120 / 248
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
CONTINUED
For the year ended 31 May 2015
118
BLUE LABEL INTEGRATED ANNUAL REPORT 2015
2.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS continued
(d)
Valuation of intangible assets acquired as part of a business combination continued
These valuations are based on information at the time of the acquisition and the expectations and
assumptions that have been deemed reasonable by the Group’s management. The risk exists that the
underlying assumptions or events associated with such assets will not occur as projected. For these
reasons, among others, the actual cash flows may vary from forecasts of future cash flows.
(e)
Assessment of principal versus agent
Details of whether Blue Label Telecoms acts as a principal or an agent in certain of its transactions is
set out in the revenue recognition note. This assessment requires an analysis of whether Blue Label
Telecoms carries inventory risk and the customer’s credit risk, whether Blue Label Telecoms has the
latitude to establish pricing and whether Blue Label Telecoms has the primary responsibility for
providing the goods or services to the customer.
(f)
Purchased starter pack bases and postpaid starter pack bases
The relative size of the Group’s purchased starter pack bases and postpaid starter pack bases makes
the judgements surrounding the estimated useful lives and residual values critical to the Group’s
financial position and performance. Useful lives are reviewed on an annual basis with the effects of
any changes in estimate accounted for on a prospective basis. The residual values of these assets are
assumed to be zero. The current useful life of these bases is estimated to be seven to 10 years, based
on management’s estimates and taking into account historical experience as well as future events
which may impact the useful lives.
(g)
Assessment of investment in joint ventures for impairment
The Group tests annually whether investment in joint ventures has suffered any impairment, in
accordance with the accounting policy. The recoverable amounts of the investment in joint ventures
has been determined based on value-in-use calculations. These calculations require the use of
estimates. Refer to note 6 for details on these estimates.
(h)
Applicability of IFRS 10 –
Consolidated Financial Statements
The Group has assessed the requirements of IFRS 10 against shareholder and management
agreements and concluded that it does not change the reporting on subsidiary companies that are
consolidated.
(i)
Assessment of investments for impairment
The Company tests annually whether investments have suffered any impairment, in accordance with
the accounting policy. The recoverable amounts of cash-generating units have been determined based
on value-in-use calculations. These calculations require the use of estimates. Refer to note 6 of the
Company financial statements for details on these estimates.