AdEPT Telecom plc is incorporated and domiciled in the UK. The
Company's shares are listed on AIM of the London Stock
Exchange.
The financial information set out in this interim report which
has not been audited, does not constitute statutory accounts as
defined in Part 15 of the Companies Act 2006. The Company's
statutory financial statements for the year ended 31 March 2011,
prepared under International Financial Reporting Standards, have
been filed with the Registrar of Companies. The auditor's report on
those financial statements was unqualified and did not contain a
statement under Section 495 (4) of the Companies Act 2006.
2 Basis of preparation and summary of significant accounting policies
Basis of preparation
The interim consolidated financial statements have been prepared
in accordance with applicable International Financial Reporting
Standards (IFRS) as adopted by the EU as issued by the
International Accounting Standards Board and in particular Interim
Financial Reporting.
The interim consolidated financial statements have been prepared
under the historical cost convention and on the same basis as the
most recent annual financial statements prepared to 31 March 2011.
The measurement bases and principal accounting policies of the
Company are set out below.
Revenue
Revenue is measured by reference to the fair value of
consideration received or receivable by the Company for goods
supplied and services provided, excluding VAT and trade discounts.
Revenue is recognised upon the performance of services or transfer
of the risks and rewards of ownership to the customer.
Revenue comprises both invoiced and un-invoiced amounts for
performance of network services supplied by the Company during the
year. The network services, which include call revenues (billing
for call minutes) and fixed charges such as line rental or
broadband, are generally billed monthly in arrears. The revenue is
recognised in the month to which the usage relates. Revenue from
mobile commissions is recognised when the customers are connected
to the relevant network.
Intangible assets acquired as part of a business combination and
amortisation
In accordance with IFRS 3 Business Combinations, an intangible
asset acquired in a business combination is deemed to have a cost
to the Company of its fair value at the acquisition date. The fair
value of the intangible asset reflects market expectations about
the probability that the future economic benefits embodied in the
asset will flow to the Company.
Intangible fixed assets continue to be subject to an impairment
review on the first anniversary after acquisition, when appropriate
lives are selected.
The intangible asset "customer base" is amortised to the income
statement over its estimated economic life. The average estimated
useful economic life of all the acquisitions has been estimated at
15 years (2010: 17 years). The amortisation charge in the income
statement for the 6 months ended 30 September 2011 includes
impairment charges of GBP41,307.
Other intangible assets
Also included within intangible fixed assets are the development
costs of the Company's billing and customer management system plus
an individual licence. These other intangible assets are stated at
cost, less amortisation and any provision for impairment.
Amortisation is provided at rates calculated to write off the cost,
less estimated residual value of each intangible asset, over its
expected useful life on the following bases:
Customer management system - three years straight line
Other licences - contract licence period
Property plant and equipment
Property plant and equipment are stated at cost, less
depreciation and any provision for impairment. Depreciation is
provided on all property plant and equipment at rates calculated to
write off the cost, less estimated residual value of each asset,
over its expected useful life on the following bases:
Short term leasehold improvements - five years straight line
Fixtures and fittings - three years straight line
Office equipment - three years straight line
Computer software - three years straight line
Leasing and hire purchase commitments
Assets held under finance leases and hire purchase contracts,
which are those where substantially all the risks and rewards of
ownership of the asset have passed to the company, are capitalised
in the balance sheet and depreciated over their useful lives. The
corresponding lease or hire purchase obligation is treated in the
balance sheet as a liability.
The interest element of the rental obligations is charged to the
income statement over the period of the lease and represents a
constant proportion of the balance of capital repayments
outstanding.
Rentals under operating leases, where substantially all of the
benefits and risks of ownership remain with the lessor, are charged
to the profit and loss on a straight line basis, even if payments
are not made on such a basis.
Pensions
The Company contributes to personal pension plans. The amount
charged to the income statement in respect of pension costs is the
contribution payable in the year.
Capital instruments
The costs incurred directly in connection with the issue of debt
instruments are charged to the income statement on a straight line
basis over the life of the debt instrument.
Income tax
Income tax is the tax currently payable based on taxable profit
for the year.
Deferred income tax is generally provided on the difference
between the carrying amounts of assets and liabilities and their
tax bases. However, deferred income tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of
an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit.
Deferred income tax liabilities are provided in full, with no
discounting. Deferred income tax assets are recognised to the
extent that it is probable that the underlying deductible temporary
differences will be able to be offset against future taxable
income. Current and deferred income tax assets and liabilities are
calculated at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Changes in deferred income tax assets or liabilities are
recognised as a component of income tax expense in the income
statement, except where they relate to items that are charged or
credited directly to equity in which case the related deferred
income tax is also charged or credited directly to equity.
Share based payments
The cost of equity-settled transactions with employees is
measured by reference to the fair value of the award at the date at
which they are granted and is recognised as an expense over the
vesting period, which ends on the date at which the relevant
employees become fully entitled to the award. Fair value is
appraised at the grant date and excludes the impact on non-market
vesting conditions such as profitability and sales growth targets,
using an appropriate pricing model for which the assumptions are
approved by the Directors. In valuing equity-settled transactions,
only vesting conditions linked to the market price of the shares of
the Company are considered.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance conditions are satisfied.
At each balance sheet date, the cumulative expense (as above) is
calculated, representing the extent to which the vesting period has
expired and management's best estimate of the achievement or
otherwise of non market conditions, the number of equity
instruments that will ultimately vest or in the case of an
instrument subject to a market condition, be treated as vesting
described above. The movement in the cumulative expense since the
previous balance sheet date is recognised in the income statement,
with a corresponding entry in equity.
Non-recurring items
Material and non-recurring items of income and expense are
separated out in the income statement. Examples of items which may
give rise to disclosure as non-recurring items include costs of
restructuring and reorganisation of existing businesses,
integration of newly acquired businesses and asset impairments.
Non-recurring costs include the current year expense charged to the
income statement in relation to restructuring which has taken place
since the year end to derive the underlying profitability of the
Company.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
Financial instruments
Financial assets and liabilities are recognised on the Company's
balance sheet when the Company becomes a party to the contractual
provisions of the instrument.
The Company makes use of derivative financial instruments to
hedge its exposure to interest rate risks arising from financing
activities.
In accordance with its treasury policy, the Company does not
hold or issue derivative financial instruments for trading
purposes.
Derivative financial instruments are recognised initially at
fair value, i.e. cost. Subsequent to initial recognition derivative
financial instruments are measured at fair value. The gain or loss
on re-measurement to fair value is recognised immediately in the
income statement as a component of financing income or cost.
The fair value of the derivative financial instrument is the
estimated amount that the Company would receive or pay to terminate
the instrument at the balance sheet date, taking into account
current interest rates and the current creditworthiness of the
instrument counterparties.
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