Ardagh Glass Finance plc - Irish Stock Exchange

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Critical accounting estimates and judgements (Continued)
(f) Establishing lives for depreciation purposes of property, plant and equipment
Long-lived assets, consisting primarily of property, plant and equipment, comprise a significant
portion of the total assets. The annual depreciation charge depends primarily on the estimated lives of
each type of asset and, in certain circumstances, estimates of fair values and residual values. The
directors regularly review these asset lives and change them as necessary to reflect current thinking on
remaining lives in light of technological change, prospective economic utilisation and physical condition
of the assets concerned. Changes in asset lives can have a significant impact on depreciation and
amortisation charges for the period. It is not practical to quantify the impact of changes in asset lives
on an overall basis, as asset lives are individually determined and there are a significant number of
asset lives in use. Details of the useful lives is included in the accounting policy. The impact of any
change would vary significantly depending on the individual changes in assets and the classes of assets
impacted.
(g) Share-based payments
The determination of the fair value of awards under the stock option plan involves the use of
judgements and estimates. The fair value has been estimated using the Black-Scholes option pricing
model in accordance with the judgemental assumptions set out in Note 21.
(h) Business combinations
Goodwill only arises in business combinations. The amount of goodwill initially recognised is
dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired
and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to
a considerable extent, on management’s judgement.
Allocation of the purchase price affects the results of the Group as finite lived intangible assets are
amortised, whereas indefinite lived intangible assets, including goodwill, are not amortised and could
result in differing amortisation charges based on the allocation to indefinite lived and finite lived
intangible assets.
Critical judgements in applying the entity’s accounting policies
Revenue recognition
The Group has recognised revenue amounting to A1,025.0 million for sales of goods during 2007.
Customers have the right to rescind the sale if the goods are damaged. The Group believes that, based
on past experience, the rate of customer returns is less than 1% of revenue and it is therefore
appropriate to recognise all revenue net of returns.
Pensions
The Group has made certain judgements relating to mortality. Please refer to Note 18.
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