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64
Hamon Annual Report 2010
Tangible Assets
An item of property, plant and equipment is recognized
as a tangible asset if it is probable that the future
economic benefits attributable to the asset will flow to
the Group and if their costs can be measured reliably.
After the initial accounting, all tangible assets are
stated at cost less the accumulated depreciation and
impairment losses. The cost includes all the costs
directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating
in the intended manner.
Repair and maintenance costs and other subsequent
expenditures linked to an asset are charged as
expenses in the income statement of the financial year
during which they are incurred.
The depreciable amount of an asset is allocated
systematically over its useful life using the straight-line
method.
The depreciation of an asset begins when it is available
for use. The estimated useful lives of the most significant
elements of tangible assets are as follows:
Description
Land
Administrative buildings
Industrial buildings
Machines
EDP equipment
Other equipment
Leasehold Improvements
Tools
Furniture
Vehicles
Useful life
No depreciation
33 years
33 years
10 years
4 years
10 years
10 years
4 years
10 years
4 years
Depreciation charges are posted to operating expenses
by reference to the function of the underlying assets
(cost of sales, selling & marketing expenses, general and
administration costs, research and development costs).
Gains or losses arising from the sale or disposal of
tangible assets are determined as the difference
between the sale proceeds and the carrying amount of
the asset and are charged to the income statement
under ‘Other Operating Income / (Expenses)’.
The Group has elected to use the cost model for the
measurement of property, plant and equipment. Therefore
items of property plant and equipment may not be
carried at a re-valued amount after their initial recognition.
Impairment of Tangible and Intangible Assets
Except for intangible assets in progress that are tested
for impairment annually, tangible and intangible assets
are subject to an impairment test only when there is an
indication that their carrying amount exceeds their
recoverable amount.
If an asset does not generate cash flows independently
of those of other assets, the Group makes an estimate
of the recoverable value of the cash-generating unit to
which the asset belongs. The recoverable value is the
highest value between the fair value less costs to sell
and the value in use. If the recoverable value of an asset
(cash flow generating unit) is lower than its carrying
amount, an impairment loss is immediately recognized
as an expense in the income statement.
When an impairment is reversed at a later date, the
carrying amount of the asset (cash flow generating unit)
is increased to the revised estimate of its recoverable
value, without however being higher than the carrying
amount which would have been determined if no
impairment had been recognized for this asset (cash
flow generating unit) during previous periods.
Lease Agreements
Capital Leases
A lease is classified as a finance lease if it substantially
transfers the entire risks and rewards incidental to
ownership to the lessee. The other lease agreements
are classified as operating leases.
At the commencement of the lease term, the Group
recognizes finance leases as assets and liabilities in its
balance sheet at amounts equal to the lower of fair
value of the leased property or the present value of
the minimum lease payments, each determined at the
inception of the lease. The corresponding liability is
posted in the obligations under finance leases.
The minimum lease payments are apportioned between
the finance charge and the reduction of the outstanding
liability. The finance charge is allocated to each period
during the lease term so as to obtain a constant
periodic interest rate on the remaining balance of
the liability. Leased assets are depreciated over their
estimated useful live consistently with the method
applicable to similar depreciable assets owned by
the Group.
Operating Leases
Lease agreements that do not substantially transfer the
entire risks and rewards incidental to ownership to the
lessee are classified as operating leases. The lease
payments are recognized as an expense on a straight-line
basis over the period of the rental agreement.