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Courts (Jamaica) Limited, Summaries of Accounting

University of SussexAccounting

Courts (Jamaica) Limited (the company) is a public company incorporated and resident in Jamaica, with registered offices at 79-81A Slipe Road, ...

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Courts (Jamaica) Limited
Identification and Significant Accounting Policies
31 March 2004
Identification and Principal Activities
Courts (Jamaica) Limited (the company) is a public company incorporated and resident in Jamaica,
with registered offices at 79-81A Slipe Road, Kingston 5. It is a subsidiary of Courts Group
International Limited, which is incorporated in England and which holds 79.86% of the company's
issued stock units. The ultimate parent company is Courts Plc, which is also incorporated in
England.
The principal activities of the company consist of the retailing and the hire purchase financing
of furniture and appliances.
The company is listed on the Jamaica Stock Exchange.
These financial statements are presented in Jamaican dollars.
Significant Accounting Policies
Basis of preparation
These financial statements have been prepared in accordance with and comply with International
Financial Reporting Standards, and have been prepared under the historical cost convention, as
modified for the revaluation of certain fixed assets.
Jamaica adopted International Financial Reporting Standards (IFRSs) as its national accounting
standards, effective for accounting periods beginning on or after 1 July 2002. The financial
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Courts (Jamaica) Limited Identification and Significant Accounting Policies 31 March 2004 Identification and Principal Activities Courts (Jamaica) Limited (the company) is a public company incorporated and resident in Jamaica, with registered offices at 79-81A Slipe Road, Kingston 5. It is a subsidiary of Courts Group International Limited, which is incorporated in England and which holds 79.86% of the company's issued stock units. The ultimate parent company is Courts Plc, which is also incorporated in England. The principal activities of the company consist of the retailing and the hire purchase financing of furniture and appliances. The company is listed on the Jamaica Stock Exchange. These financial statements are presented in Jamaican dollars. Significant Accounting Policies Basis of preparation These financial statements have been prepared in accordance with and comply with International Financial Reporting Standards, and have been prepared under the historical cost convention, as modified for the revaluation of certain fixed assets. Jamaica adopted International Financial Reporting Standards (IFRSs) as its national accounting standards, effective for accounting periods beginning on or after 1 July 2002. The financial

statements for the year ended 31 March 2004 have therefore been prepared in accordance with IFRSs and comparative information has been restated to conform with IFRSs. The company has opted for early adoption of IFRS 1, First-time Adoption of IFRS and has applied the provisions of that standard in the preparation of these financial statements. The effect of adopting IFRSs on the equity and net profit as previously reported is detailed in Note 28. The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and action, actual results could differ from those estimates. Revenue recognition and unearned charges Sales to customers are recognised upon delivery of goods and customer acceptance. Gross margin is recognised at the time of sale. Hire purchase credit charges are recognised in the profit and loss account over the life of the related hire purchase contract so as to produce a constant rate of return on the net investment. Hire purchase receivables at balance sheet date are carried net of the unearned portion of the credit charges applicable to future periods (Note 12). Foreign currency translation Foreign currency transactions are accounted for at the exchange rates prevailing at the dates of the transactions. Assets and liabilities denominated in foreign currencies are translated into Jamaican dollars at the exchange rates prevailing at the balance sheet date, that is, in the case of each currency, the Bank of Jamaica weighted average buying and selling rates at that date. Gains or losses arising from fluctuations in exchange rates are reflected in the profit and loss account. Financial instruments Financial instruments carried on the balance sheet include receivables, cash and short term investments, payables, group balances and short term loans and overdrafts. The determination of fair values of the financial instruments are discussed in Note 25. Income taxes Taxation expense in the profit and loss account comprises current and deferred tax charges.

Goodwill Goodwill is calculated as the amount by which the consideration paid and other related expenses exceed the fair value of the net identifiable assets acquired. Goodwill is amortised on the straight-line basis over its remaining useful life for a period not exceeding twenty years from the date of acquisition. Hire purchase receivables Hire purchase receivables are carried at original invoice amount less initial direct costs and provision for impairment of these receivables. Initial direct costs associated with writing hire purchase contracts are deferred and amortised against hire purchase credit charges over the terms of the contract. A provision for impairment of these receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of the hire purchase contract. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows,discounted at the market rate of interest for similar borrowers. Impairment of non-current assets Fixed assets and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset's net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. Inventories Inventories are stated at the lower of cost and net realisable value, cost being determined on a weighted average basis. Net realisable value is the estimate of the selling price in the ordinary course of business, less selling expenses. Investment securities Investment securities are classified as available-for-sale. Management determines the appropriate classification of investments at the time of purchase. Available-for-sale securities are those intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or changes in interest rates, foreign exchange rates or market prices. They are included in non-current assets unless management has the express intention of holding the investment for less then 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in

which case they are included in current assets. All purchases and sales of investment securities are recognised at settlement date. Available-for-sale securities are initially recognised at cost, which includes transaction costs, and are subsequently re-measured at fair value based on quoted bid prices or amounts derived from cash flow models. Unrealised gains or losses arising from changes in the fair value of these securities are recognised in equity. When securities classified as available -for-sale are sold, the accumulated fair value adjustments are included in the profit and loss account as gains and losses from investment securities. A financial asset is considered impaired if its carrying amount exceeds its estimated recoverable amount. The amount of the impairment loss for assets carried at amortised cost is calculated as the difference between the assets' carrying amount and the present value of expected future cash flows discounted at the original effective interest rate. The recoverable amount of a financial asset carried at fair value is the present value of expected future cash flows discounted at the current market interest rate for a similar financial asset. Interest earned while holding securities is reported as interest income. Repurchase agreements Securities purchased under agreements to resell (repurchase agreements) are treated as collateralised financing transactions. The difference between the purchase and resale price is treated as interest and accrued over the life of the agreements using the effective yield method. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash flow statement cash and cash equivalents comprise balances which mature within 90 days of the date of acquisition, including cash, short term investments, bank overdrafts and short term loans. Employee benefits (i) Pension benefits The company operates a defined benefit plan, the assets of which are generally held in a separate trustee-administered fund. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation.

the lessor are classified as operating leases. Payments made under operating lease are charged to the profit and loss account on a straight-line basis over the period of the leases. When an operating lease is terminated before the lease period has expired, any payments required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. Dividends Dividends are recorded as a deduction from stockholders' equity in the period in which they are approved. Segment reporting Business segments provide products or services that are subject to risks and returns that are different from those of other business segments. Comparative information Where necessary, comparative figures have been reclassified to conform with changes in presentation in the current year. In particular, the comparatives have been adjusted or extended to reflect the requirements of IFRSs (Note 28).