ANNUAL REPORT 06 - Bosnalijek dd

Bosnalijek d.d.Notes to financial statements for the year ended 31 December 2006(All amounts are expressed in thousands of KM)Intangible assetsIntangible assets are measured initially at purchase cost and areamortised on a straight-line basis over their estimated useful lives.Cash and cash equivalentsCash and cash equivalents include demand accounts and fixed depositswith an original maturity of three months or less.Cash and cash equivalentsCash and cash equivalents include demand accounts and fixed depositswith an original maturity of three months or less.ImpairmentAt each balance sheet date, the Company reviews the carrying amounts ofits tangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indicationexists, the recoverable amount of the asset is estimated in order todetermine the extent of the impairment loss (if any). Where it is notpossible to estimate the recoverable amount of an individual asset, theCompany estimates the recoverable amount of the cash-generating unitto which the asset belongs.Recoverable amount is the greater of net selling price and value in use. Inassessing value in use, the estimated future cash flows are discounted totheir present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific tothe asset.If the recoverable amount of an asset (or cash-generating unit) isestimated to be less than its carrying amount, the carrying amount of theasset (cash-generating unit) is reduced to its recoverable amount.Impairment losses are recognized as an expense immediately, unless therelevant asset is land or buildings other than investment property carriedat a revalued amount, in which case the impairment loss is treated as arevaluation decrease.Where an impairment loss subsequently reverses, the carrying amount ofthe asset (cash-generating unit) is increased to the revised estimate of itsrecoverable amount, but so that the increased carrying amount does notexceed the carrying amount that would have been determined had noimpairment loss been recognized for the asset (cash-generating unit) inprior years. A reversal of an impairment loss is recognized as incomeimmediately, unless the relevant asset is carried at a revalued amount, inwhich case the reversal of the impairment loss is treated as a revaluationincrease.InventoriesInventories are stated at the lower of cost and net realisable value. Cost iscomprised of direct materials and, where applicable, direct labour costsand those overheads that have been incurred in bringing the inventoriesto their present location and condition. Cost is calculated using theweighted average method. Net realizable value represents the estimatedselling price less all estimated costs to completion and costs to beincurred in marketing, selling and distribution.serving Your health INDEPENDENT AUDITOR’S REPORT ANNUAL REPORT 06 61