2008 Annual Report - SBM Offshore

SBM Offshore Annual Report 2008 / Financial Statements 2008 99Summary of significant accounting policiesProperty, plant and equipmentProperty, plant and equipment is stated at historical cost less accumulated depreciation and impairment, except for land, which isshown at cost less impairment. Historical cost includes expenditure that is directly attributable to the acquisition of such items. Thecapital value of a facility to be leased and operated for a client is the sum of external costs (such as shipyards, subcontractors,suppliers), internal costs (design, engineering, construction supervision, etc.), third party financial costs including interest paid duringconstruction and attributable overheads.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it isprobable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measuredreliably. The costs of assets include the initial estimate of costs of demobilisation of the asset. All other repairs and maintenance arecharged to the income statement during the financial period in which they are incurred.The assets are depreciated by using the straight-line method over their anticipated useful life, taking into account a residual value forthe vessels and floating equipment. Investment subsidies (with exception of investment premiums) are directly deducted from thehistorical costs of the assets.The anticipated useful lives of the categories of property, plant and equipment are as follows:Land and buildings (unless unlimited lives)Vessels and floating equipment• converted tankers, including refurbishment;• ‘non-recoverable’ investmentscosts which are incurred for a specific project e.g. installation costs, transport costs, cost of anchor lines,anchor points, risers etc. are depreciated over the period of the contract to which they relate;• investment in facilitiesthese include the mooring system, swivel stack, vessel conversion, process equipment if relevant etc.In case of long-term contracts these items are fully depreciated over the contract duration.For shorter-term contracts, a decision is taken as to which percentage of these costs should be depreciated.Machinery and equipmentOther fixed assets30-50 years10-15 years3-15 years3-15 years5-20 years2-20 yearsWhen significant parts of an item of property, plant and equipment have different useful lives, those components are accounted for asseparate items of property, plant and equipment. The average depreciation period for a converted F(P)SO amounts to 10 years.The assets’ residual values are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is writtendown immediately to its recoverable amount if the asset’s carrying amount is higher than its estimated recoverable amount.Gains and losses on disposals are determined by comparing proceeds (less attributable costs) with the carrying amount. These areincluded in the income statement.Intangible assetsGoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assetsof the acquired subsidiary at the date of the acquisition. All business combinations are accounted for by applying the purchase method.Goodwill is recognised in the acquisition of subsidiaries, associates and joint ventures. In respect of business acquisitions occurringafter 1 January 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiableassets acquired.In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, which is the amount recorded underDutch GAAP. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units andas of 1 January 2004 is no longer amortised but is tested annually for impairment.PatentsPatents acquired from third parties are capitalised and amortised over their anticipated useful lives. The amortisation is charged to theincome statement on a straight-line basis. The estimated useful life for patents is 15 years. The patents are tested annually forimpairment.