Pharmaceuticals Sector - Solvay

62
Solvay Global Annual Report 2005
5. Retirement benefi t costs
The Group operates a number of defi ned benefi t and
defi ned contribution retirement benefi t plans. Payments
to defi ned contribution retirement benefi t plans are
charged as an expense as they fall due.
The Group’s commitments under defi ned benefi ts
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 defi ned benefi t obligations,
adjusted for actuarial differences, for unrecognized
past services 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 benefi t 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 profi ts 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 profi t
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 fi nancial 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’ profi ts
that the Group does not intend distributing in the
foreseeable future are not accounted for.
Deferred tax assets are recognized only where taxable
profi ts 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 straightline
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
Patents and trademarks 5 - 20 years
Assets held under fi nance 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 fi nancial 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.
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 fulfi lled:
- the product or process is clearly defi ned and the
related costs are measured reliably and can be
separately identifi ed;
- the technical feasibility of the product has been
demonstrated;
- the product or process will be placed on the market
or used internally;
- the assets will generate future economic benefi ts (a
potential market exists for the product or, where it is
to be used internally, its future utility is demonstrated);
- the technical, fi nancial and other resources required
to complete the project are available.
The capitalized development costs are amortized on
a straight-line basis over their useful lives.
- the technical, fi nancial and other resources required
to complete the project are available.
The capitalized development costs are amortized on a
straight-line basis over their useful lives.