2010Annual Report - Schneider Electric CZ, s.r.o.

5 CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
162
Trademarks
Trademarks acquired as part of a business combination are not
amortised when they are considered to have an indefi nite life.
The criteria used to determine whether or not such trademarks have
indefi nite lives and, as the case may be, their lifespan, are as follows:
• brand awareness;
• outlook for the brand in light of the Group’s strategy for integrating
the trademark into its existing portfolio.
Non-amortised trademarks are tested for impairment at least
annually and whenever there is an indication they may be impaired.
When necessary, an impairment loss is recorded.
Internally-generated intangible assets
Research and development costs
Research costs are expensed in the statement of income when
incurred.
Systems were set up to track and capitalise development costs
in 2004. As a result, only development costs for new products
launched since 2004 are capitalised in the IFRS accounts.
Development costs for new projects are capitalised if, and only if:
• the project is clearly identifi ed and the related costs are separately
identifi ed and reliably tracked;
• the project’s technical feasibility has been demonstrated and the
Group has the intention and fi nancial resources to complete the
project and to use or sell the resulting products;
• the Group has allocated the necessary technical, fi nancial and
other resources to complete the development;
• it is probable that the future economic benefi ts attributable to the
project will fl ow to the Group.
Development costs that do not meet these criteria are expensed in
the fi nancial year in which they are incurred.
Capitalised development projects are amortised over the lifespan of
the underlying technology, which generally ranges from 3 to 10 years.
The amortisation of such capitalised projects is included in the cost
of the related products and classifi ed into “Cost of sales” when the
products are sold.
Software implementation
External and internal costs relating to the implementation of
enterprise resource planning (ERP) applications are capitalised when
they relate to the programming, coding and testing phase. They
are amortised over the applications’ useful lives. In accordance with
paragraph 98 of IAS 38, the SAP bridge application currently being
rolled out within the Group is amortised using the unit method to
refl ect the pattern in which the asset’s future economic benefi ts are
expected to be consumed. Said units of production correspond to
the number of users of the rolled-out solution divided by the number
of target users at the end of the roll-out.
2010 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC
1.10 - Property, plant and equipment
Property, plant and equipment is primarily comprised of land,
buildings and production equipment and is carried at cost, less
accumulated depreciation and any accumulated impairment losses,
in accordance with the recommended treatment in IAS 16 – Property,
plant and equipment.
Each component of an item of property, plant and equipment with a
useful life that differs from that of the item as a whole is depreciated
separately on a straight-line basis. The main useful lives are as
follows:
Buildings: 20 to 40 years
Machinery and equipment: 3 to 10 years
Other: 3 to 12 years
The useful life of property, plant and equipment used in operating
activities, such as production lines, refl ects the related products’
estimated life cycles.
Useful lives of items of property, plant and equipment are reviewed
periodically and may be adjusted prospectively if appropriate.
The depreciable amount of an asset is determined after deducting
its residual value, when the residual value is material.
Depreciation is expensed in the period or included in the production
cost of inventory or the cost of internally-generated intangible
assets. It is recognised in the statement of income under “Cost of
sales”, “Research and development costs” or “Selling, general and
administrative expenses”, as the case may be.
Items of property, plant and equipment are tested for impairment
whenever there is an indication they may have been impaired.
Impairment losses are charged to the statement of income under
“Other operating income and expenses”.
Leases
The assets used under leases are recognised in the balance sheet,
offset by a fi nancial debt, where the leases transfer substantially all
the risks and rewards of ownership to the Group.
Leases that do not transfer substantially all the risks and rewards of
ownership are classifi ed as operating leases. The related payments
are recognised as an expense on a straight-line basis over the lease
term.
Borrowing costs
In accordance with IAS 23 R – Borrowing costs (applied as of
January 1, 2009), borrowing costs that are directly attributable to
the acquisition, construction or production of a qualifying asset are
capitalised as part of the cost of the asset when it is probable that
they will result in future economic benefi ts to the entity and the costs
can be measured reliably. Other borrowing costs are recognised as
an expense for the period. Prior to January 1, 2009, borrowing costs
were systematically expensed when incurred.