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B Consolidated Annual Financial Statements/Notes V. Notes to the Consolidated Financial Statements of Salzgitter AG 224 225
Development costs are capitalized if a newly-developed product or procedure can be clearly defined,
is technically feasible and is intended for either the company’s own use or sale. Moreover, capitalization
presupposes that development costs will, with sufficient probability, be covered by future inflows
of cash and cash equivalents. The development process must be distinguished from a research phase.
Development is the application of the research result and takes place before the start of commercial
production or use. If the prerequisites for capitalization are not satisfied, the expenses are set off
through profit and loss in their year of origin.
The acquisition or production costs in question encompass all costs which are directly attributable
to the development process, as well as the parts of the development-related overhead costs which are
also directly attributable. They are amortized from the start of production onwards on a straight-line
basis over the likely economic useful life of the developed asset models, which is generally five years.
Property, Plant and Equipment
Property, plant and equipment are valued at acquisition or production cost less accumulated depreciation
and impairment costs. Any investment grants received are shown as a reduction in the acquisition
and production costs. The residual book values and the economic useful lives are examined on every
reporting date and adjusted if necessary. If the book value of an asset exceeds its estimated recoverable
amount, this amount is written down. If the reasons for a write-down in previous years no longer
apply, appropriate reversals of write-downs are carried out.
The production costs of internally generated property, plant and equipment are determined on the
basis of directly attributable costs and estimated demolition and restoration costs.
The costs incurred in the regular maintenance and repair of property, plant and equipment are recognized
as expenses. Renewal and maintenance expenses are capitalized as subsequent production costs
only if they result in a material extension of the useful life or a substantial improvement or an important
change in the use of the said property, plant and equipment.
Material components of property, plant and equipment that require replacement at regular intervals
are capitalized as autonomous assets and depreciated over the course of their economic useful lives.
Consolidated Annual
Financial Statements