Page 17 - Kitron Annual Report 2011

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Notes to the consolidated financial statements
■■
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
Property, plant and equipment
Tangible fixed assets primarily embrace buildings
and land, machinery, equipment, and fixtures and fit-
tings. They also include leased buildings, machinery
and equipment where the lease is considered to be
a financing method (financial leasing). Tangible fixed
assets are stated at historical cost less accumulated
depreciation and impairments. They are recognised in
the balance sheet and depreciated on a straight-line
basis to their residual value over their expected useful
life, which is:
■■
Buildings: 20-33 years
■■
Machinery and operating equipment: 3-10 years
Land is not depreciated. The useful life of fixed assets
and their residual value are reassessed on every bal-
ance sheet date and amended if necessary. When the
carrying amount of a fixed asset is higher than the es-
timated recoverable amount, the value is written down
to the recoverable amount.
On-going maintenance of fixed assets is charged as
an operating cost, which upgrading or improvements
are added to the historical cost of the asset and de-
preciated accordingly. Gain and loss on disposals
is recognised in the profit and loss account as the
difference between the sales price and the carrying
amount.
Fixed assets subject to depreciation are tested for
impairment when conditions arise.
An asset’s carrying amount is written down immedi-
ately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable
amount. When assessing impairment, fixed assets are
grouped at the lowest level for which identifiable in-
dependent cash inflows exist (cash generating units).
At each reporting date, an assessment is made of the
opportunity for reversing earlier impairment charges
on fixed assets.
Intangible assets
Goodwill
Goodwill is the difference between the acquisition of
a business and the fair value of the group’s share of
net identifiable assets in the business at the acquisi-
tion date. Goodwill is tested annually for impairment
and recognised in the balance sheet at its acquisition
cost less impairment charges. Impairment losses on
goodwill are not reversed. When assessing the need
to make an impairment charge on goodwill, the good-
will is allocated to relevant cash-generating units. The
allocation is made to those cash-generating units or
groups of such units which are expected to benefit
from the acquisition. The group allocates goodwill to
cash-generating units in each country in which it oper-
ates.
Computer software
Costs related to acquisition of new ERP-system are
accrued until the system is implemented and ready for
use. Computer software is depreciated on a straight-
line basis to their residual value over their expected
useful life, which is mainly 7 years.
Financial assets
The group classifies its financial assets in the following
categories based on the purpose for which the finan-
cial assets were acquired: loans and receivables, and
available for sale. Management determines the classifi-
cation of its financial assets at initial recognition.
Available-for-sale financial assets
Available-for-sale financial assets are non derivatives
that are either designated in this category or not clas-
sified in any of the other categories. They are included
in non-current assets unless management intends to
dispose of the investment within 12 months of the bal-
ance sheet date.
Loans and receivables
Loans and receivables are non-derivative financial as-
sets with fixed payments which are not traded in an
active market. They are classified as current assets
unless they mature more than 12 months after the
balance sheet date. When maturing more than 12
months after the balance sheet date, loans and re-
ceivables are classified as non-current assets. Loans
and receivables are classified as accounts receivable
and other receivables in the balance sheet.