Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

and its related value of use, and adjustments, if any, are recognized through theprofit and loss account. If the reasons which gave rise to the loss in value cease toapply, the adjustment is written back to earnings with the proviso that the amountcredited may not exceed the value which the asset would have had net ofdepreciation, which is calculated assuming no impairment took place.Intangible assetsThese chiefly comprise goodwill and long-term computer softwareapplications.Goodwill may be recognized where this is representative of the investeecompany’s ability to generate future income. At annual and interim reportingdates assets are tested for impairment, which is calculated as the differencebetween the initial recognition value of the goodwill and its realizable value, thelatter being equal to the higher of the fair value of the cash-generating unitconcerned net of any sales costs and its assumed value of use. Any adjustmentsare taken through the profit and loss account.Other intangible assets are recognized at cost, adjusted to reflect ancillarycharges only where it is likely that future earnings will derive from the asset andthe cost of the asset itself may be reliably determined. Otherwise the cost of theasset is booked to the profit and loss account in the year in which the expensewas incurred.The cost of intangible assets is amortized on the straight-line basis over theuseful life of the asset concerned. If useful life is not determinable the cost of theasset is not amortized, but the value at which it is initially recognized is tested forimpairment on a regular basis.At annual and interim reporting dates, where there is evidence ofimpairment the realizable value of the asset is estimated, and the impairment isrecognized in the profit and loss account as the difference between the carryingamount and the recoverable value of the asset concerned.Derecognition of assetsFinancial assets are derecognized as and when the Group is no longerentitled to receive cash flows deriving from them, or when they are sold and therelated risks and benefits are transferred accordingly. Tangible and intangibleassets are derecognized upon disposal, or when an asset is permanently retiredfrom use and no further earnings are expected to derive from it.82 –