Annual Report 2010 - Enel.com

Investment property
Investment property consists of the Group’s real estate
held to generate rental income or capital gains rather than
for use in operations or the delivery of goods and services.
Investment property is initially recognized at cost in the
same manner as other property, plant and equipment.
Subsequently, it is measured at cost net of depreciation
and any impairment losses. Impairment losses are determined
on the basis of the following criteria.
The fair value of investment property is determined on the
basis of the state of the individual assets, projecting the
valuations for the previous year in relation to the performance
of the real estate market and estimated developments
in the value of the assets. The fair value of investment
property recognized at December 31, 2010 is equal
to €365 million.
Intangible assets
Intangible assets are measured at purchase or internal development
cost, when it is probable that the use of such
assets will generate future economic benefits and the related
cost can be reliably determined.
The cost includes any directly attributable incidental expenses
necessary to make the assets ready for use. The
assets, with a definite useful life, are reported net of accumulated
amortization and any impairment losses, determined
as set out below.
Amortization is calculated on a straight-line basis over the
item’s estimated useful life, which is checked at least annually;
any changes in amortization policies are reflected
on a prospective basis.
Amortization commences when the asset is ready for use.
Intangible assets with an indefinite useful life are not amortized
systematically. Instead, they undergo impairment
testing at least annually.
Goodwill deriving from the acquisition of subsidiaries, associated
companies or joint ventures is allocated to each
of the cash-generating units identified. After initial recognition,
goodwill is not amortized but is tested for recoverability
at least annually using the criteria described in the
notes. Goodwill relating to equity investments in associates
is included in their carrying amount.
Impairment losses
160 Enel Annual Report 2010 Consolidated financial statements
Property, plant and equipment, property investment and
intangible assets are reviewed at least once a year to determine
whether there is evidence of impairment. If such
evidence exists, the recoverable amount of any property,
plant and equipment and intangible assets is estimated.
The recoverable amount of goodwill and intangible assets
with an indefinite useful life as well as that of intangible
assets not yet available for use, is estimated annually.
The recoverable amount is the higher of an asset’s fair
value less costs to sell and its value in use.
Value in use is determined by discounting estimated future
cash flows using a pre-tax discount rate that reflects
the current market assessment of the time value of money
and the specific risks of the asset. The recoverable amount
of assets that do not generate independent cash flows is
determined based on the cash-generating unit to which
the asset belongs.
An impairment loss is recognized in the income statement
if an asset’s carrying amount or that of the cash-generating
unit to which it is allocated is higher than its recoverable
amount.
Impairment losses of cash generating units are first
charged against the carrying amount of any goodwill attributed
to it and then against the value of other assets, in
proportion to their carrying amount.
Impairment losses are reversed if the impairment has
been reduced or is no longer present or there has been a
change in the assumptions used to determine the recoverable
amount.
The recoverable amount of goodwill and intangible assets
with an indefinite useful life as well as that of intangible
assets not yet available for use is tested for recoverability
annually or more frequently if there is evidence suggesting
that the assets may be impaired. The original value of
goodwill is not restored even if in subsequent years the
reasons for the impairment no longer obtain.
Inventories
Inventories are measured at the lower of cost and net estimated
realizable value except for those involved in trading
activities, which are measured at fair value with recognition
through profit or loss. Average weighted cost is used, which
includes related ancillary charges. Net estimated realizable
value is the estimated normal selling price net of estimated
selling costs or, where applicable, replacement cost.