Experian 2013 Annual Report Download - page 113
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Business review Business overview Governance Financial statements
5. Significant accounting policies (continued)
Experian separately presents information equivalent to segment disclosures in respect of the costs of its central functions under the caption
of ‘Central Activities’, as management believes that the reporting of this information is helpful to users of the financial statements. Information
disclosed under Central Activities includes costs arising from finance, treasury and other global functions.
Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third
parties. There is no material impact from inter-segment transactions on the Group’s results.
Segment assets consist primarily of property, plant and equipment, intangible assets including goodwill, inventories, derivatives designated
as hedges of future commercial transactions, and receivables. They exclude tax assets, cash and cash equivalents and derivatives designated
as hedges of borrowings. Segment liabilities comprise operating liabilities, including derivatives designated as hedges of future commercial
transactions. They exclude tax liabilities, borrowings and related hedging derivatives. Capital employed is now defined as net assets excluding
net debt and tax balances.
Capital expenditure comprises additions to property, plant and equipment and intangible assets, excluding additions resulting from acquisitions
through business combinations.
Information required to be presented additionally includes analysis of the Group’s revenues over groups of service lines. This is supplemented
by voluntary disclosure of the profitability of those same groups of service lines and, for ease of reference, Experian continues to use the term
‘business segments’ when discussing the results of groups of service lines. The four business segments for Experian, details of which are given
in the business overview section of this annual report, are:
•Credit Services;
•Decision Analytics;
•Marketing Services; and
•Consumer Services.
In the annual report for the year ended 31 March 2012, the ‘Consumer Services’ business segment was styled ‘Interactive’. The North America
and the UK and Ireland operating segments derive revenues from all of the Group’s business segments. The Latin America, EMEA and Asia
Pacific segments currently do not derive revenue from the Consumer Services business segment.
Reportable segment information for the full year provided to the chief operating decision maker is set out in note 9(a).
6. Critical accounting estimates and judgments
(a) Critical accounting estimates and assumptions
In preparing the Group financial statements, management is required to make estimates and assumptions that affect the reported amount
of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. The resulting accounting estimates, which are based
on management’s best judgment at the date of the Group financial statements, will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are summarised below. There has been no change in this information since the annual report for the year ended 31
March 2012 and revenue recognition is accordingly again excluded from this summary on the grounds that the policy adopted in this area is
sufficiently objective.
Tax (note 16)
The Group is subject to tax in numerous jurisdictions. Significant judgment is required in determining the related assets or provisions as there
are transactions in the ordinary course of business and calculations for which the ultimate tax determination is uncertain. The Group recognises
liabilities based on estimates of whether additional tax will be due. Where the final tax outcome of these matters is different from the amounts
that were initially recognised, such differences will impact on the results for the year and the respective income tax and deferred tax assets or
provisions in the year in which such determination is made. The Group recognises tax assets based on forecasts of future profits against which
those assets may be utilised.
Goodwill (note 21)
The Group tests goodwill for impairment annually or more frequently if events or changes in circumstances indicate that the goodwill may be
impaired. The recoverable amount of each CGU is generally determined on the basis of value-in-use calculations which require the use of cash
flow projections based on approved financial budgets, looking forward up to five years. Management determines budgeted gross margin based
on past performance and its expectations for the market development. Cash flows are extrapolated using estimated growth rates beyond a
five year period. The growth rates used do not exceed the long-term average growth rate for the markets in which the segment operates. The
discount rates used reflect the segment’s pre-tax weighted average cost of capital (‘WACC’).