Notes to the Financial Statements - Efacec

1.2 Tangible Fixed Assets
Land and buildings basically correspond to factories and offi ces. Land is shown at fair value, based on periodic valuations done at
least every three years by external independent valuers. Other tangible fi xed assets are shown at historical cost, less depreciation,
including all expenditure directly attributable to the acquisition of the assets.
Subsequent costs are included in the cost already booked for the asset, or recognised as separate assets, as appropriate, but only
when it is probable that economic benefi ts will accrue to the company and that the cost can be measured reliably. Other expenditure
for repairs and maintenance are recognised as costs in the period in which they are incurred.
Increases resulting from revaluations are shown in Reserves in Shareholders’ Funds. Each year, the difference between depreciation
based on the re-valued amount of the asset taken to Profi t and Loss in the period, and depreciation based on the original cost
of the asset, is transferred from Fair Value Reserves to Retained Earnings.
Land is not depreciated. Depreciation on other assets is calculated using the straight line method using the cost value or the revalued
amount, in order to apportion their cost or re-valued amount over the useful life of the asset down to their residual value,
as follows:
Depreciation begins in the month following that in which the asset entered service, in accordance with its useful life, as follows:
Line Years
Land -
Buildings and Other Construction 25 - 50
Plant and Equipment 8 - 12
Vehicles 4 - 5
Tools and Utensils 4 - 8
Offi ce Equipment 4 - 6
The residual values of assets and their useful lives are revised and adjusted, if necessary, at the balance sheet date.
If the amount booked is greater than the recoverable value of the asset, it is immediately adjusted to its estimated recoverable
value (Note 1.3).
Gains and/or losses on disposal or write offs are determined by calculating the difference between the net accounting value of the
asset, and its disposal or write off value, being in the latter case zero, and included in the Profi t or Loss of the period.
1.3 Intangible Assets
Software
The acquisition cost of software licences is capitalised and includes all costs incurred for its acquisition and those required to put
the available software into use. These costs are depreciated over the estimated useful life (not exceeding 5 years).
Costs related to the development or maintenance of the software are recognised as costs of the period in which they are incurred.
Costs directly associated with the production of identifi able and unique software controlled by the company, and which is probably
going to generate future economic benefi ts that are superior to costs involved beyond one year, are recognised as intangible assets.
Direct costs include people costs to develop the software and a share of relevant fi xed costs.
Software development costs recognised as assets are amortised over its estimated useful life (not exceeding 5 years).
1.4 Asset impairment
Assets that do not have a defi ned useful life are not subject to amortisation, but are the object of annual impairment tests. Assets
subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the value at which
they were booked may not be recoverable. Na impairment loss is recognised by the amount by which the booked value of the
asset exceeds its recoverable value. The recoverable value is the higher of the fair value of the asset, less expenses required for
sale, and its use value. To carry out impairment tests, assets are grouped together at the lowest level at which cash fl ows can be
identifi ed separately (cash fl ow generation units or UGCs).
The amount recoverable from a UGC is calculated based on calculations of useful value. These calculations use cash fl ow projections
based on fi nancial budgets approved by the management entity, covering a period of at least 5 years.
Assumptions have been used for the analysis of each UGC of the business segment. The management entity works out the budgeted
gross margin based on prior performance and its expectations for the development of the market. The average weighted
growth rate used is consistent with the forecasts included in sector reports. The discount rates used are before tax, and refl ect the
specifi c risks related to the relevant sectors.
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