Annual Report 2006 (pdf) - EuroMaint Rail

E u r o M a i n t A n n u a l R e p o r t 2 0 0 6
Notes
Note 1
Accounting principles Contd.
Intra-Group transactions and balance sheet items, as well as profits
on transactions between Group companies, are eliminated. Losses
are also eliminated, unless the transaction is proof of a write-down
requirement for the transferred asset. The accounting principles
for subsidiaries have been changed where appropriate to guarantee
consistent application of the Group’s principles.
Business combinations
IFRS 3 entails establishing the fair value of identifiable assets and
liabilities in the acquired operation at the time of acquisition. Identifiable
assets and liabilities also include assets, liabilities and provisions
including obligations and demands from external parties not reported
in the acquired operation’s balance sheet. No provisions are made
for costs relating to planned restructuring measures resulting from
the acquisition. The difference between the cost of the acquisition
and the acquired proportion of net assets in the acquired operation is
classified as goodwill and is recognised as an intangible asset in the
balance sheet.
The useful life of each individual intangible asset is established
and the asset’s fair value is amortised over its useful life. If the useful
life is deemed indefinite, no amortisation takes place. If the useful life
of an intangible asset is deemed indefinite, all relevant conditions are
taken into account and based on there being no foreseeable upper
time limit for the net cash flow generated by the asset. The useful life
for goodwill is generally assumed to be indefinite.
Segment reporting
As the subsidiaries conduct separate operations with separate products
and services, their operations have been chosen as the primary
segment. Sales between subsidiaries are based on market conditions.
All assets and liabilities have been included for each subsidiary.
Segment information per subsidiary is given in Note 3.
Translation of foreign currencies
Transactions in foreign currencies are translated at the rate used on
the transaction date. Receivables and liabilities in foreign currencies
are translated at the exchange rates in force on the balance sheet
date. Exchange rate differences on loans and investments in foreign
currencies are reported as financial revenues or financial expense.
Other exchange differences are included in operating revenues.
Tangible fixed assets
Tangible fixed assets are recognised at cost less accumulated depreciation
according to plan and accumulated write-downs. Depreciation
takes place in accordance with a systematic plan over the useful life of
the asset to an estimated residual value.
Additional costs are added to the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is likely
that future economic benefits associated with the asset will accrue to
the Group and the asset’s cost can be measured in a reliable way. All
other forms of repair and maintenance are recognised as expenses in
the income statement for the period in which they arise.
In order to distribute the cost of tangible fixed assets down to the
estimated residual value, depreciation takes place linearly over the
estimated useful life, in accordance with the following percentages.
Machinery and equipment 10–20
Computers and terminals 33
Improvements to third-party property 10–20
The residual values and useful lives of assets are tested on each
balance sheet date and adjusted as necessary. An asset’s carrying
amount is depreciated immediately to its recoverable amount (the
higher of the net selling price and value in use) if the asset’s carrying
amount exceeds its estimated recoverable amount.
Profits and losses from sales are established by means of a
comparison between the sales proceeds and carrying amount and the
result is recognised in the income statement.
Intangible assets
Goodwill
Goodwill is the amount by which the cost exceeds the fair value of the
Group’s proportion of the subsidiary’s identifiable net assets upon
acquisition. Goodwill is recognised as an intangible asset. Profit or
loss from the sale of a unit includes the remaining carrying amount
of the goodwill pertaining to the sold unit.
Goodwill is distributed between cash generating units upon testing
to determine any write-down requirement. The write-down requirement
for goodwill is tested as follows: the goodwill value established at
the time of acquisition is distributed among cash generating units or
groups of cash generating units, which are expected to bring benefits
through the acquisition in the form of synergy effects. Assets and
liabilities already within the Group at the time of acquisition may
also be attributed to these cash generating units. Each cash flow
of this kind to which goodwill is distributed, corresponds to the
lowest level in the Group at which goodwill is monitored in the
company’s Board and is not a larger part of the Group than a
segment. A write-down requirement exists when the recoverable
amount for a cash generating unit, or group of cash generating units,
is lower than the carrying amount. In such cases a write-down is
entered in the income statement.
Other intangible assets/Customer relations
In connection with corporate acquisitions, the Group has identified
intangible assets which fulfil the criteria set out in IAS 38. Linear
amortisation is applied over the useful life of the asset, which is taken
as 8 years.
The carrying amounts of intangible assets are tested to determine
any write-down requirement when events or changes in circumstances
indicate that the value may not be recoverable.
Investment property
Investment property is recognised at fair value, which equates to
the market value and is established annually by external and internal
valuers. Changes in fair value are recognised in the income statement
as part of the Other operating revenues item.
The “Land and buildings” header in Note 7 mainly recognises
rebuilding of hired premises and investment property.
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