Annual Report 2003 - Nobel Biocare Corporate

NOBEL BIOCARE ANNUAL REPORT 200341SIGNIFICANT ACCOUNTING POLICIESalso recognized directly in equity. On disposal of a foreign operation,exchange differences recognized in equity are recognized inthe income statement as part of the gain or loss on disposal.Foreign exchange differences arising on a foreign currencyliability accounted for as a hedge of a net investment in a foreignentity are recognized directly in equity. On disposal of a netinvestment in a foreign entity, exchange differences recognized inequity are recognized in the income statement as part of the gainor loss on disposal.RevenueRevenue from the sale of goods is recognized in the incomestatement when the significant risks and rewards of ownershiphave been transferred to the buyer, which is usually on deliveryto third parties. Revenue is reported net of sales taxes, discounts,rebates and return of goods.Financial income and expensesFinancial income comprises interest receivable on funds invested,net foreign exchange gains, dividends, gains on disposal offinancial investments and gains on derivative financial instruments.Interest income is recognized in the income statement as itaccrues, taking into account the effective yield on the asset.Dividend is recognized in the income statement on the date thatthe dividend is declared.Financial expenses comprise interest payable on loans, interestexpenses derived from net present value calculations of deferredpurchase price related to the acquisition of Nobel Biocare ProceraAB, net foreign exchange losses, losses on disposal of financialinvestments and losses on derivative financial instruments.Income taxIncome tax on the profit or loss for the year comprises current anddeferred tax. Income tax is recognized in the income statementexcept to the extent that it relates to items recognized directlyin equity, in which case it is recognized in equity.Current tax is the expected tax payable on the taxable incomefor the year, using tax rates enacted or substantially enacted atthe balance sheet date, and any adjustment to tax payable inrespect of previous years.Deferred tax is recognized, based on the balance sheet liabilitymethod, on temporary differences between the carrying amountsof assets and liabilities for financial reporting purposes and theamounts used for taxation purposes. The temporary differencesrelating to investments in subsidiaries are not accounted for.The amount of deferred tax recognized is based on the expectedmanner of realization or settlement of the carrying amount ofassets and liabilities, using tax rates enacted or substantiallyenacted at the balance sheet date.A deferred tax asset is recognized only to the extent that it isprobable that future taxable profits will be available againstwhich the asset can be utilized. Deferred tax assets are reducedto the extent that it is no longer probable that the related taxbenefit will be realized.Additional income taxes that arise from the distribution ofdividends are recognized when the liability to pay the relateddividend is incurred.Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulateddepreciation and impairment losses. Where an item of property,plant and equipment comprises major components havingdifferent useful lives, they are accounted for as separate items ofproperty, plant and equipment.Depreciation is charged to the income statement on a straightlinebasis over the estimated useful lives of property, plant andequipment. Land is not depreciated. The estimated useful livesare as follows:Land improvementsBuildingsMachineryEquipment25 years25 years5-8 years3-5 yearsIntangible assetsGoodwillGoodwill arising on an acquisition of a subsidiary or associaterepresents the excess of the cost of the acquisition over the fairvalue of the net identifiable assets acquired. In respect ofassociates, the carrying amount of goodwill is included in thecarrying amount of the investment in the associate.Amortization of goodwill is charged to the income statementon a straight-line basis over its estimated useful life not exceeding20 years.Research and developmentExpenditure on research and development activities includes thecost of materials, direct labor and an appropriate proportion ofoverheads relating to research and development.Expenditure on research activities is expensed as incurred.Expenditure on development activities is capitalized only if theproduct or process is technically and commercially feasible.Other development expenditure is expensed as incurred.Management does not believe that the development expenditureincurred fulfill the criteria for capitalization.Other intangible assetsOther intangible assets comprise patents and expenditures forcomputer programs acquired by the Group. Acquired intangibleassets are stated at cost less accumulated amortization andimpairment.Subsequent expenditure on capitalized intangible assets iscapitalized only when it increases the future economic benefitsembodied in the specific asset to which it relates. All otherexpenditure is expensed as incurred.Amortization of other intangible assets is charged to theincome statement on a straight-line basis over the estimateduseful lives not exceeding 5 years.LeasesLeases of property, plant and equipment and intangible assetswhere the Group has substantially all the risks and rewards ofownership of the leased asset are classified as finance leases.The Group has no material finance lease contracts.Leases where all the risks and rewards of ownership areeffectively retained by the lessor are classified as operating leases.Payments made under operating leases (net of any incentivesreceived from the lessor) are charged to the income statementon a straight-line basis over the period of the lease.