Annual Report LRP 2007 - Rheinland Pfalz Bank

76 LRP 2007 CONSOLIDATED FINANCIAL STATEMENTS
(13) Investment Property
Properties leased out to third parties or acquired for deriving
profit are reported as investment property, providing
it is held to earn rental income and/or for capital
appreciation. Where mixed-use property exists and the
non-owner-occupied parts can be sold or leased out
separately, these parts are accounted for separately.
Mixed-use properties with a leased portion of more
than 80 % of total use are aggregated and classified as
investment property.
Investment property is reported as a separate item in
the balance sheet. The initial measurement of investment
property is carried out at acquisition or production
costs including incidental costs. Measurement
subsequent to initial recognition is carried out at fair
value. If no market values that have arisen as a result of
active markets exist, expert opinions are obtained.
In the measurement of investment property, the scope
of measurement is based on the assumptions used to
calculate future cash flows. Changes in parameters like
inflation rate, interest rate, anticipated cost trends and
leasing, market conditions and vacancy rates affect future
cash flows and hence the subsequent fair value
amount.
(14) Property and Equipment
Land and buildings used for business purposes, technical
equipment and machines, operating and office
equipment, advance payments and assets under construction,
as well as leased assets under operating leases
are reported under property and equipment.
Items of property and equipment are recognized at acquisition
and production costs and subsequently measured
at amortized cost. The cost of internally developed
property and equipment includes directly attributable
direct costs, as well as variable and fixed production
overheads.
Subsequent expenditure for property and equipment
is capitalized, if it is deemed to increase the future potential
benefit. All other subsequent expenditure is recognized
as an expense. Items of property and equipment
are depreciated over their expected economic
useful life using the straight-line or declining-balance
method. Useful life is determined by taking into account
the expected physical wear and tear, technical
obsolescence, as well as legal and contractual constraints.
Expected useful life
in years
Buildings 25–50
Technical equipment and machines 3–15
Operating and office equipment 1–23
Purchased IT systems 3–5
The determination of useful life and depreciation
method is reviewed at least at the end of each fiscal
year. After carrying out the planned depreciation including
review of the applied depreciation method, the
useful life on which it is based and the residual value of
the respective asset (sale value of a comparable asset),
a check is performed, at each balance sheet date, to ascertain
whether there are indications of impairment.
Consequently, any impairments resulting from technical
or economic obsolescence or wear and tear, or due
to a decline in market prices, are taken into account. If
there are indications of impairment, the recoverable
amount is determined and compared with the carrying
amount. Impairments losses are charged to profit or
loss as extraordinary write-down in the income statement.
The permanence of impairment is not relevant to
a valuation of the asset.