Abbreviated Company Accounts - OVATION LIMITED

1Accounting Policies

Basis of measurement and preparation of accounts
The full financial statements, from which these abbreviated accounts have been extracted, have
been prepared under the historical cost convention and in accordance with the Financial Reporting
Standard for Smaller Entities (effective April 2008).

Turnover policy
Turnover comprises revenue recognised by the company in respect of goods and services supplied during the year, exclusive of Value Added Tax and trade discounts.

Revenue recognision

Transaction revenue is recognised when there has been a request for universal gift vouchers and the client has demonstrated a clear intention of completing the transaction. A provision is made against revenue based on the historic rate of vouchers that will not be redeemed.

Tangible assets depreciation policy
Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their expected useful lives on the following bases.

In the current year, there has been a change of depreciation estimate from 3 years straight line basis to 7 years straight line basis:

- Office equipment - 7 years straight line (3 years straight line in prior years)
- Computer equipment - 7 years straight line (3 years straight line in prior years)

Intangible assets amortisation policy
Goodwill is the difference between amounts paid on the acquisition of a business and the fair value
of the identifiable assets and liabilities. It is amortised to the Profit and loss account over its estimated economic life.

IT development costs (see Note 1.11) are capitalised at cost if they can be accurately allocated to a project and if both the technical feasibility and the marketing of the new product are assured. The development work must be sufficiently likely to generate future cash inflows. The capitalised asset is being amortised over a period of 5 years.

Other accounting policies
Cash Flow

The financial statements do not include a Cash flow statement because the company, as a small
reporting entity, is exempt from the requirement to prepare such a statement under the Financial
Reporting Standard for Smaller Entities (effective April 2008).

Leasing and hire purchase

Assets obtained under hire purchase contracts and finance leases are capitalised as tangible fixed assets. Assets acquired by finance lease are depreciated over the shorter of the lease term and their useful lives. Assets acquired by hire purchase are depreciated over their useful lives. Finance leases are those where substantially all of the benefits and risks of ownership are assumed by the
company. Obligations under such agreements are included in creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the Profit and loss account so as to produce a constant periodic rate of charge on the net obligation outstanding in each period.

Operating leases

Rentals under operating leases are charged to the profit and loss account on a straight line basis over the lease term. Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the period until the date the rent is expected to be adjusted to the prevailing market rate.

Stocks

Stocks are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving stocks. Cost includes all direct costs and an appropriate proportion of fixed and variable overheads

Research and development

Development costs are capitalised within intangible assets where they can be identified with a specific product or project anticipated to produce future benefits, and are amortised on the straight line basis over the anticipated life of the benefits arising from the completed product or project.

Deferred research and development costs are reviewed annually, and where future benefits are deemed to have ceased or to be in doubt, the balance of any related research and development is written off to the Profit and loss account.

PRIOR YEAR ADJUSTMENT

In prior years the company wrote off its internally generated development expenditure in the year of expenditure. During the year ended 31 May 2015, the directors decided that it is more appropriate to defer these costs to future periods and classify them as intangible assets, subject to meeting the necessary criteria.

Prior year adjustments have been made in these financial statements to recognise the net book amount of £398,266 as intangible fixed assets in the company’s balance sheet at 31 May 2014, with a corresponding deferred tax adjustment of £79,653.

The impact of the change is to increase profit for the year ended 31 May 2014 by £98,231 after tax and increase retained earnings by £220,382 at 1 June 2013 and £318,613 at 1 June 2014.

On 9 December 2011 the company acquired Real World Technologies Limited. This company has
subsequently been dissolved. The company paid a cash consideration of £50,000 for net liabilities with a fair value of £31,789. Subsequently all the trade and assets were hived up into the company and this resulted in the recognition of goodwill of £81,789.

Goodwill is being amortised over a straight line period of 3 years.

IT development costs are being amortised over a straight line period of 5 years.

4Fixed assets Investments
-

-