2005 Annual report - Virbac

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using estimated cash flows is undertaken. This approach
involves calculating the value in use of the CGU by
discounting estimated future cash flows. When the value in
use of the CGU calculated in this way is lower than its
carrying amount, an impairment loss in respect of goodwill is
recognised to reduce the carrying amount of the assets in the
CGU to their recoverable amount, defined as the higher of net
fair value and value in use.
The valuations made for the purposes of the goodwill
impairment tests are sensitive to the assumptions used as
regards not only the selling price and future costs, but also the
discount rate and growth rate. The future cash flows used for
the impairment tests are calculated on the basis of estimates
made over a period that may vary between a minimum of five
years and a maximum of twenty years. For the purposes of
these calculations the Group uses a discount rate of 10%.
Specific rule regarding the first-time adoption of IFRS: in accordance
with the option offered by IFRS 1, the Group has not revised the
calculations of goodwill made in respect of acquisitions carried out
prior to 1 January 2004.
Property, plant and equipment
As required by IAS 16, property, plant and equipment are
measured in accordance with the historical cost method. If
the acquisition of an item of property, plant and equipment
is financed by means of a loan, the costs associated with the
loan are not included in the gross value of the item
concerned.
As required by IAS 17, assets acquired under a finance lease
are recognised as assets in the balance sheet when the lease
transfers to the Group substantially all the risks and rewards
of ownership incidental to ownership of the assets
concerned. The component approach is adopted, each
component of an asset having its own specific depreciation
period, in line with the depreciation period of assets of the
same type.
Property, plant and equipment are depreciated over their
estimated useful lives, which are:
❖ Buildings
- structure: 40 years
- components: 10 to 20 year
❖ Machinery and industrial equipment:
- structure: 20 years
- components: 5 to 10 years
❖ Computer hardware: 3 or 4 years
❖ Other property, plant and equipment: 5 to 10 years
Specific rule regarding the first-time adoption of IFRS: the Group has
reviewed the depreciation periods in respect of its property, plant and
equipment and revised the depreciation rates applied to certain classes
of property, plant and equipment, to bring the depreciation periods
closer to the actual useful lives of the assets concerned. As a result,
there was a reduction in the total depreciation charge for the year and
a significant revaluation of the carrying amount of property, plant and
equipment in the opening balance sheet at 1 January 2004.
Financial assets
Financial assets comprise equity securities in companies that
are not consolidated since they are not considered material
in the context of the Group as a whole, loans, marketable
securities, other long-term receivables and financial
instruments. These instruments are presented as non-current
assets, except in the case of those with a maturity of less
than 12 months, which are classified as current assets or
cash equivalents, as appropriate.
❖ Available-for-sale financial assets
Virbac does not own any securities that were acquired with
the intention of realising a profit in the short term or that
comply with the definition of held-to-maturity securities (the
securities in the Group’s portfolio are equities).
Available-for-sale financial assets are initially recognised at fair
value. Acquisition cost is regarded as a reliable indication of
the fair value of securities. They are subsequently remeasured
at each balance sheet date and changes in values are
recognised in reversible equity impact.
The fair value of listed securities for which there is an active
market is determined at the balance sheet date.
Virbac uses the historical cost method to measure securities
that are not listed or listed on an illiquid market and whose
fair value cannot be estimated reliably.
❖ Financial assets at fair value through profit or loss
Virbac owns marketable securities that are classified as
“financial assets at fair value through profit or loss”. They
are measured at fair value at the balance sheet date, and
changes in fair value are recognised in profit or loss. The fair
values of marketable securities are determined mainly by
reference to the market price (bid or offer price, as
appropriate).
❖ Loans
This category consists mainly of loans granted by Virbac SA
to its employees. On initial recognition, loans are measured
at fair value, plus directly attributable transaction costs.
At each subsequent balance sheet date, loans are measured
at amortised cost. A provision is recognised in the income
statement where there is an objective indication of
impairment resulting from an event that has occurred since
the initial recognition of the asset.
Specific rule regarding the first-time adoption of IFRS: the Group has
chosen to apply IAS 32 and IAS 39 on financial instruments as from
1 January 2004.