ANNUAL FINANCIAL REPORT 2010 2010 - TiGenix

The clinical development of new drugs is subject to a long,protracted maturity period (normally several years). In each ofthe different phases of the development process, the projectmay need to be abandoned, either because it does not meetmedical and regulatory standards, or because it fails to meetprofitability thresholds. For these reasons, the directors ofCellerix have decided to record development expenses asexpense for the year they are incurred, until the time the drughas been approved by the competent authorities in a referencemarket.Thus, at December 31, 2010, 2009 and 2008 no developmentexpenses were capitalised as the above condition had not beenfulfilled in any of the development projects under way.Property, plant and equipmentProperty, plant and equipment is initially carried at historicalcost of acquisition, and then, reduced by the accumulateddepreciation and such impairment losses as may have beenrecognised.The costs of repair and maintenance of property, plantand equipment are taken to the comprehensive incomestatement for the year incurred. Conversely, sums investedin improvements that contribute to increasing productivity,capacity or efficiency, or to lengthening the useful life of thoseassets are recorded as an increase in their cost.Cellerix depreciates its property, plant and equipment using thestraight-line method, distributing the cost of the assets over theyears of their estimated useful life, as specified below:Years of estimateduseful lifeLaboratory equipment 8.33Technical facilities 8.33Furniture 10IT equipment 4Other property, plant and equipment 2 – 8Cellerix has not capitalised any financial costs associated withproperty, plant and equipment.Intangible assetsIntangible assets are initially recorded at acquisition cost andlater are carried at cost, less any cumulative amortisation orimpairment losses that may apply.Any patent acquired from third parties and the costs arisingfrom registration of patents and trademarks are initiallyrecorded at their price of acquisition and are amortised ona straight-line basis over the estimated period of use of therelated products. These periods normally do not exceed10 years.Expenditure derived from patents and trademarks that are noteconomically viable is fully expensed in the year in which suchcircumstance becomes known.Impairment of tangible and intangible assetsEach year, Cellerix assesses the possible existence of indicationsof impairment losses that would require it to reduce the bookvalue of its tangible and intangible fixed assets. An impairmentloss is considered to exist when the recoverable value is lessthan the book value.The recoverable value is determined as the higher amountbetween the net sale value and the value in use. Value inuse is calculated on the basis of estimated future cash flowsdiscounted to present value using a pre-tax discount rate thatreflects the current market valuations with respect to the timevalue of money and the specific risks associated with the asset.If it is estimated that the recoverable amount of an asset isless than its book value, the latter is reduced to its recoverableamount and the related write-down is recognised in thestatement of comprehensive income.When an impairment loss is later reversed, the book value ofthe asset is increased to the limit of the asset’s book value thatwould be recognised at the reversal date if the impairment hadnot been recorded.LeasesCellerix has no finance leases. Regarding operating leases,rentals payable arising from these agreements, in whichCellerix acts as lessee are expensed on a straight-line basis overthe term of the lease. Benefits received and receivable as anincentive to enter into an operating lease are also spread on astraight-line basis over the term of the lease.Financial assetsCellerix presents deposits and guarantees at cost of acquisitionand/or the amounts delivered, which does not differsignificantly from the amortised cost. Shares in investmentfunds in money market assets are carried, in accordance withIAS 39, at fair value (their year-end net asset value).205 •