Annual report 2005 - Xeikon

The estimated useful lives of the various identified asset
categories are as follows:
Buildings
Machinery and equipment
Furniture and fixtures
Other fixed assets
25 to 40 years
3 to 8 years
5 to10 years
3 to 5 years
The depreciation is calculated to write off the carrying
value of items on a straight-line basis starting from the
month of purchase. Where the carrying amount of an
asset is greater than its estimated recoverable amount,
it is written down immediately to its recoverable value.
Government grants
Government grants relating to the purchase of property,
plant and equipment are included in non-current
liabilities as deferred income and are credited to the
income statement on a straight-line basis over the
expected lives of the related assets.
Leases
As lessee
Finance leases
Leases of property, plant and equipment, where the
group substantially has all the risks and rewards of
ownership, are classified as finance leases. Finance leases
are capitalised at the inception of the lease at the lower
of the fair value of the leased property or the present
value of the minimum lease payments. Each lease
payment is allocated between the liability and the
finance charges so as to achieve a constant rate on the
finance balance outstanding. The corresponding rental
obligations, net of finance charges, are included as
borrowing. The interest element of the finance cost is
charged to the income statement over the lease term.
The leased assets are depreciated over their expected
useful lives on a basis consistent with similar owned
property, plant and equipment. If there is no reasonable
certainty that ownership will be acquired by the end of
the lease term, the asset is depreciated over the shorter
of the lease term and its useful life.
the sale occurs.
Operating leases
Assets leased out under operating leases are included
in property, plant and equipment in the balance sheet.
They are depreciated over their expected useful lives
on a basis consistent with similar owned property,
plant and equipment. Rental income (net of any
incentives given to the lessee) is recognised on a
straight-line basis over the lease term or in accordance
with usage as appropriate.
Inventories
Inventories are initially valued at cost, and subsequently
at the lower of cost or net realisable value, fixed according
to the weighted average cost method. Work in progress
and finished goods are valued at direct production cost.
The cost of production comprises the direct cost of
materials, direct manufacturing expenses, appropriate
allocation of material and manufacturing overhead,
and an appropriate share of the depreciation and
write-downs of assets used for production. If the
purchase or production cost is higher than the net
realisable value, inventories are written down to net
realisable value. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
Trade receivables
Trade receivables are carried at original invoice amount
less impairment losses as a result of a past event that occurred
subsequent to the assets’ recognition.
Operating leases
Lease payments under operating leases are recognised
as an expense on a straight-line basis over the lease
term.
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As lessor
Finance leases
When assets are leased under a finance lease, the present
value of the lease payment is recognised as a receivable.
Financial income is recognised over the term of the
lease using the net investment method, which reflects a
constant periodic rate of return. Profits arising on sales
under finance leases are recognised in the period that