Financial Report

AFG
Annual Report
2011
Consolidated Financial Statements AFG Arbonia-Forster-Group
Notes to the Consolidated Financial Statements
18 Investment property
121
Investment property, principally comprising land and buildings, is held for longterm
rental yields or appreciation and is predominantly rented to third parties.
Investment property is carried at cost less accumulated depreciation and any
accumulated impairment losses. Depreciation is calculated using the straight-line
method.
The fair value of investment property is determined using the discounted
cash flow method. Based on attainable net rental income (gross rental income
minus operating costs and future refurbishment costs), the discounted cash flows
are calculated for the next 10 years with a residual value for the time thereafter.
The fair value of undeveloped land is determined by considering current local
market conditions. The fair value of land with buildings and undeveloped land of
acquired subsidiaries is determined by external valuers. The fair value of certain
other undeveloped land has been estimated internally.
19 Intangible assets
Intangible assets include goodwill, which represents the excess of the cost of an
acquisition over the fair value of the Group's share of the net identifiable assets
of the acquired subsidiary at the date of acquisition. Goodwill is seen as an intangible
asset with an indefinite useful life. Impairment on goodwill (see note 20) is
separately disclosed under accumulated impairment losses.
Intangible assets comprise purchased computer software and licenses at
costs incurred. They are measured at cost less accumulated amortisation, calculated
using the straight-line method based on estimated useful lives as stipulated
under note 21.
Intangible assets acquired in a business combination (trademarks, patents,
technologies, client relationships, distribution channels, etc.) are carried at fair
value less accumulated amortisation, calculated using the straight-line method
based on estimated useful lives as stipulated under note 21.
Expenses relating to research activities are directly charged to the income
statement in the period in which they are incurred. Development costs are capitalised
at acquisition cost or production cost and reported under intangible assets
if all criteria under IAS 38 have been met on a cumulative basis, including evidence
of technical and economic feasibility, evidence of expected future economic benefit
and attributability of costs and their reliable valuation. They are amortised
over the expected useful life on the basis specified in note 21. Development costs
not meeting the criteria under IAS 38 are directly charged to the income statement
in the period in which they are incurred.
20 Impairment of assets
Assets subject to amortisation and depreciation, such as property, plant and
equipment, other non-current assets and intangible assets with a definite useful
life are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Assets that have an
indefinite useful life, such as goodwill, are tested annually for impairment. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
its fair value less costs to sell and its value in use. The value in use is based on
discounted future cash flows. The applied discount rate is a pre-tax rate using the
weighted average cost of capital (WACC) method. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units – CGU).