NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Jimmy Choo PLC (the “Company”) and its subsidiaries (together referred to as the “Group”) is a global luxury shoes and accessories brand owner, wholesaler and retailer incorporated and domiciled in the United Kingdom.

The consolidated financial statements of the Group have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in these Group financial statements.

Judgements made by the Directors in the application of these accounting policies, that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year, are discussed in note 2.

1.1 MEASUREMENT CONVENTION

The financial statements have been prepared on the historical cost basis, except for financial instruments that are measured at revalued amounts or fair values at the end of each reporting year, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. The principal accounting policies adopted are set out below.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of International Accounting Standard (“IAS”) 17 and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

1.2 GOING CONCERN

The Group’s consolidated financial statements are prepared on a going concern basis as the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. The Group has considerable financial resources, following the refinancing of the Group completed on 17 March 2016 together with a strong ongoing trading performance. Details of the Group’s liquidity position and borrowing facilities are described in note 17. Financial risk management objectives, details of financial instruments and hedging activities and exposures to credit risk and liquidity risk are described in note 22.

The Directors have reviewed the Group’s forecasts and projections. These include the assumptions around the Group’s products and markets, expenditure commitments, expected cash flows and borrowing facilities.

Taking into account reasonable possible changes in trading performance and after making enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements.

1.3 BASIS OF CONSOLIDATION

The Group’s annual financial statements comprise of Jimmy Choo PLC (the Company) and its subsidiaries. These are presented as a single economic entity.

SUBSIDIARIES

Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group transactions, balances and unrealised profits on transactions between Group companies are eliminated in preparing the Group’s consolidated financial statements.

The results of the subsidiaries are prepared for the same reporting year as the Company, using accounting policies that are consistent across the Group.

Employee benefit trusts that are controlled by the Group are consolidated on the same basis as subsidiaries as set out above.

1.4 ASSOCIATES AND JOINT VENTURES

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Joint ventures are those entities over whose activities the Group has joint control.

Associates and joint ventures are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee.

The Group currently has one associate, for which equity accounting is applied. In addition, the Group has one joint venture which is consolidated as a subsidiary, as the Directors have concluded that the Group has control over the entity by virtue of its control over voting rights.

1.5 FOREIGN CURRENCY

FUNCTIONAL AND PRESENTATIONAL CURRENCIES

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Pounds Sterling which is the Company’s functional and the Group’s presentational currency.

TRANSACTIONS IN FOREIGN CURRENCIES

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined.

TRANSLATION OF THE RESULTS OF OVERSEAS BUSINESSES

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentational currency at foreign exchange rates ruling at the balance sheet date. The revenue and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

1.6 FINANCIAL INSTRUMENTS

Classification of financial instruments issued by the Group.

Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital exclude amounts in relation to those shares.

FINANCIAL ASSETS

Financial assets are initially recognised at fair value on the consolidated balance sheet when the entity becomes a party to the contractual provisions of the instrument. A financial asset is derecognised when the contractual rights to the cash flow expire or substantially all risks and rewards of the asset are transferred.

I. TRADE RECEIVABLES

Trade and other receivables are included in current assets, except for maturities greater than 12 months after the balance sheet date. Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows and is recognised in the consolidated income statement in administrative expenses.

II. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand and deposits held at call with banks with an original maturity of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents includes bank overdrafts in addition to the definition above.

FINANCIAL LIABILITIES

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

The Group’s financial liabilities comprise trade and other payables, borrowings and other non-current liabilities including the EBT liability. All financial liabilities are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method except for derivatives, which are classified as held for trading, except where they qualify for hedge accounting and are held at fair value. The fair value of the Group’s liabilities held at amortised cost are approximately equal to their carrying amount. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.

I. BANK BORROWINGS

All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement over the period of the borrowings using the effective interest method.

Financial expenses comprise interest expense on borrowings and the cost of foreign currency forward contracts.

