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noteS TO THE CONSolidated FINANCIAL StatementS
conSolidated FINANCIAL StatementS FOR THE Year ENDED 31 DECEMBER 2011
ACCOUNTING AND VALUATION METHODS
(1) INTANGIBLE ASSetS
Purchased intangible assets are capitalized at acquisition cost. Internally generated intangible assets are capitalized
at manufacturing cost if the preconditions set out in IAS 38 regarding the capitalization of internally generated
intangible assets are satisfied.
Intangible assets are subject to amortization over their relevant useful lives. Amortization is performed on a straightline
basis over a time frame between two and fifteen years or in line with the products’ life cycles in the case of
development expenses, and is recorded under the item depreciation, amortization and impairment expenses.
Customer relationships capitalized as part of corporate acquisitions are amortized over a useful life of five to ten
years. At the end of every financial year the residual values, the useful lives and the methods of amortization of
these assets are reviewed and, if necessary, adjusted prospectively. Changes in the method or period of amortization
that become necessary as a consequence of modifications of the anticipated useful lives or the expected consumption
of the future economic benefits of the assets are treated as changes in estimates.
In the case of intangible assets with indefinite useful lives and intangible assets under development, each asset
is tested for impairment at least once a year. These intangible assets are not amortized over their useful lives on
a systematic basis. Once a year, the useful lives of all intangible assets with indefinite useful lives are checked as
to whether the estimations of the indefinite useful lives are still justified. If this is not the case, the estimates are
changed prospectively from an indefinite useful life into a finite useful life.
Impairments are recognized in the year in which the event giving rise to the impairment occurs and are recorded
under the item depreciation, amortization and impairment expenses. If the reasons for the impairment cease to
exist, corresponding reversals of the impairment loss are performed until the level of amortized cost is reached.
Such reversals are recorded as other operating income.
Goodwill
Goodwill according to IFRS 3 is not amortized but is instead tested for impairment annually as well as whenever
there are indications that impairment has occurred.
In order to perform impairment tests, goodwill is allocated to cash-generating units. The essential standard
applied for determining whether a unit qualifies as a cash-generating unit is the assessment of its technical and
commercial independence in the generation of income. The impairment test of the cash-generating unit is
carried out by comparing the amortized carrying amount (including the allocated goodwill) to the higher of either
the net realizable value or the value in use. The value in use is calculated as the present value of relevant future
cash inflows and outflows on the basis of the data obtained from the internal medium-term corporate planning.
The discount rate is derived from the Company’s weighted cost of capital. If the calculated amount is less than
the carrying amount, the impairment loss in the amount of the difference is allocated first to reduce the carrying
amount of the goodwill. Any additional impairment loss is then to be allocated to the remaining assets of the
cash-generating units in proportion to their carrying amounts.
The impairment test is applied to the entire goodwill capitalized. When, in the course of an acquisition, noncontrolling
interests are reported at their fair values, the impairment is spread over the individual groups of shareholders.
The allocation is made on the basis of the same key that is also applied when distributing the results of
the subsidiary at hand among the shareholders, provided that the subsidiary under review is a cash-generating
unit to which goodwill is allocated.
According to IFRS 3, goodwill once written down for impairment can no longer be recovered.
palfinger Annual Report 2011
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