Committed to growth

Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015 continued
(all amounts are presented in thousands of US dollars, unless otherwise stated)
2 Basis of preparation and significant accounting policies continued
All capitalized exploration and evaluation expenditures are assessed for impairment if facts and circumstances indicate that impairment may
exist. Exploration and evaluation assets are also tested for impairment once commercial reserves are found, before the assets are transferred
to development properties.
Operating leases
Where the Group is a lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from the lessor
to the Group, the total lease payments are charged to profit and loss on a straight-line basis over the period of the lease. The lease term is the
non-cancellable period for which the lessee has contracted to lease the asset together with any further terms for which the lessee has the
option to continue to lease the asset, with or without further payment, when at the inception of the lease it is reasonably certain that the lessee
will exercise the option.
When assets are leased out under an operating lease, the lease payments receivable are recognized as rental income on a straight-line basis
over the lease term.
Goodwill
Goodwill is carried at cost less accumulated impairment losses, if any. The Group tests goodwill for impairment at least annually and whenever
there are indications that goodwill may be impaired. The carrying value of goodwill is compared to the relevant amount, which is the higher of
value in use and the fair value less cost of disposal. Any impairment is recognized immediately as an expense and is not subsequently reversed.
Goodwill is allocated to the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the
business combination. Such units or groups of units represent the lowest level at which the Group monitors goodwill and are not larger than
an operating segment.
Gains or losses on disposal of an operation within a cash generating unit to which goodwill has been allocated include the carrying amount
of goodwill associated with the operation disposed of, generally measured on the basis of the relative values of the operation disposed of and
the portion of the cash-generating unit which is retained.
Mineral rights
Mineral rights include rights for evaluation, exploration and production of mineral resources under the licenses or agreements. Such assets
are carried at cost, amortization is charged on a straight line basis over the shorter of the valid period of the license or the agreement, or the
expected life of mine, starting from the date when production activities commence. The costs directly attributable to acquisition of rights for
evaluation, exploration and production are capitalized as a part of the mineral rights. If the reserves related to the mineral rights are not
economically viable, the carrying amount of such mineral rights is written off.
Mineral resources are recognized as assets when acquired as part of a business combination and then depleted using the unit-of-production
method for oil and gas assets based on total proved mineral reserves and straight line method for other assets. Proved mineral reserves reflect
the economically recoverable quantities which can be legally recovered in the future from known mineral deposits and were determined by
independent professional appraisers when acquired as part of a business combination and are subject update in future periods.
Intangible assets other than goodwill and mineral rights
The Group’s intangible assets other than goodwill and mineral rights have definite useful lives and primarily include acquired core process
technology, distribution agreements, customer relationships, trademarks, capitalized computer software costs and other intangible assets.
These assets are capitalized on the basis of the costs incurred to acquire and bring them to use.
Intangible assets with definite useful lives are amortized using the straight-line method over their useful lives:
Useful lives in years
Land use rights 50
Know-how and production technology 5 – 18
Trademarks 15
Customer relationships 10
Distribution agreement 8
Software licenses 5
The Group tests intangible assets for impairment whenever there are indications that intangible assets may be impaired.
If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair value less cost of disposal.
70 EuroChem Annual Report and Accounts 2015