Annual Report 2011 - T-Hrvatski Telekom

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Impairment losses relating to goodwill cannot be
reversed in future periods. The Group performs
its annual impairment test of goodwill as at 31
December. Please see Note 10 for more details.
f) Property, plant and equipment
An item of property, plant and equipment that
qualifies for recognition as an asset is measured at
its cost. The cost of an item of property, plant and
equipment comprises its purchase price, including
import duties and non-refundable purchase taxes,
after deducting trade discounts and rebates, and any
directly attributable costs of bringing the asset to its
working condition and location for its intended use.
In addition to directly attributable costs, the costs of
internally constructed assets include proportionate
indirect material and labour costs, as well as
administrative expenses relating to production or the
provision of services.
After recognition as an asset, an item of property,
plant and equipment is measured at cost less
accumulated depreciation and any accumulated
impairment losses.
Each part of an item of property, plant and equipment
with a cost that is significant in relation to the total
cost of the item is depreciated separately.
Depreciation is computed on a straight-line basis.
Useful lives of newly acquired assets are as follows:
Buildings
Telecom plant and machinery
Cables
Cable ducts and tubes
Other
Tools, vehicles, IT, office and other
equipment
Land and assets under construction are not
depreciated.
10 — 50 years
8 — 18 years
30 years
2 — 15 years
4 — 15 years
The useful life, depreciation method and residual
values are reviewed at each financial year-end,
and if expectations differ from previous estimates,
the change(s) are accounted for as a change in an
accounting estimate.
Construction-in-progress represents plant and
properties under construction and is stated at cost.
Depreciation of an asset begins when it is available
for use.
g) Impairment of assets
Impairment of non-financial assets
The determination of impairment of assets involves
the use of estimates that include, but are not limited
to, the cause, timing and amount of the impairment.
Impairment is based on the large number of
factors, such as changes in current competitive
conditions, expectations of growth in the industry,
increased cost of capital, changes in the future
availability of financing, technological obsolescence,
discontinuance of services, current replacement
costs, prices paid in comparable transactions and
other changes in circumstances that indicate an
impairment exists. The recoverable amount and
the fair values are typically determined using the
discounted cash flow method which incorporates
reasonable market participant assumptions. The
identification of impairment indicators, as well as the
estimation of future cash flows and the determination
of fair values for assets (or groups of assets) require
management to make significant judgments
concerning the identification and validation of
impairment indicators, expected cash flows,
applicable discount rates, useful lives and residual
values. Specifically, the estimation of cash flows
underlying the fair values of the business considers
the continued investment in network infrastructure
required to generate future revenue growth through
the offering of new data products and services, for
which only limited historical information on customer
demand is available. If the demand for those products
and services does not materialize as expected, this
would result in less revenue, less cash flow and
potential impairment to write down these investments
to their fair values, which could adversely affect future
operating results.
Consolidated financial statements