Where necessary, adjustments are made to the Financial
Statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
Business combinations
The purchase method of accounting is used for all acquired
businesses as defined by IFRS3 - Business Combinations.
As a result of the application of the purchase method of
accounting, goodwill is initially recognised as an asset being the
excess at the date of acquisition of the fair value of the purchase
acquisition consideration plus directly attributable costs of
acquisition over the net fair values of the identifiable assets,
liabilities and contingent liabilities of the subsidiaries
acquired.
Goodwill arising on acquisitions before the date of transition
to IFRS is subject to alternative policies for valuation as
described below.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Intangible assets
An intangible asset is considered identifiable only if it is
separable or arises from contractual or other legal rights,
regardless of whether those rights are transferable or separable
from the entity or from other rights and obligations.
For intangible assets with finite useful lives, amortisation is
calculated so as to write off the cost of an asset less its
estimated residual value over its economic life as follows:
Software development - 10 years
Website development costs - 3 years
In addition to amortisation, at each balance sheet date the
Group reviews the carrying amounts of its intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Recoverable amount is
the higher of fair value less costs to sell and value in use. An
impairment loss is recognised as an expense immediately, unless the
relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease. Where an
impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years.
Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Goodwill
Goodwill arising on consolidation represents the excess cost of
acquisition over the group's interest in the fair value of the
identifiable assets and liabilities of a subsidiary, associate or
jointly controlled entity at the date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment
at least annually. Any impairment is recognised immediately in the
income statement and is not subsequently reversed. Goodwill arising
on acquisition before the date of transition to IFRS has been
retained at the previous UK GAAP amounts subject to being tested
for impairment at that date.
On disposal of a subsidiary, associate or jointly controlled
entity, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Revenue recognition
Lottery turnover represents takings received for entry into the
lottery prize draws. Revenue is recognised upon receipt of the
money for the period that the draw takes place. Payment processing
turnover is recognised when transactions are processed. The revenue
is recognised upon receipt of the money for the period that the
draws take place, net of VAT and other sales-related taxes.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profits for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and corresponding tax bases used in the
computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting
profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that is no longer
probable that sufficient taxable profits will be available to allow
all, or part, of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt
with in equity.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment loss. Useful
lives are reviewed annually by the Directors.
Depreciation is charged so as to write off the cost or valuation
of assets over their estimated useful lives using the straight-line
method, on the following bases:
Property - 5% per annum
Fixtures, fittings and equipment - 25% per annum
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in income.
Where there is evidence of impairment, fixed assets are written
down to their recoverable amount.
Leased assets
Rentals payable under non-onerous operating leases are expensed
in the income statement on a straight-line basis over the lease
term.
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. An intangible asset with an indefinite
useful life is tested for impairment annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair values less costs to
sell and value in use. In assessing value in use, 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
which the estimate of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation
increase.
Foreign currencies
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in Pounds Sterling,
which is the functional currency of the Group, and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
function currency (foreign currencies) are recorded at the rates of
exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date. Non-monetary items carried at
fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value
was determined. Non-monetary items that are measured in terms of
historical costs in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the
period in which they arise.
Share based payments
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