kAThMANdu  annual report 2012 35 notes to the financial statements 1  GENERAL INFORMATION kathmandu Pty Limited kathmandu (u.k.) Limited Statutory base historical cost convention Critical accounting estimates (i) Estimated impairment of goodwill and brands (ii) Stock obsolescence (B) PRINCIPLES OF CONSOLIdATION (i) Subsidiaries kathmandu Limited Milford Group holdings Limited kathmandu holdings Limited (A) BASIS OF PREPARATION Entities reporting 2  SuMMARY OF SIGNIFICANT ACCOuNTING POLICIES 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. 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. 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. 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: parent Company 100% owned by Kathmandu holdings limited 100% owned by Milford Group holdings limited Subsidiaries are all entities (including special purpose entities)  over which the Group has the power to govern the financial  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. 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). 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.  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. the financial statements have been prepared in accordance  with the requirements of the Financial reporting act 1993 and  the Companies act 1993. Kathmandu holdings limited is a company registered under  the Companies act 1993. the Company and Group are designated as profit oriented  entities for financial reporting purposes. 100% owned by Milford Group holdings limited 100% owned by Milford Group holdings limited