TŽ Annual Report 2008 in pdf, 7.5 MB - Třinecké železárny

3. Summary of Significant Accounting Policies3.1. Tangible and Intangible Fixed AssetsValuationTangible fixed assets include assets with a cost greater than CZK 40 thousand on an individual basis and an estimated useful life greater than one year.Intangible fixed assets include assets (such as software, valuable rights, and research and development) with a cost greater than CZK 60 thousand on anindividual basis and an estimated useful life greater than one year.Purchased tangible and intangible fixed assets are valued at cost. Tangible and intangible fixed assets developed internally are valued at direct costs, incidentalcosts directly attributable to the internal production of assets, or alternatively incidental costs of an administrative character if the productionperiod of the assets exceeds one year.The following tangible and intangible fixed assets are stated at replacement cost: tangible and intangible fixed assets acquired through donation, intangiblefixed assets internally generated if replacement cost is lower than internal costs, assets recently entered in the accounting records such as an inventorycount surplus (accounted for by a corresponding entry in the relevant accumulated depreciation account) and an investment of intangible and tangiblefixed assets, except for cases where the investment is valued differently pursuant to a Memorandum of Association or a Foundation Deed.The replacement cost is also applied to tangible fixed assets acquired under finance lease arrangements with an original cost exceeding CZK 1 million.These assets are carried at replacement cost and recorded in the statutory books as fully depreciated. Replacement cost is determined by an expert appraiseror through an estimate performed under the Companys internal regulations.Tangible and intangible assets with an estimated useful life greater than one year and a cost equal to or lower than CZK 40 thousand and CZK 60 thousand,respectively, are not treated as fixed assets. Such tangible assets are accounted for as inventory and when brought into use they are charged to Consumedmaterial and energy in the profit and loss account. Intangible assets costing CZK 60 thousand and less are expensed through the account Servicesin the year of acquisition.The cost of a fixed asset improvement exceeding CZK 40 thousand increases the acquisition cost of the related fixed asset.The results of the Companys research and development activities, if designed for trading or resale, are recognised through the balance sheet line Researchand development. Research and development results designed for internal purposes are not classified as intangible fixed assets for financial reportingpurposes and are held in off balance sheet records at internal costs of production.Greenhouse emission allowances are recognised as non-depreciable intangible fixed assets and are stated at cost, or replacement cost when acquiredfree of charge. The use of emission allowances is accounted for at the balance sheet date as a minimum, depending upon the level of emissions producedby the Company in the calendar year. An initial free-of-charge acquisition of the allowances is recognised as a subsidy not reducing the carrying amountof the intangible fixed assets. This subsidy is released into income on a systematic basis as the allowances are used and charged to expenses. The sale of allowancesis recorded as a component of Sales of fixed assets.As of the balance sheet date, emission allowances are valued according to the EUROPEAN ENERGY EXCHANGE rate. The change in the valuation ofemission allowances as of the balance sheet date is recognised between balance sheet accounts Other intangible fixed assets and State – tax payables andsubsidies. If there is a lack of allowances at the balance sheet date, the Company recognises a reserve as part of Other reserves and Change in reserves andprovisions relating to operating activities and complex deferred expenses. The reserve for the purchase of allowances is released in the following accountingperiod when the missing allowances are purchased.Depreciation for Accounting PurposesDepreciation of fixed assets, other than land and assets under construction, is recorded on a straight line basis over the depreciation period indicated below:Category of assetsDepreciation period in yearsStructures 2 – 77Machines and equipment 2 – 42Vehicles 3 – 40Furniture and fixtures 6 – 15Software 3 – 7The depreciation period in years is established in terms of the estimated useful life of the fixed assets taking into account the operational conditions.If the inventory count indicates that the estimated useful life of assets has changed, the Company appropriately adjusts the depreciation period of therelated asset.The bulk of buildings and structures are depreciated over 45 – 60 years. The shorter depreciation period is applied to temporary structures and shorttermstructures (lighting, fencing, energy grids, pipelines, etc.). A depreciation period over 60 years is applied to structures with a long useful life such asrailway and road bridges, conveying tunnels, and production and administrative buildings.The bulk of machines and equipment are depreciated over 15 – 25 years. The shorter depreciation period is primarily applied to IT systems, managementsystems, devices, etc.; the longer depreciation period is applied in exceptional cases to agglomeration equipment.Objects from precious metals acquired prior to 1 January 2002 are depreciated based on actual weight loss.The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the net book value ofthe asset at the sale date and is recognised through the profit and loss account.A N N U A L R E P O R T T Ř I N E C K É Ž E L E Z Á R N Y , a . s . 2 0 0 839