Engineering

3.6 Consolidated financial statements Notes to the consolidated financial statements
3.6 Consolidated financial statements Notes to the consolidated financial statements
Goodwill is stated at cost and tested for impairment annually or on
such other occasions that events or changes in circumstances indicate
that it might be impaired. Goodwill impairment losses are included in
other operating expenses.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation. Capitalized production costs for self constructed assets
include costs of material, direct labour, and allocable material and
manufacturing overhead. Borrowing costs directly attributable to the
production of assets that necessarily take a substantial period of time
to get ready for their intended use, are added to the cost of those
assets, until such time as the assets are substantially ready for their
intended use. Administrative costs are capitalized only if such costs are
directly related to production. Maintenance and repair costs (day-today
servicing) are expensed as incurred. The Group recognizes in the
carrying amount of an item of property, plant and equipment the cost
of replacing parts and major inspection of such an item if it is probable
that the future economic benefits embodied within the item will flow to
the Group and the cost of the item can be measured reliably. Where
fixtures and equipment comprise of significant parts having different
useful lives those parts are accounted for as separate units and
depreciated accordingly.
Fixtures and equipment are depreciated using the straight-line method.
Upon sale or retirement, the acquisition or production cost and related
accumulated depreciation are removed from the balance sheet and
any gain or loss is included in the consolidated statement of income.
The following useful lives are used as a basis for calculating
depreciation:
Useful lives of property, plant and equipment
Buildings (incl. investment property) 10 to 50 years
Building and land improvements 15 to 25 years
Technical machinery and equipment 8 to 25 years
Factory and office equipment 3 to 10 years
Investment property
Investment property consists of investments in land and buildings that
are held to earn rental income or for capital appreciation, rather than
for use in the production or supply of goods or services or for
administrative purposes or sale in the ordinary course of business.
Investment property is stated at cost less accumulated depreciation.
The fair value of the Group’s investment property is stated in Note 06.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of
its intangible assets, property, plant and equipment and investment
property to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). The recoverable amount is the
greater of the fair value less cost to sell and the value in use. In
assessing the value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market conditions. Where it is not possible to estimate
the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the Cash Generating Unit to which the asset
belongs.
Goodwill arising on acquisition is allocated to the Cash Generating
Units that are expected to benefit from the synergies of the acquisition.
Those groups of Cash Generating Units represent the lowest level
within the Group at which goodwill is monitored for internal
management purposes. The recoverable amount of the Cash
Generating Unit that carries a goodwill is tested for impairment
annually as of September 30, or on such other occasions that events
or changes in circumstances indicate that it might be impaired. For
more details refer to Note 04.
If the recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. Impairment losses are recognized as an expense
immediately.
In case of impairment losses related to Cash Generating Units that
carry a goodwill the carrying amount of any goodwill allocated to the
Cash Generating Unit is reduced first. If the amount of impairment
losses exceeds the carrying amount of goodwill, the difference is
generally allocated proportionally to the remaining non-current assets
of the Cash Generating Unit to reduce their carrying amounts
accordingly.
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