ARCO VARA AS - NASDAQ OMX Baltic

Expenses incurred on PPE after their recognition (e.g. replacement of a part of the asset) are added to
the carrying value of the asset, provided they meet the following criteria: (a) it is probable that future
economic benefits associated with the item will flow to the Group; and (b) the acquisition cost of the
item can be reliably measured. Replaced parts are derecognized from the balance sheet. All other
expenditures are recognised as an expense in the period in which they have been incurred.
Depreciation of PPE is calculated on a straight-line basis. Depreciation rates are determined for each
tangible asset item individually, depending on its estimated useful life. The following annual
depreciation rates are applied for PPE groups:
• Buildings and facilities 2–18%
• Machinery and equipment 8–20%
• Transport vehicles 15–25%
• Fixtures, fittings and tools 20–40%
Depreciation is calculated until the moment the residual value of the asset exceeds its carrying value.
The residual value is the amount that the Group would currently obtain from disposal of the asset, if
the asset was already of the age and in condition expected at the end of its useful life.
The depreciation rates, depreciation methods and the residual value of items of PPE are reviewed at
the end of each financial year, and changed, where necessary. If the methods of valuation change, the
changes are accounted for prospectively.
The carrying values of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recoverable. The impairment test
has been described in more detail below (see the accounting principles for impairment of asset).
PPE is derecognised upon disposal of the asset, or when no future economic benefits are expected
from the use or disposal of the asset. Any profits and losses arising from derecognition of an item of
PPE are charged to "Other operating income" or "Other operating expenses" in the income statement
of the period when the PPE item was derecognised.
PPE items which are very likely to be sold within 12 months are reclassified into non-current assets
held for sale. Non-current assets held for sale are presented separately from current and non-current
assets in the balance sheet, and are no longer depreciated. Non-current assets held for sale are valued
at whichever is lower, net carrying amount or fair value less costs to sell.
Goodwill
Goodwill acquired in a business combination is initially measured at cost. Goodwill is the positive
difference of the acquisition cost of the acquired holding and the Group’s interest in the fair value of
the net assets of the subsidiary or joint venture as at the date of acquisition. Net assets of the subsidiary
or joint venture as at the acquisition date are the net value of the identifiable assets, liabilities and
contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. In
order to determine the impairment, any goodwill acquired is allocated to each cash-generating units
expected to benefit from the combination's synergies, or groups of such units. An independent cashgenerating
unit (set of units) is the smallest identifiable group of assets, which is not larger than a
primary segment based on the Group's segment reporting.
Goodwill is reviewed for impairment annually, as at the end of the financial year or more frequently if
events or changes in assessments indicate that the carrying value may be impaired. 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. Impairment loss is recognised in profit and loss, under “general and
administrative expenses”.
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