Annual Report - Miba

86
On August 27, 2001, the bearing manufacturing plant in McConnelsville, Ohio, USA was
acquired under an asset deal. Most of the difference resulting from the consolidation of
capital was capitalized under goodwill and amortized over 15 years, the last time during
the 2003/04 fiscal year. The allocation of the acquisition cost was finalized during the
2002/03 fiscal year and goodwill was adjusted in accordance with IAS 22.71. Along the
lines of the draft at hand at the time, “Exposure Draft ED 3 Business Combinations” and
in view of the planned harmonization of regulations of the International Financial Reporting
Standards regarding the US-GAAP instructions for mergers, based on the value of existing
customer relations, goodwill for the McConnelsville plant was reduced by EUR 31.7
million and subsequently customer relations (without contractual bind) capitalized by the
same amount.
From the 2004/05 fiscal year onwards, the recognition criteria for customer relations
according to IAS 38 were fulfilled, due to the early application of IFRS 3 in combination
with IAS 36 and IAS 38 (in the version revised in 2004).
The value of customer relations was determined by means of a discounted cash flow
valuation based on estimated sales to the nine largest customers of the McConnelsville
plant. At the time of acquisition, the current market value of the customer relations thus
established amounted to USD 28.4 million. Customer relations are depreciated over an
anticipated average life of 10 to 15 years (in line with the product life cycle).
In accordance with IAS 16, property, plant & equipment is valued at acquisition or manufacturing
cost minus scheduled straight-line depreciation or at the lower market value.
Repair and maintenance expenses are reported as current expenditures. Assets of low
value are fully depreciated in the year they were acquired.
Interest on loans for tangible assets manufactured or acquired over a longer period of time
is not capitalized.
If there are any indications of a loss in asset values and if the cash value in use or the net
selling price should fall below the respective book value, unscheduled depreciation is
required according to IAS 36 to the relevant lower reportable value. If the reasons for the
unscheduled depreciation cease to exist, the assets will be revaluated upward accordingly.
For internally produced fixed assets, the manufacturing costs consist of the directly
allocable production costs and the pro rata fixed and variable production overhead, including
pro rata costs for the employee pension plan and voluntary social benefits.