## notes to the financial statements 

## 1 GENERAL INFORMATION 

Kathmandu holdings limited (the Company) and its subsidiaries (together the Group) is a designer, marketer and retailer of clothing and equipment for travel and adventure. It operates in new Zealand, australia and the united Kingdom. 

the Company is a limited liability company incorporated and domiciled in new Zealand. the address of its registered office is 11 Mary Muller drive, heathcote, Christchurch. 

these audited consolidated financial statements have been approved for issue by the Board of directors on 20 September 2012. 

## 2 SuMMARY OF SIGNIFICANT ACCOuNTING POLICIES 

these financial statements have been prepared in accordance with Generally accepted accounting practice in new Zealand. 

they comply with the new Zealand equivalents to International Financial reporting Standards (nZ IFrS) and other applicable Financial reporting Standards, as appropriate for profit- oriented entities. the financial statements also comply with International Financial reporting Standards (IFrS). 

the reporting currency used in the preparation of these consolidated financial statements is new Zealand dollars, rounded where necessary to the nearest thousand dollars. 

## (A) BASIS OF PREPARATION 

the principal accounting policies adopted in the preparation of the financial statements are set out below. these policies have been consistently applied to all periods presented, unless otherwise stated. 

## Entities reporting 

the financial statements for the “parent” are for Kathmandu holdings limited as a separate legal entity. 

the consolidated financial statements for the “Group” are for the economic entity comprising Kathmandu holdings limited and its subsidiaries. the Group consists of: 

## kathmandu holdings Limited 

parent Company 

## Milford Group holdings Limited 

100% owned by Kathmandu holdings limited 

## kathmandu Limited 

100% owned by Milford Group holdings limited 

## kathmandu Pty Limited 

100% owned by Milford Group holdings limited 

## kathmandu (u.k.) Limited 

100% owned by Milford Group holdings limited 

the Company and Group are designated as profit oriented entities for financial reporting purposes. 

## Statutory base 

Kathmandu holdings limited is a company registered under the Companies act 1993. 

the financial statements have been prepared in accordance with the requirements of the Financial reporting act 1993 and the Companies act 1993. 

## historical cost convention 

these financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets as identified in specific accounting policies below. 

## Critical accounting estimates 

the Group makes estimates and assumptions concerning the future. the resulting accounting estimates will, by definition, seldom equal the related actual results. the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 

## (i) Estimated impairment of goodwill and brands 

the group tests annually whether goodwill and brands have suffered any impairment; in accordance with the accounting policy stated in note 2 (q) (i) & (ii). the recoverable amounts of cash-generating units have been determined based on the fair value less cost to sell calculation. these calculations require the use of estimates (note 13). 

## (ii) Stock obsolescence 

the Group assesses the likely residual value of inventory. a stock provision is recognised for stock which is selling for less than cost. any increase in these provisions is taken as a reduction to inventory on the balance sheet and expensed into gross profit on the income statement. 

## (B) PRINCIPLES OF CONSOLIdATION 

## (i) Subsidiaries 

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial 

