Annual Report 2012.pdf - Karo Bio

Accounting and valuation principles
Taxes
Income tax
Income tax comprises current and deferred taxes. Income tax is
recognized in the income statement in respect of items recognized
in the income statement, and recognized directly in equity
when the tax is related to items recognized directly in equity.
Deferred tax is calculated as the difference between, on the
one hand, the tax base of assets and liabilities and, on the other
hand, their carrying amounts in the financial statements (temporary
differences). Deferred tax is calculated based on the tax rates
estimated to apply to settlement of the tax. As required by IAS 12
Income Taxes, deferred tax liabilities are recognized for all taxable
temporary differences using the liability method. Deferred tax
assets are recognized only to the extent that it is probable that
future taxable profit will be available against which unused tax
losses and deductible temporary differences deferred tax assets are
recognized only when there is convincing evidence that sufficient
taxable profits will be available.
Value added tax (VAT)
Revenues, expenses and assets are recognized net of VAT. The
net amount of VAT recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the
balance sheet.
Intangible assets
Acquired intangible assets are recognized as assets in the balance
sheet. Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is the fair value as at the date of the acquisition.
Following initial recognition, intangible assets are carried
at cost less any accumulated amortization and any accumulated
impairment losses. Internally generated intangible assets are not
capitalized and expenditure for these is charged against profits in
the year in which the expenditure is incurred, with the exception
of capitalized development costs (see below).
The useful lives of all intangible assets of the Group have been
assessed to be finite. Intangible assets with finite lives are amortized
over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be
impaired. The amortization period and amortization method for
an intangible asset is reviewed at least at each financial year-end.
Changes in the expected useful lives or the expected pattern of
consumption of future economic benefits embodied in the asset is
accounted for by changing the amortization period or method, as
appropriate, and treated as changes in accounting estimates. The
amortization expense is recognized in the income statement in the
expense category consistent with the function of the intangible
asset.
Research and development costs
Costs regarding development activities shall, as stipulated by IAS
38 Intangible Assets, be capitalized and reported in the balance
sheet if certain criteria are met, while research costs are expensed
as incurred. An intangible asset arising from development
expenditure is recognized only when the Group can demonstrate
the technical feasibility of completing the intangible asset so that
it will be available for use or sale; its intention to complete and its
ability to use or sell the asset; how the asset will generate future
economic benefits; the availability of resources to complete; and
the ability to measure reliably the expenditure during the development.
To date the Group has expensed all development costs as
incurred since the recognition criteria for capitalization have not
been met.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and any accumulated impairment
losses. Historical cost includes, in addition to the purchase price,
expenses directly related to bringing the asset into use.
The difference between cost and estimated residual value is
depreciated on a straight-line basis over the useful life of the
assets.
The carrying values of property, plant and equipment are reviewed
for impairment when events or changes in circumstances
indicate that the carrying value may no longer be recoverable.
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each financial year-end.
Depreciation and amortization of non-current assets
Property, plant and equipment and intangible non-current assets
are depreciated and amortized, using a straight-line depreciation
and amortization method, over their estimated useful life based
on the asset’s cost as per the following schedule.
Year
Licenses 3–10
Laboratory equipment 4–7
Leasehold improvements, IT equipment and other equipment 4
Impairment of non-current assets
At each reporting date the Group assesses whether there is an
indication that an asset may be impaired. If any such indication
exists, the Karo Bio Group makes an estimate of the asset’s recoverable
amount. Where the carrying amount of an asset exceeds
its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
Impairment losses of continuing operations are recognized
in the income statement in the expense categories consistent
with the function of the impaired asset.
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