+1 - Solvay

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Solvay Global Annual Report 2007
5. Retirement benefit costs
The Group operates a number of defined benefit and
defined contribution retirement benefit plans. Payments
to defined contribution retirement benefit plans are
charged as an expense as they fall due.
The Group’s commitments under defined benefits plans,
and the related costs, are valued using the “projected
unit credit method” in order to determine the present
value of the obligation at closing date.
The amount recorded in the balance sheet represents
the present value of the defined benefit obligations,
adjusted for actuarial differences, for unrecognized
past service costs and for the fair value of external plan
assets, limited in the case of a surplus to the present
value of available refunds and/or reductions in future
contributions.
Actuarial differences exceeding the higher of 10 % of
the present value of the retirement benefit obligations
and 10 % of the fair value of the assets of the external
plan assets at balance sheet closing date are amortized
over the expected average remaining working life of
the participating employees.
6. Income taxes
Income taxes on profits for the period include
both current and deferred taxes. They are recorded in
the income statement except where they relate to items
recorded directly in equity, in which case they too are
recorded in equity.
Current taxes are taxes payable on the taxable profit
for the period, calculated at the tax rates prevailing
at the balance sheet closing date, as well as
adjustments relating to previous periods.
Deferred tax assets and liabilities are required to be
measured at the tax rates that are expected to apply
to the financial year in which the asset is realized or
the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax liabilities relating to subsidiaries’ profits that
the Group does not intend distributing in the foreseeable
future are not accounted for.
Deferred tax assets are recognized only where
taxable profits are likely to be realized, against which
the deferred tax assets will be imputed.
7. Tangible and intangible assets
Tangible and intangible assets are carried at their
historical cost less depreciation/amortization.
Depreciation/amortization is included in the income
statement under cost of goods sold, commercial and
administrative costs, and in R&D costs.
Depreciation/amortization is calculated on a straight-line
basis, according to the useful life listed below:
Buildings 30 years
IT equipment 3 - 5 years
Machinery and equipment 10 - 20 years
Transportation equipment 5 - 20 years
Development costs 2 - 5 years
Patents, trademarks and other
intangible assets
5 - 20 years
Assets held under finance leases are initially recognized
as assets at the lower of their fair value or the present
value of the minimum lease payments related to
the contracts. The corresponding liability is included
in financial debts. Financial charges, representing
the difference between the full amount of the lease
obligations and the fair value of the assets acquired,
are charged to the income statement over the duration
of the contract. Agreements not in the legal form of
a lease contract are analyzed with reference to IFRIC
4 to determine whether or not they contain a leasing
contract to be accounted for in accordance with IAS 17.
Borrowing costs directly attributable to the acquisition,
construction or production of an asset requiring a long
preparation period are added to the cost of this asset
until it is ready for use.
Grants for the purchase of assets are recorded net of
the value of these assets.
8. Research and Development costs
Research costs are charged in the period in which
they are incurred.
Development costs are capitalized if, and only if
all the following conditions are fulfilled:
• the product or process is clearly defined and
the related costs are measured reliably and can be
separately identified;
• the technical feasibility of the product has been
demonstrated;
• the product or process will be placed on
the market or used internally;