Annual report 2007 - Torotrak

Notes to the Financial Statements - continuedA full analysis of the affect of the change in policy are detailed in note 16.Basis of consolidationSubsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, togovern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,potential voting rights that are currently exercisable or convertible are taken into account. The financial statements ofsubsidiaries are included in the consolidated financial statements from the date that control commences until the datethat control ceases.Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractualagreement. The consolidated financial statements include the Group’s share of each line of the Group Income Statement,Balance Sheet, Cash Flow and related notes to the Financial Statements on a proportionate consolidation basis, from thedate that joint control commences until the date that joint control ceases.Foreign currencyTransactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreignexchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the incomestatement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated inforeign currencies that are stated at fair value are translated at foreign exchange rates ruling at the dates the fair valuewas determined.Exchange differences arising on the retranslation of the jointly controlled entity Income Statements and Balance Sheetare taken to reserves.InvestmentsIn the Company’s accounts, investments in jointly controlled entities and subsidiaries are carried at cost less impairment.Patent and other intellectual property rightsPatents are stated at cost less accumulated amortisation and impairment losses. Cost includes the cost of obtaining patentprotection for intellectual property rights (IPR) on technologies arising from inventive ideas. Income from patents isderived through licensing and other agreements.Such expenditure is amortised in a manner calculated to write off the cost, in equal annual proportions, over the effectivelife of the underlying patent or other IPR up to a maximum of 20 years. In the event that a patent is abandoned or isconsidered to have suffered a full impairment in value at any time before the expiry of its granted life, the balance ofunamortised expenditure is charged to the income statement in the year in which the abandonment or other impairmentin value takes place.Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and impairment losses.Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separateitems of property, plant and equipment.DepreciationOnce the item of property, plant and equipment has been commissioned for use, depreciation is charged to the incomestatement over the estimated useful lives of each part of an item of property, plant and equipment. The estimated usefullives are as follows:%Plant, machinery & equipment 25 Straight lineComputer hardware 33 1/3 Straight lineComputer software 33 1/3 Straight lineOffice furniture and fittings 20 Straight lineTest vehicles 50 Straight lineLeasehold improvements 10 Straight line38Annual Report and Financial Statement 2007