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Escher Group Holdings plc
Annual report 2011
28
for the year ended 31 December 2011
Accounting policies and estimation techniques
continued
(viii) Investments in subsidiaries
Investments in subsidiaries included in the Parent Company Balance Sheet are shown at cost, plus share based payments
expense less provision for impairment. Investments in subsidiaries are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the subsidiaries carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the
subsidiaries fair value less costs to sell and value in use.
(ix) Pension obligations
The Group operates defined contribution plans. A defined contribution is a pension plan under which the Group pays fixed
contributions into an independently administrated pension fund.
The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the current and prior periods.
The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in future payments is available.
(x) Research and development and software development costs
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Research expenditure
is recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable
and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:
—— it is technically feasible to complete the software so that it will be available for use;
—— management intends to complete the software and use or sell it;
—— there is an ability to use or sell the software;
—— it can be demonstrated how the software will generate probable future economic benefits;
—— adequate technical, financial and other resources to complete the development and to use or sell the software are available; and
—— the expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software include the software development employee costs
and an appropriate portion of relevant overheads.
The estimated useful lives currently range up to five years and are reviewed at each statement of financial position date.
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.
(xi) Impairment of non-financial assets
Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to
amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets
other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
(xii) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income
statement on a straight line basis over the period of the lease.
(xiii) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits
with an original maturity of three months or less.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term
deposits, net of outstanding bank overdrafts.