Annual Report & Accounts 2005 - Notes to the Financial Statements
(iii) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of
intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful
life are systematically tested for impairment at each balance sheet date. Other intangible assets are
amortised from the date they are available for use. The estimated useful lives are as follows:
. consulting agreements 3-5 years
. capitalised development costs 2-4 years
. software licence agreements 5-15 years
At each reporting date, the Group assesses whether there is any indication that an asset may be
impaired. Where an indicator of impairment exists, the group makes an estimate of the recoverable
amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is written
down to its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value
in use and is determined for an individual asset. If the asset does not generate cash inŁows that are
largely independent of those from other assets or groups of assets the recoverable amount of the cash
generating unit to which the asset belongs is determined. Discount rates reŁecting the asset specific risks
and the time value of money are used for the value in use calculation.
For goodwill and trademarks that have an indefinite useful life, the recoverable amount is estimated at
each balance sheet date.
(h) Share capital
Dividends are recognised as a liability in the period in which they are declared.
(i) Employee benefits
(i) Defined contribution plans
The Group operates a defined contribution plan. Obligations for contributions to defined contribution
pension plans are recognised as an expense in the income statement as incurred.
(ii) Share-based payment transactions
The share option programme allows Group employees to acquire shares of the Company. The fair value
of options granted is recognised as an employee expense with a corresponding increase in equity. The
fair value is measured at grant date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured using a
Black-Scholes valuation model, taking into account the terms and conditions upon which the options
were granted. The amount recognised as an expense is adjusted to reŁect the actual number of share
options that vest except where forfeiture is only due to share prices not achieving the threshold for
A provision is recognised in the balance sheet when the Group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outŁow of economic benefits will be
required to settle the obligation. If the effect is material, provisions are determined by discounting the
expected future cash Łows at a pre-tax rate that reŁects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
(k) Trade and other payables
Trade and other payables are stated at cost.