In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.
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 affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Management consider the following to be key sources of estimation uncertainty or significant judgement areas:
Investments in subsidiaries
Investments in subsidiaries are recognised at cost less provision for impairment. Management will assess recoverable amounts of each subsidiary by considering their net asset position and their future profitability. Two subsidiaries were fully impaired as at 31 December 2022 as a result of management decisions to close down these companies. Management have prepared and reviewed forecasts and anticipate that significant profits will be generated by the remainder of the group in the foreseeable future and have therefore not impaired any of the other balances.
Goodwill
Goodwill is recognised at cost on the acquisition of its subsidiaries and subsequently amortised over its useful economic life. Management reconsiders the useful economic life at each balance sheet date and if it has changed, will prospectively alter the rate at which the goodwill is written down. Management also consider whether there are any indicators of impairment at the balance sheet date, and if so, will consider whether the recoverable amount is less than the carrying value. Two subsidiaries were fully impaired as at 31 December 2022 as a result of management decisions to close down those companies. Management have prepared and reviewed forecasts and anticipate that significant profits will be generated by the remainder of the group in the foreseeable future and have therefore not impaired any of the other balances.
Development expenditure
Development expenditure is recognised at cost and subsequently amortised over its useful economic life, estimated to be 10 years. Management reconsiders the useful economic life at each balance sheet date and if it has changed, will prospectively alter the rate at which the Development expenditure is written down. The expenditure incurred relates to a combination of the core infrastructure costs and developing the underlying architecture to build for scale and growth. There are also updates and improvements being made to existing assets. Judgement is applied by management and an element of estimation uncertainty exists in relation to the allocation of time spent by staff and developers between core infrastructure and ongoing updates and improvements to existing assets. The majority of spend year on year relates to core infrastructure spend.
Management also consider whether there are any indicators of impairment at the balance sheet date, and if so, will consider whether the recoverable amount is less than the carrying value. Management have prepared and reviewed forecasts and anticipate that significant profits will be generated from the asset in the foreseeable future and have therefore not impaired any of the balance.
Deferred tax asset
Significant taxable losses have been made during the start up phase of the group, which can be offset against future taxable profits. Management have not recognised a deferred tax asset on the basis that it has yet to make a profit and there is a level of subjectivity over when those losses will be utilised or any asset reversed.