Å kodaAuto ANNUAL REPORT 2006 - Skoda Auto

1.6 Intangible assets
Purchased intangible assets are recorded at cost less amortisation and accumulated impairment losses. All research costs are recognised
as expenses when incurred. In accordance with IAS 38, all development costs of new Škoda models and other products are recognized as
intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and costs
can be measured reliably. These development costs are valued at cost of purchase or at own work cost. If the criteria for recognition as an
asset are not met, the expenses are recognised in the income statement in the year in which they are incurred. The right to use Volkswagen’s
tooling for new platforms is capitalised as an intangible asset. Own costs include all direct costs as well as an appropriate portion of
development-related overheads.
The costs are amortised using the straight-line method from the start of production over the expected life cycle of the models or
components, generally between 5–10 years. Amortisation recognised during the year is allocated to the relevant functions in the income
statement.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the
acquired subsidiary or associate on the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is not amortised, only tested annually for impairment and carried at cost less accumulated impairment losses.
Other intangible assets are amortised applying the straight-line method over their estimated useful lives as follows:
– Development costs 5–10 years according to the product life cycle
– Software 3 years
– Royalties 8 years
– Other intangible fixed assets 5 years
Intangible assets not yet available for use are tested annually for impairment and carried at cost less accumulated impairment losses.
Government grants related to the purchase of intangible assets are deducted in order to arrive at the carrying amount of the relevant
intangible asset.
1.7 Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation and – where necessary – write-downs for impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
All repairs and maintenance costs, as well as interest paid, are charged to the income statement during the financial period in which they
are incurred. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Land is not depreciated. Depreciation of other assets is calculated using the straight-line method over its estimated useful life, as follows:
– Buildings 10–50 years
– Technical equipment and machinery (incl. special tools) 2–18 years
– Other equipment, operating and office equipment 3–15 years
Government grants related to purchase of tangible assets are deducted in order to arrive at the carrying amount of the relevant tangible asset.
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