annual report - Harvey Norman Company Reports & Announcements

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(vii) Investment properties (continued)
Investment Properties under Construction
Investment properties under construction are valued at fair value if fair value can be reliably determined. The assessment
of fair value may be based on an internal assessment conducted by the Board of the Company which may engage
independent, qualified valuers to assist in the valuation process. The fair value of investment property under construction is
calculated using the capitalisation method of valuation.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their intended use or sale.
(viii) Goodwill
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the
acquirer‟s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised at the date of
acquisition.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is not amortised. Goodwill is reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. As at acquisition date, any goodwill acquired is allocated
to each of the cash-generating units expected to benefit from the combination‟s synergies. Impairment is determined by
assessing the recoverable amount of the cash-generating unit to which the goodwill relates.
Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is
recognised. When goodwill forms part of a cash-generating unit and an operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining
the gain or loss on disposal of the operation.
Impairment losses recognised for goodwill are not subsequently reversed.
(ix) Intangible assets
Intangible assets, consisting of capitalised computer software assets and licence property, are initially recorded at cost and
are amortised on a straight line basis over their estimated useful lives but not greater than a period of seven and a half (7.5)
years.
Intangible assets are tested for impairment where an indicator of impairment exists, either individually or at the cash
generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a
prospective basis. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense
category consistent with the function of the intangible asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the intangible asset and are recognised in the income statement when the
intangible asset is derecognised.
(x) Impairment of non-financial assets
At each reporting date, the consolidated entity assesses whether there is any indication that an asset may be impaired.
Where an indicator of impairment exists, the consolidated entity makes a formal estimate of recoverable amount. Where
the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its
recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset,
unless the asset‟s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate
cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable
amount is determined for the cash-generating unit (CGU) to which the asset belongs.
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.
In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such
transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
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