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Escher Group Holdings plc
Annual report 2011
27
Financial statements
Corporate governance
Business review
Overview
(iv) Revenue recognition
continued
License revenue for time based licences is deferred by the Group, and recognised evenly over the term of the licence.
Revenues for perpetually licensed software is recognised on customer acceptance, provided the company has objective
evidence of fair value of any undelivered elements. Revenue is deferred for undelivered elements.
For customers where the collectability is not assured, revenue is recognised when it is probable that the economic benefits
associated with the transaction will flow to the Group.
Where the Group receives payment from customers in advance of the performance of its contractual obligations, a liability
equal to the amount received is recognised as deferred revenue. That liability is reduced and the amount of the reduction
is recognised as revenue, when and as the Group obtains the right to consideration in exchange for the service it provides.
Deferred revenue includes licence, software configuration and consulting service fees and maintenance and support contracts
billed in advance.
(v) Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for making strategic decisions, allocating resources and assessing performance
of the operating segments, has been identified as the Board.
(vi) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). These consolidated financial statements
are presented in US Dollar, which is the company’s functional and the Group’s presentation currency and is denoted by
the symbol “US$”.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the retranslation
at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the
income statement.
Group entities
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency
as follows:
—— assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
—— income and expenses for each income statement are translated at average exchange rates (unless this average is not
a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions); and
—— all resulting exchange differences are recognised in equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations and of borrowings
are taken to shareholders’ equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
The Group has availed of the exemption in IFRS 1, whereby the cumulative translation differences for all foreign operations
were deemed to be reset to zero at the date of transition to IFRS (1 January 2008).
(vii) Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised
as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably. Depreciation is provided at rates calculated to write off the
cost less residual value of each asset over its expected useful life, as follows:
Equipment
33⅓% straight line
Fixtures and fittings
20% straight line
Computer equipment
33⅓% straight line
Leasehold improvements
50% straight line
Maintenance and repairs are charged to the income statement as incurred. Upon retirement or sale, the cost of the assets
disposed of and the related accumulated depreciation are removed from the financial statements and any resulting gain
or loss is included in the determination of net income or loss.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (see accounting policy note (xi)).