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NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
CONTINUED
For the year ended 31 May 2015
111
BLUE LABEL INTEGRATED ANNUAL REPORT 2015
1.
SIGNIFICANT ACCOUNTING POLICIES continued
Impairment of non-financial assets
The Group evaluates the carrying value of assets with finite useful lives when events and
circumstances indicate that the carrying value may not be recoverable and when there are indicators
of impairment. Intangible assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment.
An impairment loss is recognised in the statement of comprehensive income when the carrying
amount of an asset exceeds its recoverable amount. An asset’s recoverable amount is the higher of the
fair value less cost of disposal (the amount obtainable from the sale of an asset in an arm’s-length
transaction between knowledgeable willing parties), or its value-in-use. Value-in-use is the present
value of estimated future cash flows expected to arise from the continuing use of an asset and from
its disposal at the end of its useful life. The estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows.
An impairment loss recognised for an asset, other than goodwill, in prior years is reversed if there has
been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised and the recoverable amount exceeds the new carrying amount. The
reversal of the impairment is limited to the carrying amount that would have been determined (net of
depreciation or amortisation) had no impairment loss been recognised in prior years. The reversal of
such an impairment loss is recognised in the statement of comprehensive income in the same line item
as the original impairment charge.
Leases
(a)
Finance leases
Lease agreements that transfer substantially all the risks and rewards of ownership are classified as
finance leases at inception of the lease. The asset is capitalised at the lower of the fair value of the
asset or the present value of the minimum lease payments at inception of the lease, with an
equivalent amount being stated as a finance lease liability. Finance lease liabilities are classified as
non-current or current liabilities, as appropriate. Each lease payment is allocated between the liability
and finance charges using the effective interest rate. Finance costs are charged to the statement of
comprehensive income over the lease period.
The capitalised asset is depreciated over the shorter of the useful life of the asset or the lease term to
its residual value.
(b)
Operating leases
Leases in which a significant portion of the risks and benefits of ownership are effectively retained by
the lessor are classified as operating leases. Payments under operating leases, net of incentives, are
charged to the statement of comprehensive income on a straight-line basis over the period of the
lease. When an operating lease is terminated before the lease period has expired, any payment
required to be made to the lessor by way of penalty is recognised as an expense in the period in which
termination takes place.