English - Siegfried

The exchange rates applied to the Group’s most importantforeign currencies are as follows:Balance SheetYear-end rates 2006 20051 USD 1.220 1.3161 EUR 1.610 1.559Income StatementAverage rates 2006 20051 USD 1.2492 1.25321 EUR 1.5752 1.5480Property, plant and equipment are valued at acquisitionor production cost less accumulated depreciation. Land isnot depreciated. Depreciation is charged on a straight-linebasis over the following estimated useful life of the assets:BuildingsMachinery and equipmentVehiclesEDP systems10–45 years8–15 years8–10 years3– 5 yearsThe useful lives of assets are evaluated at least once a yearand, if necessary, amended. Property, plant and equipmentare excluded from the Balance Sheet on retirement or whenno value in use can be expected. Gains or losses on disposalare recorded in the Income Statement. In determining therecoverable value for items of property, plant and equipment,expected future cash flows are discounted at their presentvalue. Maintenance and repair costs are recognized in theIncome Statement. No borrowing costs are capitalized inproperty, and supplementary purchase and production costsare only capitalized if a future economic benefit is expectedand the costs of the asset value can be reliably determined.All other repair and maintenance costs are recorded undernet profit in the financial year these costs are incurred.Leasing Leased Property, plant and equipment for whichthe significant risks and rewards are transferred to the Groupare disclosed as Financial Leases. All other lease agreementsare considered as Operating Leases. Financial leasing contractsare capitalized at the beginning of the leasing periodat the net present value of the minimum leasing payment.The corresponding liability is disclosed under Financial Liabilities(after deduction of the financing costs). The depreciationperiod for leased objects corresponds to the guidelinesfor the depreciation of property, plant and equipment (seeabove) or the period of the lease if shorter. Leasing rates aredivided into a depreciation and interest portion. The interestportion is charged at a constant rate (for the remainder ofthe liability) against financial expenses.Intangible assets Intangible assets consist of goodwillfrom acquisitions as well as purchased licenses, patents,trademarks, technology, client base and software and capitalizeddevelopment costs for Siegfried products. Goodwillfrom an acquisition is allocated to the cash-generating uniton the date of the acquisition, which benefit from futurecash flow as a result of the acquisition. Recorded in the localcurrency of the purchase, goodwill is the excess of the costof acquisition over the Group’s interest in the fair value ofidentifiable net assets acquired. Goodwill is carried in thelocal currency of the Group company which has performedthe purchase. Patents, licenses, trademarks and other intangibleassets not acquired through acquisitions are recordedat cost.Goodwill from acquisitions and Intangible Assets with indefiniteuseful lives are not amortized. These items are tested forimpairment at least once a year. Currently, this pertains onlyto capitalized goodwill resulting from acquisitions.All other intangible assets are regarded as having a finiteuseful life and are amortized on a straight-line basis overtheir estimated economic or legal life, whichever is shorter:Licenses, patentsTrademarks, technologyand client baseCapitalized development costsSoftwareThe shorter of economic or legal life,as a rule 5 to 20 yearsThe shorter of economic or legal life,as a rule 5 to 20 years10 years3–5 yearsImpairment tests are carried-out whenever there are indi -cations that these intangible assets may be impaired. If thecarrying amount is greater than the value in use, a reduc -tion in the amount of the difference is recorded as anexpense. Intangible assets also comprise capitalized devel -opment costs for Siegfried products. These costs are capitalizedaccording to the stage of the project. The capitalizeddevelopment costs are regularly assessed for «recoverability»and impaired if the recoverable amount is below thecarrying amount.Impairment of assets An assessment whether the value ofProperty, plant and equipment and other non-current assetswith finite useful life may be impaired is done if certainevents or changed circumstances incurred. When there isevidence that the recoverable amount of an asset is less thanits carrying amount, then the carrying amount is reduced tothe amount considered recoverable. The recoverable amountis the higher of the assets fair value less costs to sell andthe value in use. This reduction is reported as an impairmentloss. When an impairment loss arises the useful life of the66 Financial Statements Siegfried Group