Annual Report 2009 - Isagen

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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
ANNUAL REPORT 2009 / ISAGEN S.A. E.S.P.99Intangibles such as licenses and software that are amortized on astraight-line basis along a useful life ranging between 3 and 6 years.Easements acquired to carry out productive projects. Suchassets are considered of finite useful life and are amortized overa 50-year period.I) ReappraisalsRe-appraisals that are part of assets and equity include:Any excess of the economic valuation, technically determined, ofassets over their per-books net cost, as of the date of valuation.The economic valuation of main components of property, plantand equipment took place in 2007. Update of property, plant andequipment shall be conducted every three years and recorded inthe respective accounting period, except when market conditionsindicate that recognized values may vary significantly.The excess of intrinsic value of equity investments over their netper-books cost.j) Financial liabilitiesThese include liabilities incurred by the Company with credit andfinancial institutions, or from underwriting of outstanding bonds.The amount recorded corresponds to that of the liability’s principalor to the bonds’ par value; financial expenses, which do not add tothe capital, are recorded separately.Interest on financial liabilities incurred to finance projects underconstruction is capitalized as increased value thereof, until theyare in conditions to be used or sold.k) Accounts and other documents payableThese represent liabilities incurred by the Company originated ingoods and services obtained.l) Deposits received under administrationThese are specific-purpose funds received from third parties. Theyare controlled separately and their returns recorded as increasedvalue of the liability.m) Income tax provisionPayable income tax is determined based on estimations.The effect of temporary differences between accounting and fiscalrecords resulting from recognition of revenues, costs and expensesin different periods is accounted as deferred tax.The Company records as credit deferred tax the value of temporarydifferences between per-books and fiscal depreciation ofbuildings, plants, ducts, machinery and equipment, that result inlower tax paid during the reporting period, calculated at currentrates, provided there is reasonable expectation such differenceswill subsequently revert.n) Labor liabilitiesLabor liabilities are adjusted at the end of each period on thebasis of legal provisions and labor agreements in force.Retirement pension liabilities payable by the Company are determinedbased on actuarial studies as provided by legal regulations.Retirement pension provision is adjusted systematically. TheCompany decided to fully amortize the retirement pension liabilityat December 31, 2005; accordingly, as of such date, any variationin pension liabilities is recognized directly in the period’s results.o) Net income per shareNet income per share is calculated on the number of outstandingshares – 2,726,072,000 as of December 31, 2009 and 2008.Contents Letter from the CEO Achievements2009Good GovernancePractices EvaluationCorporateManagementFinancial Management
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Annual Report 2009 - Isagen

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