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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
Notes
to the Group annual financial statements
continued
For the year ended 31 May 2017
4.
Non-financial instruments
continued
4.2 Intangible assets
(a) Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use
the specific software. Computer software has a finite useful life and is subsequently carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the computer software
over its estimated useful life (three to 10 years).
Costs associated with the maintenance of existing computer software programmes are expensed as incurred.
(b) Trademarks and franchise fees
Trademarks and franchise fees are shown at historical cost. They have a finite useful life and are subsequently carried
at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost
of trademarks and franchise fees over their estimated useful lives (10 years and 20 years respectively).
Trademarks and franchise fees are initially shown at fair value as determined in accordance with IFRS 3 –
Business
Combinations
, and are subsequently carried at the initially determined fair value less accumulated amortisation and
impairment losses.
(c)
Databases, customer listings, distribution agreements and customer relationships
Databases, customer listings, distribution agreements and customer relationships acquired through business
combinations are initially shown at fair value as determined in accordance with IFRS 3 –
Business Combinations
, and
are subsequently carried at the initially determined fair value less accumulated amortisation and impairment losses.
Amortisation is calculated using the straight-line method to allocate the value of these assets over their estimated
useful lives (three to 10 years).
Distribution agreements purchased are initially shown at cost, and are subsequently carried at the initial cost less
accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method to
allocate the value of these assets over their estimated useful lives (10 years).
(d)
Internally generated software development
Costs incurred on development projects are recognised as intangible assets when the following criteria are fulfilled:
t
It is technically feasible to complete the intangible asset and that it will be available for use or sale;
t
Management intends to complete the intangible asset and use or sell it;
t
There is an ability to use or sell the intangible asset;
t
It can be demonstrated how the intangible asset will generate probable future economic benefits;
t
Adequate technical, financial and other resources to complete the development and to use or sell the intangible
asset are available; and
t
The expenditure attributable to the intangible asset during its development can be reliably measured.
Research expenditure is recognised as an expense as incurred. 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.
Capitalised internally generated software development costs are recorded as intangible assets and amortised from
the point at which the asset is available for use (i.e. when it is in the location and condition necessary for it to be
capable of operating in the manner intended by management) on a straight-line basis over its useful life (five to
10 years). Direct costs include the product development employee costs and an appropriate portion of relevant
overheads. Costs associated with the maintenance of existing products are expensed as incurred.
(e) Purchased starter pack bases and postpaid bases
Purchased starter pack bases represent the right to earn future revenue from starter packs already distributed and
are initially recognised at the cost to the Group. Starter pack bases have a finite life and are subsequently carried at
cost less accumulated amortisation. Amortisation is calculated using the straight-line method over their estimated
useful lives (seven years).
Purchased postpaid bases represent the right to earn revenue from the cellular network in respect of contracts forming
part of the acquired base. Postpaid bases have a finite life and are subsequently carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line method over their estimated useful lives (10 years).
Critical accounting estimates and assumptions
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.