Accounting Policies

Basis of preparation
The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards.

Going concern
The Directors have considered the implications of the change in US legislation on 13 October 2006 for the Group and the Company. As explained in note 28 to the Financial Statements this will have a material adverse impact on the trading and carrying value of assets relating to the Group’s US-facing operations. The Directors have reviewed the cash flow projections for the Group in light of these events and have considered the financial resources available to the Group. Accordingly, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue operations for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Restatement of comparatives
The principal accounting policies are summarised below. They have all been applied consistently throughout the financial period and the preceding year with the exception of the accounting policies for dividends and earnings per share.

During the period the Group adopted FRS 21 ‘Events after the balance sheet date’, and has restated its comparative figures with respect to dividends accordingly.

The Group has also adopted FRS 22 ‘Earnings per share’, and FRS 25 ‘Financial Instruments: Disclosure and Presentation’.

The impact of these changes has been given in note 2.

Basis of consolidation
The consolidated financial statements incorporate the results of Sportingbet Plc and all of its subsidiary undertakings as at 31 July 2006 using the acquisition method of accounting as required. Results of subsidiary undertakings are included from the effective date of acquisition.

Goodwill
Goodwill arising on an acquisition of a subsidiary undertaking is the difference between the fair value of the consideration paid and the fair value of the assets and liabilities acquired. It is capitalised and amortised through the profit and loss account over the Directors’ estimate of its useful economic life which ranges from 10 to 20 years. Impairment tests on the carrying value of goodwill are undertaken at the end of the first full financial year following acquisition and in other periods if events or changes in circumstance indicate that the carrying value may not be recoverable.

Associates
An entity is treated as an associated undertaking where the Group has a participating interest and exercises significant influence over its operating and financial policy decisions. In the Group accounts, interests in associated undertakings are accounted for using the equity method of accounting. The consolidated profit and loss account includes the Group’s share of the operating results, interest, pre-tax results and attributable taxation of such undertakings based on audited financial statements. In the consolidated balance sheet, the interests in associated undertakings are shown as the Group’s share of the identifiable net assets, including any unamortised premium paid on acquisition.

The premium on acquisition is dealt with under the goodwill policy.

Joint ventures
An entity is treated as a joint venture where the Group holds a long term interest and shares control under a contractual agreement.

In the Group accounts, interests in joint ventures are accounted for using the gross equity method of accounting. The consolidated profit and loss account indicates the Group’s share of the joint ventures’ turnover and includes the Group’s share of the operating results, interest, pre-tax results and attributable taxation of such undertakings based on audited financial statements. In the consolidated balance sheet, the Group’s share of the identifiable gross assets (including any unamortised premium paid on acquisition) and its share of the gross liabilities attributable to its joint ventures are shown separately.

The premium on goodwill is dealt with under the goodwill policy.

Turnover
Turnover represents the amounts staked in respect of bets placed on sporting events and net win in respect of bets placed on casino games and rake for poker games that have concluded in the period, plus net commissions invoiced in respect of licensing type agreements. Revenue is measured at the fair value of consideration received or receivable and is net of certain promotional bonuses.

Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all tangible fixed assets, except for freehold land, at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life, as follows. 

Computer software
Where, in the opinion of the Directors, the Group’s expenditure in relation to development of internet activities results in future economic benefits, these costs are capitalised and amortised over the shorter of three years or the average period of future benefit.

Valuation of investments
Investments held as fixed assets are stated at cost less any provision for impairment. Investments held as current assets are stated at the lower of cost and net realisable value.

Finance costs
Finance costs are charged to profit over the term of the debt so that the amount charged is at a constant rate on the carrying amount.

Finance costs include issue costs, which are initially recognised as a reduction in the proceeds of the associated capital instrument.

Financial instruments
In relation to the disclosures made in note 20, short term debtors and creditors are not treated as financial assets or financial liabilities except for currency disclosures.

The Group does not hold or issue derivative financial instruments for trading purposes.

Dividends
Dividends are recognised when they become legally payable. Interim dividends are recognised when paid. Final dividends are recognised whenapproved by the shareholders at an annual general meeting.

Dividends on shares wholly recognised as liabilities are recognised as expenses and classified within interest payable.

Foreign currency
Foreign currency transactions of individual companies are translated at the rates ruling when they occurred. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet dates or at contracted rates. Any differences are taken to the profit and loss account.

The results of overseas operations are translated at the average rates of exchange during the period and their balance sheets translated into sterling at the rates of exchange ruling on the balance sheet date. Exchange differences which arise from translation of the opening net assets and results of foreign subsidiary undertakings and from translating the profit and loss account at an average rate are taken to reserves.

Deferred taxation
Deferred tax is recognised in respect of all material timing differences that have originated but not reversed by the balance sheet date, except for deferred tax assets which are only recognised to the extent that they have either been agreed with the relevant Revenue authority and/or the Group anticipates making sufficient suitable taxable profits in the near future.

Liquid resources
For the purposes of the cash flow statement liquid resources are defined as current asset investments and short term deposits.

Pension costs
For defined contribution arrangements the amount charged to the profit and loss account in respect of pension costs and other post-retirement benefits is the contributions payable in the period. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

Share based employee remuneration
When shares and share options are awarded to employees a charge is made to the profit and loss account and a reserve created in capital and reserves to record the intrinsic value of the awards in accordance with UITF Abstract 17 ‘Employee Share Schemes’.

National Insurance on share options
To the extent that the share price at the balance sheet date is greater than the exercise price on options granted under unapproved schemes, provision for any National Insurance contributions has been made based on the prevailing rate of National Insurance. The provision is accrued over the performance period attaching to the award.

Leases
Assets held under finance leases and other similar contracts, which confer rights and obligations similar to those attached to owned assets, are capitalised as tangible fixed assets and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the leases to produce a constant rate of charge on the balance of capital repayments outstanding. Hire purchase transactions are dealt with similarly, except that assets are depreciated over their useful lives.

Rentals under operating leases are charged on a straight line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight line basis over the lease term, except where the period to the review date on which the rent is first expected to be adjusted to the prevailing market rate is shorter than the full lease term, in which case the shorter period is used.