0175 Geely Automobile Holdings Limited Annual Report 2011

Annual Report 2011Geely Automobile Holdings LimitedNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFor the year ended 31 December 20115. Significant Accounting Policies (Continued)(d)Intangible assets (other than goodwill)Intangible assets acquired separately are recognised initially at cost. After initial recognition, intangible assetswith finite useful lives are carried at cost less accumulated amortisation and any accumulated impairmentlosses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis overtheir estimated useful lives. Amortisation begins when the asset is available for use (i.e. when it is in thelocation and condition necessary for it to be capable of operating in the manner intended by management).The following useful lives are applied:Capitalised development costs5 to 10 yearsResearch and development costsCosts associated with research activities are expensed in the consolidated income statement as they occur.Costs that are directly attributable to the development phase are recognised as intangible assets providedthey meet the following recognition requirements:(i)(ii)(iii)(iv)(v)(vi)demonstration of technical feasibility of the prospective product for internal use or sale;there is an intention to complete the intangible asset and use or sell it;the Group’s ability to use or sell the intangible asset is demonstrated;the intangible asset will generate probable economic benefits through internal use or sale;sufficient technical, financial and other resources are available for completion; andthe expenditure attributable to the intangible asset can be reliably measured.Direct costs include employee costs incurred on development along with an appropriate portion of relevantoverheads. The costs of internally generated product developments are recognised as intangible assets.They are subject to the same subsequent measurement method as externally acquired intangible assets.All other development costs are expensed as incurred.(e)(f)InventoriesInventories are stated at the lower of cost and net realisable value. Cost, which comprises all costs ofpurchase and, where applicable, cost of conversion and other costs that have been incurred in bringing theinventories to their present location and condition, is calculated using the weighted average method. Netrealisable value represents the estimated selling price in the ordinary course of business less the estimatedcosts of completion and the estimated costs necessary to make the sale.Foreign currenciesIn preparing the financial statements of each individual group entity, transactions in currencies other thanthe functional currency of that entity (foreign currencies) are recorded in its functional currency (i.e. thecurrency of the primary economic environment in which the entity operates) at the rates of exchangeprevailing on the dates of the transactions. At each balance sheet date, monetary items denominated inforeign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary itemscarried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing onthe date when the fair value was determined. Non-monetary items that are measured in terms of historicalcost in a foreign currency are not retranslated.69