Annual Report 2012 - Inwido

FINANCIAL STATEMENTS
Subsequent expenses
Subsequent expenses are only added to the cost if it is
probable that the future economic benefits associated with
the asset will flow to the company and the cost can be measured
reliably. All other subsequent expenses are expensed in
the period they arise. The question of whether a subsequent
expense is attributable to the replacement of identified
components, or parts thereof (whereby such expenses are
capitalized) plays a decisive role in determining if that
expense should be added to cost. Even in cases where new
components are constructed, the expense is added to the
cost. Any non-depreciated carrying amounts for replaced
components, or parts of components, are scrapped and
derecognized in connection with replacement. Repairs are
expensed as they are incurred.
Borrowing expenses
Borrowing expenses attributable to the construction of
qualifying assets are capitalized as part of the acquisition
cost of the qualifying asset. A qualifying asset is one that by
nature takes considerable time to complete. The borrowing
expenses primarily capitalized those incurred through
general loans not specific to any other qualifying asset.
For the Group, the capitalization of borrowing expenses
is mainly applicable in connection with the proprietary
construction of storage and production buildings.
Depreciation principles
Depreciation is carried out on a linear basis over the asset’s
estimated useful life. Leased assets are also depreciated
over their estimated useful life or over the agreed lease term,
which ever is shorter. The Group applies the component
approach, whereby the components assessed useful life
forms the basis for depreciation.
Estimated useful lives:
• Buildings
25–50 years
• Land improvements
20–27 years
• Machinery and technical plant 10 years
• Equipment, tools, fixtures and fittings 3–5 years
Land is not depreciated. Depreciation methods used
and the residual value and useful life of assets are reviewed
at each year-end.
Intangible assets
Goodwill
Goodwill represents the difference between the cost of
the business combination and the fair value of acquired
assets, assumed liabilities and contingent liabilities. Since
the Group’s inception on 28 December 2004, all acquisitions
have been reported in accordance with IFRS 3. Goodwill is
stated at cost less any accumulated impairment. Goodwill is
distributed to cash generating units and is tested annually
to determine possible impairment needs. Goodwill arising
from acquisitions of associated companies is included in the
carrying amount for participations in associated companies.
For business combinations where the cost is less than the
net value of the acquired assets and assumed liabilities and
contingent liabilities, the difference is recognized directly
in profit/loss for the year.
Product development expenses
Where research results or other knowledge are applied
to achieve new or improved processes, product development
expenses are reported as an asset in the statement of
financial position if the product or process is technically
and commercially viable and the company has sufficient
resources to complete development and subsequently use
or sell the intangible asset. Most of the Group’s product expenses
pertain to unique customer adaptations or updating
existing products in line with technical advances. For such
expenses, the criteria for capitalization stipulated by IAS 38
are not considered to have been met and the expenses are
recognized as expenses against profit/loss for the year in
which they are incurred.
Other intangible assets
Other intangible assets mainly include customer agreements
and software acquired by the Group. These assets
are recognized at cost less accumulated amortization and
impairment. Expenses for internally generated goodwill and
internally generated trademarks are recognized in profit/loss
as they are incurred.
Subsequent expenses
Subsequent expenses for capitalized intangible assets are
only recognized as assets in the statement of financial
position if they increase the future economic benefits for
the specific assets to which they refer. All other costs are
expensed as they are incurred.
Depreciation principles
Amortization is charged to statement of comprehensive
income on a linear basis over the intangible assets’ estimated
useful lives, provided the useful life is not indefinite. The
useful lives of assets are reassessed at least once per year.
Goodwill has an indefinite useful life and is therefore tested
for possible impairment annually, or as soon as indications
arise that the asset in question has decreased in value. Intangible
assets which are amortized are amortized from the date
they are available for use. The estimated useful lives are:
• Customer agreements 5 years
• Software
10–20 years
Inventories
Inventories are stated at the lower of cost and net realizable
value. The cost for inventories is based on the first-in
first-out principle (FIFO) and includes costs arising upon
acquisition of the inventories and their transport to their
current location and condition. For manufactured goods
and work in progress, the purchase value includes a reasonable
proportion of indirect costs based on normal capacity.
Net realizable value is the estimated sales price in the
ordinary course of business, less estimated expenses for
completion and bringing about a sale.
Annual Report 2012 | Inwido AB 59