Annual Report 2009 - Isagen

ANNUAL REPORT 2009 / ISAGEN S.A. E.S.P.98Inventories considered obsolete by technical criteria are writtenoff with charge to the income statement.f) Property, plant, equipment and depreciationProperty, plant and equipment are recorded at cost, which, whererelevant, may include:Financing expenses and foreign exchange differences of foreigncurrencyliabilities incurred for their acquisition, until they becomeoperational.Until December 31, 2001, inflation adjustments.Sales and retirements are discharged at their respective net adjustedcost, and differences between sale price and net adjustedcost are recorded in the income statement.Depreciation is calculated over the asset’s adjusted cost by thestraight-line method, based on the estimated useful life of assets, asfollows:AssetUseful life - yearsConstructions and buildings 50Generation equipment 25Electronic equipment 25Furniture, office equipment, laboratory equipment,10tools, workshop equipment, construction andmaintenance machinery and storage equipmentComputer and communications equipment 5Transport equipment 5Any differences between per-books and fiscal depreciation are recordedas deferred depreciation.Expenditures that extend the asset’s useful life or use capacity justifiedby a technical opinion, as well as overhauls, are capitalized. Allother routine maintenance expenditures and repairs are charged tocosts and expenses as they are incurred.Generation equipment’s spare parts considered as dependent technology(single supplier) are considered property, plant and equipment,as warehouse assets, and are not subject to depreciation.Default differences between assets’ economic valuation, technicallydetermined, over their per-books net cost are recognized as a chargeto the income statement.G) Deferred chargesDeferred charges include:Indirect costs necessary for construction of projects, amortizedover a 5-year period from commissioning date. As described innote 13 to the financial statements, until December 31, 2008, suchitems were treated as expenses and therefore charged to the period’sresults. The above-mentioned accounting policy changegenerated lower amount of costs and expenses for $42,867.Costs of studies and research of projects in development stage. Ifthe project is subsequently cancelled or suspended, accumulatedbalance is written off against the period’s results.Deferred tax resulting from temporary differences betweenper-books and fiscal retirement pensions’ expense and provisions.H) Other assetsOther assets include, mainly:Actuarial financial reserve established to fund retirement pensionliabilities for which the Company is responsible. The Company’spolicy is to fund this reserve with approximately 50% of thepension liabilities established at the end of each year according toactuarial studies. Such funds are specific-purpose funds.Contents Letter from the CEO Achievements2009Good GovernancePractices EvaluationCorporateManagementFinancial Management