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1.4 Use of Estimates and Judgements (continued)

The estimates and underlying assumptions are reviewed

on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if

the revision only affects that period, or in the period of the

revision and future periods if the revision affects both current

and future periods.

Estimates and judgements made in applying the RCS Group’s

accounting policies, that potentially have a significant effect

on the amounts recognised in the consolidated financial

statements relate to the following:

(a) Card and loan receivables are disclosed net of any

accumulated impairment losses and future recoveries.

The calculation of the impairment amount is performed

using the internationally-recognised Markov model.

The Markov model uses delinquency roll rates on

customer balances to determine the inherent bad debt in

a receivables’ book. The directors believe that the card

and loan receivables balances are being measured fairly.

(b) The RCS Group reviews the goodwill for impairment

at least annually or when events or changes in

economic circumstances indicate that impairment may

have taken place. Impairment reviews are performed by

projecting future cashflows, baseduponbudgets andplans

and making appropriate assumptions about rates of

growth and discounting these using a rate that takes into

account prevailing market interest rates and the risks

inherent in the business. If the present value of the

projected cash flows is less than the carrying value of the

underlying net assets and goodwill, an impairment charge

is required to be recognised in the income statement.

This calculation requires the exercise of significant

judgment by management, if the estimates prove to

be incorrect or performance does not meet expectations,

which affects the amount and timing of future cash flows

and goodwill may become impaired in future periods.

Goodwill is disclosed in note 10.

1.5 Segmental Reporting

An operating segment is a component of the RCS Group

that engages in business activities from which it may earn

revenues and incur expenses, including revenues and

expenses that relate to transactions with any of the Group’s

other components. Operating segments’ operating results

are reviewed regularly by the board, identified as the chief

operating decision-maker, to make decisions about resources

to be allocated to the segment and assess its performance and

for which internal financial information is available.

Segment results that are reported to the board include items

directly attributable to a segment as well as those that can be

allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during

the period to acquire equipment and intangible assets.

Amounts reported in the group segmental analysis are

measured in accordance with International Financial

Reporting Standards.

Inter-segment pricing is determined on an arm’s length basis.

1.6 Financial Instruments

A financial instrument is recognised when the RCS Group

becomes aparty to the contractual provisions of the instrument.

Financial assets are derecognised if the RCS Group’s

contractual rights to the cash flows from the financial assets

expire or if the RCS Group transfers the financial asset to

another party without retaining control or substantially all

risks and rewards of the asset. Regular way purchases and

sales of financial assets are accounted for at trade date, being

the date that the RCS Group commits itself to purchase or

sell the asset. Financial liabilities are derecognised if the RCS

Group’s obligations specified in the contract expire or are

discharged or cancelled.

Accounting Policies


for the period ended 31 December 2015