RCS GROUP CONSOLIDATED FINANCIAL STATEMENTS
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
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.
for the period ended 31 December 2015