II. TRADE PAYABLES

Trade and other payables are included in current liabilities, except for maturities greater than 12 months after the balance sheet date. Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

III. PUT OPTION LIABILITIES OVER NON-CONTROLLING INTEREST

Put options over shares in subsidiaries or joint ventures held by non-controlling interests are recognised initially at fair value through equity when granted. They are subsequently remeasured at fair value at each reporting period with the change in fair value recorded in the consolidated income statement as other finance expenses and income.

IV. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

The Group uses derivative financial instruments to hedge its exposure to fluctuations in foreign exchange rates arising on certain trading transactions. The principal derivative instruments used are forward foreign exchange contracts taken out to hedge highly probable cash flows in relation to future sales and product purchases.

Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised in the consolidated income statement.

1.7 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Operating lease payments are accounted for as described at 1.16 Operating leases below.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date or if events or changes in circumstances indicate the carrying value may not be recoverable.

1.8 BUSINESS COMBINATIONS

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

When a business combination is achieved in stages, the Group’s previously held interests in the acquired entity is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

1.9 ACQUISITIONS AND DISPOSALS OF NON-CONTROLLING INTERESTS

Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the parent.

1.10 INTANGIBLE ASSETS AND GOODWILL

GOODWILL

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units (“CGUs”) and is not amortised but tested annually for impairment or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s CGUs expected to benefit from synergies of the combination. If the recoverable amount of the CGU is less than the carrying amount of the CGU, the impairment loss is allocated first to reduce the carrying amount of goodwill and then to the other assets of the CGU on a pro rata basis. Impairment losses relating to goodwill are not reversed in subsequent years.

For further details see 1.12 Impairment excluding inventories and deferred tax assets.

BRAND

Brands acquired in a business combination are recognised at fair value at the acquisition date and are carried at cost less accumulated impairment.

The Jimmy Choo brand is the only intangible asset that is considered to have an indefinite useful life on the basis that:

The brand value is not amortised but subject to an impairment test which is performed annually or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.

For further details see 1.12 Impairment excluding inventories and deferred tax assets.

KEY MONEY

Key money paid to the outgoing tenant to enter a leasehold property is stated within intangible assets at cost, net of amortisation and any provision for impairment. Amortisation is charged on key money at rates calculated to write- off the cost, less estimated residual value (which in some locations and geographies equates to cost) on a straight-line basis over the lease term. For locations where key money residual value is carried at cost, an annual assessment of impairment is undertaken which reviews the carrying value of key money and compares this value to key money values paid for recent, similar key money based transactions based on independent third party property reviews. An assessment is then made regarding whether impairment is required for these locations.

OTHER INTANGIBLE ASSETS

The cost of securing and renewing design patents, trademarks and other intangible assets is capitalised at purchase price and amortised by equal annual instalments over the period in which benefits are expected to accrue. The useful economic life of these assets is determined on a case by case basis, in accordance with the terms of the underlying agreement and the nature of the asset.

AMORTISATION

Amortisation is charged to the statement of profit and loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life including the Jimmy Choo brand and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

1.11 INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and other costs in bringing them to their existing location and condition.

Where necessary, provision is made to reduce the cost to no more than net realisable value having regard to the nature and condition of inventory, as well as anticipated utilisation and saleability.

1.12 IMPAIRMENT EXCLUDING INVENTORIES AND DEFERRED TAX ASSETS

FINANCIAL ASSETS (INCLUDING RECEIVABLES)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset and that the loss event has a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

NON-FINANCIAL ASSETS

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed 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 an asset or CGU is the greater of its value in use and its fair value less costs to sell. 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 the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs. CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes which does not exceed the level of individual operating segments. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the consolidated income statement. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the units on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

1.13 EMPLOYEE BENEFITS

DEFINED CONTRIBUTION PLANS

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the consolidated income statement in the periods during which services are rendered by employees.

SHORT TERM BENEFITS

Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

1.14 PROVISIONS

A provision is recognised in the consolidated balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are discounted if the effect of the time value of money is material using a pre-tax market rate adjusted for risks specific to the liability.

