Annual Report 2010 (PDF, 5.2MB) - Panalpina Annual Report 2012

Consolidated and Annual Financial Statements 2010
Computer software
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the
Group are recognized as intangible assets when the following criteria are met:
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• it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use or sell it;
• there is an ability to use or sell the software product;
• it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software product are available;
and
• the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalized as part of the software product include software development costs, employee costs and an
appropriate portion of relevant overhead costs. Other development expenditures that do not meet these criteria are recognized as an
expense as incurred. Development costs previously recognized as expenses are not recognized as an asset in a subsequent period. Costs
associated with maintaining computer software programs are recognized as an expense as incurred. Computer software development
costs recognized as assets are amortized over their estimated useful life, which does not exceed three to five years.
Other intangible assets
Other intangible assets that are acquired by the Group that have finite useful lives are measured at cost less accumulated amortization and
accumulated impairment losses.
Impairment of property, plant and equipment and intangible assets
An impairment assessment is carried out when there is evidence that an asset may be impaired. In addition, intangible assets that are not
yet available for use are tested for impairment annually. If any such indication exists, or when annual impairment testing for an asset is
required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or
cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of those from other assets or asset groups. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. An appropriate valuation model is used to determine fair value less
costs to sell. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available
fair value indicators. Impairment losses are recognized in the income statement. When an impairment loss arises, the useful life of the
asset in question is reviewed and, if necessary, the future depreciation / amortization charge is accelerated.
Impairment of goodwill
Goodwill is assessed for possible impairment at each reporting date and is additionally tested annually for impairment. When the recoverable
amount of the cash-generating units, being the higher of its fair value less costs to sell or its value in use, is less, then the carrying
value the goodwill is reduced to its recoverable amount. The reduction is reported in the income statement as an impairment loss. The
methodology used in the impairment testing is further described in note 15.
Financial assets
Financial assets, including cash and marketable securities, short- and long-term deposits, trade and other receivables, loans and other
receivables, quoted and unquoted financial instruments and derivative financial instruments, are classified either as fair value through profit
or loss, loans and receivables, available-for-sale or in exceptional cases as held to maturity. The classification depends on the purpose
for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. All financial
assets are initially recognized at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable
transaction costs. All purchases and sales are recognized on the settlement date.
Subsequent measurement
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial
recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling
in the near term. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting
criteria. Derivatives, including separately embedded derivatives, are also classified as held for trading unless they are designated as effective
hedging instruments. Financial assets at fair value through profit or loss are carried on the statement of financial position at fair value with
gains or losses recognized in the income statement.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Such financial assets are normally carried at amortized cost using the effective interest rate method. Gains and losses are recognized in
the income statement when the loans and receivables are derecognized or impaired, as well as through the amortization process.
Panalpina Annual Report 2010