Today, Wavin - Jaarverslag.com

Wavin Annual Report 2010 | page 85(ii) Brand namesThe Group carries assets in the balance sheet for the major brands such as ‘Wavin’, ’Hep 2O’, ’Chemidro’ and ‘Pilsa’.Internally generated brands are not capitalised. The fair value of an acquired brand name is estimated using generallyaccepted valuation methods such as the relief from royalty method. Brand names have an indefi nite live as there are nomaterial legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of these intangibles.Furthermore:• the Group has the ability to transfer the brand name to new product groups;• the Group supports the main brands through spending on marketing across the business and through investments inpromotional support. The brands are expected to be in longstanding and profi table market sectors;• the likelihood that market-based factors could reduce a brand’s life is relatively remote because of the size, diversifi cationand market share of the brands in question;• the Group owns the trademark for all brands valued on the balance sheet and renews these for nominal cost at regularintervals. The Group has never experienced problems with such renewals.(iii) Customer relationsAcquired customer relations and distribution networks are calculated based on the Group’s valuation methodology, which isbased on cash fl ow projections of value-added products taking into account an attrition rate for the acquired customers. Wehave excluded the revenue generated by the sale of commoditised products, since for these products the competition isbased on price and having excellent customer relationships hardly has any impact. Acquired customer relations anddistribution networks are stated at fair value at acquisition date less accumulated amortisation (see below) and impairmentlosses (see note 3 (I)).(iv) Other assets from business combinationsThe previously unrecognised assets in an acquired company such as order portfolios are recognised at the fair value onacquisition date. These other intangible assets acquired through business combinations are amortised over their individualuseful life of which the range is one to fi ve years.(v) Research and developmentExpenditure on research activities, undertaken with the prospect of gaining new scientifi c or technical knowledge andunderstanding, is recognised in the income statement as an expense when incurred. Development activities involve a plan ordesign for the production of new or substantially improved products and processes. These are capitalised only if developmentcosts can be measured reliably and the product or process is technically and commercially feasible and the Group hassuffi cient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour,an appropriate part of overhead costs and capitalised borrowing costs for qualifying projects. Other development expenditureis recognised in the income statement when incurred. Capitalised development expenditure is stated at cost lessaccumulated amortisation (see below) and impairment losses (see note 3 (l)).(vi) Other intangible assetsOther intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see below) andimpairment losses (see note 3 (l)). Expenditure on internally generated goodwill, patents, brands, etc. is recognised in theincome statement as an expense when incurred.(vii) Subsequent expenditureSubsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefi tsembodied in the specifi c asset to which it relates. All other expenditure is expensed when incurred.(vii) AmortisationAmortisation is charged to the income statement on a straight-line basis over the estimated useful life of intangible assets.Intangible assets other than goodwill and brand names are amortised from the date they are available for use. The annualamortisation rates are:Customer relations and distribution networks 4 to 10%Other assets from business combinations 20 to 50%Licenses 20%Capitalised development costs 20%Software 20 to 33.33%Brand names are an indissoluble part of the Company on a going concern principle. The Company is continuously investingin its brand names to maintain its competitive position and therefore the value of the brand names. Due to this infi nitecharacter the brand names are not amortised but tested for impairment annually.