1.15 REVENUE RECOGNITION

Revenue, which is stated excluding Value Added Tax and other sales related taxes, is the amount receivable for goods supplied (less returns, trade discounts and allowances) and royalties receivable.

Retail revenues, returns and allowances are reflected at the dates of transactions with customers. Provisions for returns on retail sales are calculated based on historical return levels.

Wholesale revenue is only recognised when the significant risks and rewards of ownership have transferred to the customer according to, and in line with, the various internationally recognised shipping terms agreed with customers. Provisions are made for expected returns and allowances based on historical return levels or commercial agreements.

Royalty revenue from licensing agreements is recognised on an accruals basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably).

1.16 OPERATING LEASES

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the year in which they are incurred.

In the event that lease incentives are received to enter into an operating lease such incentives are recognised as a liability. Lease incentives are recognised as a reduction of rental expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the lease are consumed.

Premiums paid to landlords to secure operating leases are recognised as assets and depreciated to residual value over the lease term.

1.17 FINANCIAL INCOME AND EXPENSES

Financial expenses comprise interest payable and changes in the fair value of financial liabilities that are recognised in the income statement. Financial income comprises interest receivable on funds invested and changes in the fair value of financial assets that are recognised in the consolidated income statement.

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.

1.18 TAXATION

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the consolidated income statement and consolidated statement of other comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future profits will be available against which the temporary difference can be utilised.

Current and deferred tax assets and liabilities are only offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entities or different taxable entities where there is an intention to settle the balances on a net basis.

1.19 SHARE-BASED PAYMENT TRANSACTIONS

CASH-SETTLED SHARE-BASED PAYMENT SCHEMES

Share-based payment transactions in which the Group receives goods or services by incurring a liability to transfer cash or other assets that is based on the price of the Group’s equity instruments are accounted for as cash-settled share-based payments. The fair value of the amount payable to employees is recognised as an expense, with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is remeasured at each balance sheet date and at settlement date. Any changes in the fair value of the liability are recognised as staff costs in the consolidated income statement.

EQUITY-SETTLED SHARE-BASED PAYMENT SCHEMES

Share-based payment transactions in which the Group receives goods or services by incurring a liability to transfer its own equity instruments are accounted for as equity-settled share-based payments. The payments are assessed at their fair value on the grant date. The cost of the share-based incentives is recognised as an expense over the vesting period of the awards, with a corresponding increase in equity. The estimate of the number of options expected to vest is revised at each balance sheet date.

When options and awards are exercised, they are settled through awards of shares held in the Employee Benefit Trust. The proceeds received from the exercises, net of any directly attributable transaction costs, are credited to equity.

1.20 OWN SHARES RESERVE

Where the Company or its subsidiaries (including the Jimmy Choo PLC Employee Benefit Trust) purchase the Company’s own equity shares, the cost of those shares, including any attributable transaction costs, is presented within the own shares reserve as a deduction in shareholders’ equity in the consolidated financial statements.

1.21 ADOPTION OF NEW AND REVISED STANDARDS

ADOPTION OF NEW STANDARDS

With effect from 1 January 2016, the Group has adopted the following standards, amendments and improvements issued by the IASB and effective during 2015 and 2016.

The Group chose not to adopt any of the above standards and interpretations early. It is anticipated that adoption of these standards and interpretations in future periods will not have a material impact on the Group’s financial results except for the following standards that may alter measurement and/or disclosure:

The Group is assessing the impact of IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases. The Group’s initial view is that IFRS 9 and IFRS 15 will not have a material impact on measurement but may require some further disclosure. From the initial analysis of the potential impact of IFRS 16 Leases, the Group recognises that there is likely to be a significant impact in the financial statements for both asset values, with the creation of a right to use asset, and liabilities, with an increase in financial liabilities, which will impact the classification and reporting of costs and profits in the consolidated income statement. The assessment of the impact of IFRS 16 Leases is at an early stage and will require further work to verify the completeness and accuracy of data.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of the consolidated financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future year impacted. The key judgements and estimates employed in the financial statements are considered below.

IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE LIFE INTANGIBLE ASSETS

On an annual basis, the Group is required to perform an impairment review to assess whether the carrying value of goodwill and other indefinite life intangible assets is less than its recoverable amount. The recoverable amount is based on a calculation of expected future cash flows, which include estimates of future performance. Details of assumptions used in the impairment tests are detailed in note 10.

KEY MONEY VALUATION

Judgement is required in estimating the residual value of key money paid to outgoing tenants to secure a leasehold property. In certain locations, the residual value of key money is considered to be equal to cost, either due to legal protection offered to tenants in that jurisdiction or because it is common practice to at least recover the amounts paid at the end of the lease due to the existence of an active market for operating leases of prime luxury real estate.

VALUATION OF OTHER INTANGIBLE ASSETS

The assessment of fair value in a business combination requires the recognition and measurement of the identifiable assets, liabilities and contingent liabilities in the acquired business. The key judgements required are the identification of intangible assets meeting the recognition criteria of IAS 38 and their attributable fair values. The key assumptions in relation to the brand valuation are the Directors’ best estimate of its life and the royalty and discount rate used in its valuation.

SHARE-BASED PAYMENTS

The vesting of awards granted under the Group’s share-based payments scheme is dependent upon continued employment within the Group over the vesting period. Judgement is required in determining the number of shares that will ultimately vest.

TAXATION

The Group recognises deferred tax assets and liabilities based upon future taxable income and the expected recoverability of the balance. The estimate will include assumptions regarding future income streams of the Group and the future movement in corporation tax rates in the respective jurisdictions. The estimation of provisions and liabilities in respect of current taxation depends on estimates and judgements in respect of whether or not and the extent to which items of income and expenditure will be taxable. The estimation of provisions in respect of current taxation depends on estimates and judgements in respect of ongoing tax inquiries and the uncertainty surrounding their resolution.

Current tax liabilities include £1.8m (2015: £2.8m) in relation to regional transfer pricing inquiries. The provision represents management’s best estimate of the anticipated settlement of these inquiries which are all expected to be resolved within the next financial year.

3. OPERATING SEGMENTS

The Chief Operating Decision Maker (“CODM”) is the Executive Directors. Internal management reports are reviewed by the CODM. Key measures used to evaluate segment performance are revenue and segment contribution to operating profit and EBITDA. Management believes that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions as central costs are not allocated across the segments.

The CODM considers the Group’s segments to be its three channels to market, being Retail (including Online), Wholesale and Other.

Retail revenue is generated through the sale of luxury goods to end clients through Jimmy Choo DOS in UK, Europe, USA, Canada, Hong Kong, China, Singapore, Malaysia and Japan and through the Group’s website.

Wholesale revenue is generated through the sale of luxury goods to distribution partners, multibrand department stores and specialty stores worldwide.

Other revenue is predominantly generated through receipt of royalties from the Group’s global licensees of Jimmy Choo branded fragrance, sunglasses and eyewear products.

There are no material inter-segment transactions.

An analysis of net assets by segment is not reviewed by the CODM and accordingly is not presented below. Total assets by segment have been presented below.

The following is an analysis of the Group’s revenue and results by reportable segment for the year ended 31 December 2016.

The following is an analysis of the Group’s revenue and results by reportable segment for the year ended 31 December 2015.

The total of non-current assets other than deferred tax assets located in the UK and foreign countries is as follows:

The Group did not have a single customer which accounted for more than 10% of the Group’s consolidated revenue in either of the years presented.

Earnings per share is calculated as follows:

Included in auditor remuneration for the year ended 31 December 2016 were fees incurred in relation to tax advice for the replatforming of the business of: £nil (2015: £0.1m).

The aggregate payroll costs incurred were as follows:

Share-based payment expenses have been recognised in administrative expenses.

The foreign exchange loss on external borrowings in 2016 relates to the close-out on the old debt facilities (see note 17).