47153 AG Barr Annual Report 2025 AW4 SQ WEB - Flipbook - Page 150
A.G. BARR p.l.c. Annual Report and Accounts 2025
N OTE S TO TH E
ACCO U NT S
CO N TI N U ED
1. Accounting Policies continued
Brands
Separately acquired brands are recognised at cost at the date of purchase. Brands acquired in a business combination are recognised at fair value at the acquisition date. Brands
acquired separately or through a business combination are assessed at the date of acquisition as to whether they have an indefinite life. The assessment includes whether the
brand name will continue to trade, and the expected lifetime of the brand. All brands acquired to date have been assessed as having an indefinite life as they are expected to
continue to contribute to the long-term future of the Group. The brands are reviewed annually for impairment, being carried at cost less accumulated impairment charges.
The fair value of a brand at the date of acquisition is based on the Relief from Royalties method, which is a valuation model based on discounted cash flows.
Customer relationships
Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The customer relationships have a finite useful life and are
carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship.
The fair value of the customer relationships at the acquisition date was based on the Multiple Excess Earnings Method (MEEM), which is a valuation model based on
discounted cash flows. The useful lives of customer relationships are based on the churn rate of the acquired portfolio and are up to 10 years corresponding to a yearly
amortisation of between 10% and 33%. The useful lives of all intangible assets are reviewed annually and amended, as required, on a prospective basis.
Software costs
Software expenditure is recognised as an intangible asset only after its technical feasibility and commercial viability can be demonstrated. Acquired computer software
licences and software developed in-house are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs include resources focused
on delivery of capital projects where the choice has been made to use internal resources. These costs are amortised using the straight-line method over the expected useful
life of the software, which is 10 years.
Property, plant and equipment
Land and buildings comprise mainly factories, distribution sites and offices. All property, plant and equipment is stated at historical cost less accumulated depreciation and
impairments. Historical cost includes expenditure that is directly attributable to the acquisition or construction of the assets. The purchase price of an asset will include the
fair value of the consideration paid to acquire the asset. Borrowing costs directly attributable to acquisition, construction and/or production of assets that take a substantial
time to complete are capitalised.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably.
The carrying amount of any replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which
they are incurred.
Land is not depreciated. Depreciation is charged from the date that assets, other than land, are available for use. It is calculated using the straight-line method to allocate
the cost to the residual values of the related assets using the following rates:
Buildings – 1%
Leasehold buildings – Term of lease
Plant, equipment and vehicles – 10% to 33%
Property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at each year end date. The carrying value of the property,
plant and equipment is reviewed for impairment when events or changes in circumstances indicate that the recoverable amount may be less than the carrying value.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
An item of property, plant and equipment is derecognised on disposal or where no future economic benefits are expected to arise from the continued use of the asset.
Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are recognised within administration costs in the income statement.
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