applicable until 2 May 2013 but is available for early adoption. The Group is yet to assess IFRS 9's full impact. However, initial indications are that it will not materially affect the Group's financial statements;
  • IFRIC 14 (amendments), 'Prepayments of a minimum funding requirement', issued in November 2009. The amendments correct an unintended consequence of IFRIC 14. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. The amendments are effective for annual periods commencing 1 January 2011. This is not applicable for the Group as it does not have any defined benefit pension schemes;
  • IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. This clarified the requirements of IFRS's when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods commencing on or after 1 July 2010. This is not expected to affect the Group's financial statements as no such transactions have occurred; and
  • IAS 24 (revised), 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. There is expected to be no material impact on the Group's financial statements.