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72 Financial Statements
Notes to the Financial Statements
Continued
Acquired customer relationships
Acquired customer relationships consist of intangible assets arising on the consolidation of recently acquired business, principally future
order books, that do not appear within the balance sheet of the acquired entity itself, and which are separable from goodwill in
accordance with IFRS 3, Business Combinations and IAS 38, Intangible Assets. Customer relationships are amortised on a straight-line
basis over their useful economic lives of between one and three years.
Corporate information systems
In accordance with IAS 38, Intangible assets, the Group’s corporate information systems are treated as an intangible asset. Costs
included are those directly attributable to the design, construction and testing of new systems (including major enhancements and
internally generated costs) from the point of inception to the point of satisfactory completion where the probable future economic
benefits arising from the investment could be assessed with reasonable certainty at the time the costs are incurred. Maintenance and
minor modifications are expensed in the income statement as incurred. The corporate information systems are amortised on a straightline
basis over their estimated useful economic life of six years.
Software licences
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific
software. These costs are amortised on a straight-line basis over their useful lives of between two and five years.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation and impairment. Cost comprises purchase price after
discounts and rebates plus all directly attributable costs of bringing the asset to working condition for its intended use.
Property, plant and equipment is depreciated on a straight line basis calculated at annual rates to write off the cost less residual value
of each asset over the term of its estimated useful economic life as follows:
Freehold buildings
Short leasehold
Plant and machinery
Special purpose industrial motor vehicles
Other motor vehicles
Information technology
10 to 50 years
over the life of the lease
3 to 10 years
3 to 12 years
3 to 4 years
2 1 ⁄2 to 5 years
No depreciation is provided in respect of freehold land.
The directors annually review the estimated useful economic lives and residual values of property, plant and equipment.
Impairment
Assets that have an indefinite useful life are not subject to amortisation and are reviewed for impairment annually and when there are
indications that the carrying value may not be recoverable. Assets that are subject to amortisation are reviewed for impairment wherever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of the fair
value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
Investments in subsidiaries
Investments in subsidiaries are stated at cost less impairments.
Financial assets
The Group classifies its financial assets into the following two categories: at fair value through profit or loss and loans and receivables.
Financial assets at fair value through profit or loss
These include fixed interest securities, floating rate notes and certificates of deposit which are valued at bid price quoted on a recognised
stock exchange. Debt securities issued at a significant discount to the maturity value are valued at cost plus amortised discount over the
life of the security. Also included are restricted cash deposits where withdrawals are restricted under contractual arrangements. Changes
in fair value are recognised in the income statement.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included within current assets except where the maturity is greater than 12 months after the balance sheet date in which case
they are included as non-current assets. The Group’s loans and receivables consist of trade and other receivables and cash and cash
equivalents, which are shown separately within the balance sheet. Trade receivables are recognised at original invoice amount less
provision for impairment, which, due to their short-term nature, approximates to their fair value.
WS Atkins plc Annual Report 2008