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Subsequent expenditure on software assets is capitalised only when it increases the future econom-
ic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as
incurred.

Amortisation is recognised in the income statement on a straight-line basis over the estimated useful
life of the software, from the date that it is available for use since this most closely reflects the expect-
ed pattern of consumption of future economic benefits embodied in the asset. Software has a finite
useful life, the estimated useful life of software is between three and five years. Amortisation methods,
useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

3.12 Leases

Leases are accounted for in accordance with IAS 17 and IFRIC 4. They are divided into finance leases and operat-
ing leases.

A group company is the lessee

(a) Operating lease
Leases in which a significant portion of the risks and rewards of ownership are retained by another
party, the lessor, are classified as operating leases. Payments, including prepayments, made under op-
erating leases (net of any incentives received from the lessor) are charged to operating expenses in the
income statement on a straight-line basis over the year of the lease and used as investment property.

(b) Finance lease
Leases of assets where the Group has substantially all the risks and rewards of ownership are classi-
fied as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the
fair value of the leased property and the present value of the minimum lease payments. Each lease
payment is allocated between the liability and finance charges so as to achieve a constant rate on the
finance balance outstanding. The corresponding rental obligations, net of finance charges, are includ-
ed in deposits from banks or deposits from customers depending on the counter party. The interest
element of the finance cost is charged to the income statement over the lease year so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each year.

A group company is the lessor
When assets are held subject to a finance lease, the present value of the lease payments is recognised as a
receivable. The difference between the gross receivable and the present value of the receivable is recognised
as unearned finance income. Lease income is recognised over the term of the lease using the net investment
method (before tax), which reflects a constant periodic rate of return.

3.13 Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets other than goodwill and deferred tax assets, are re-
viewed at each reporting date to determine whether there is any indication of impairment. If any such indication
exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite
useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of goodwill is estimated at each reporting date. An impairment loss is recognised if
the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely independent of cash
inflows of other assets or groups of assets (the “cash-generating unit” or CGU). Subject to an operating seg-
ment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated

192 Access BAnk Plc
Annual Report & Accounts 2017