4.0 - Imperial

Notes to the group annual financial statements continued...
for the year ended 30 June 2009
1. Accounting policies (continued)
1.6 Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss, or whether an impairment loss recognised in a
previous period has reversed or decreased. If any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset
belongs.
An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the
asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market
assessment of the time value of money and the risks specific to the asset for which the estimates of future cash flows have
not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an
expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.
1.7 Property, plant and equipment, leasing assets, transport fleet and vehicles for hire
Land is reflected at cost and is not depreciated. New property investments and developments are reflected at cost which
includes holding and direct development costs incurred until the property is available for occupation.
Cost also includes the estimated costs of dismantling and removing the assets and where appropriate cost is split into
significant components. Major improvements to leasehold properties are capitalised and written off over the period of the
leases. Where land and buildings are held as portfolio properties and benefits are shared with policyholders, such property is
fair valued through the income statement.
All other assets are recorded at historical cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated on the straight-line basis to write off the cost of each component of an asset to its residual value
over its estimated useful life as follows:
Buildings
20 years
Equipment and furniture
3 to 10 years
Motor vehicles
3 to 5 years
Transport fleet
3 to 12 years
Vehicles for hire
2 to 5 years
The depreciation methods, estimated remaining useful lives and residual values are reviewed at least annually.
Where significant components of an asset have different useful lives to the asset itself, these components are depreciated over
their estimated useful lives.
When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its
recoverable amount.
Where a reversal of a previously recognised impairment loss is recognised, the depreciation charge for the asset is adjusted to
allocate the asset’s revised carrying amount, less residual value, on a systematic basis over its remaining useful life.
Gains and losses on disposal are determined by reference to their carrying amount.
1.8 Capitalised borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial
period of time to get ready for their intended use or sale, are capitalised to the cost of those assets until such time as the
assets are substantially ready for their intended use or sale.
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Imperial holdings limited Annual Report 2009