34
I LISI FINANCIALREPORT2013
CONSOLIDATEDFINANCIALSTATEMENTS
3
value of theminimum lease payments if this is lower. These assets are
depreciatedover the sameperiodas goods of the same typewhichare
ownedoutright. Thecorrespondingdebt isenteredon the liabilitiesside
ofthebalancesheet.
2.2.8.3Subsequentexpenditure
When calculating the book value of a tangible fixed asset, the Group
recognizes thecostof replacingacomponentof this tangible fixedasset
at the timewhen the cost is incurred, if it is likely that future economic
benefitsassociatedwiththisassetwill flowtotheGroupandthecostcan
be reliably estimated. All ongoing servicing andmaintenance costs are
recognizedasanexpensewhentheyare incurred.
2.2.8.4Depreciation
Depreciation is recognizedasanexpenseusing thestraight-linemethod
over the estimated useful life for each component of a tangible fixed
asset.
Land isnotdepreciated.
Estimateduseful livesareas follows:
–buildings:20–40years
–plantandmachinery: 10–15years
– fixturesand fittings:5–15years
–transportequipment:5years
–equipmentandtools: 10years
–officeequipment:5years
–office furniture: 10years
– IThardware:3years
2.2.8.5 Impairmentofassets
Goodwilland intangiblefixedassetsof indefinite life-spanaresubmitted
toadepreciationtestateachannualclose(seenote2.2.7.2)andeachtime
events ormarket-changingmodifications indicatea riskof impairment.
Other intangibleassets fixedandtangible fixedassetsarealsosubjectto
suchatestatanytimewhenthere isariskof lossofvalue.
The method used involves comparing the recoverable value of each
of the Group’s cash-generating units with the net book value of the
correspondingassets (includingthegoodwill).
The recoverablevalue iscalculated foreachasset individually,unless the
assetunderconsiderationdoesnotgeneratecash inflows independently
ofthecash inflowsgeneratedbyotherassetsorgroupsofassets. Insome
cases, therecoverablevalue iscalculated foragroupofassets.
Recoverable value is defined as: whichever is the higher out of the
realizablevalue(lessthecostsofdisposal)andthevalue inuse.The latter
is calculated by discounting future cash flows, using predicted cash
flows which are consistent with themost recent budget and business
planapprovedby theExecutiveCommitteeandpresented to theBoard
of Directors. The discount rate applied reflects the market's current
assessmentof the timevalueofmoneyand the risksspecific to theasset
orthegroupofassets.
The realizable value is defined as the sumwhich couldbe obtainedby
selling theasset or groupof assets in conditionsof normal competition
where all parties are fully informed and consenting, less the costs of
disposal. These figures are calculated frommarket values (comparison
with similar listed companies, valueof recent deals and stockprices) or
failingthat, fromdiscounted futurecash flows.
If the recoverablevalue is lower than thenetbookvalue for theassetor
groupof assets tested, thediscrepancy is recognized as a loss of value.
In the case of a group of assets, it should preferably be classified as a
reduction ingoodwill.
LossesofvaluerecognizedunderGoodwillare irreversible.
For thedefinitionof Cash-GeneratingUnits, theGrouphas retained the
strategic combination for Business Units (B.U.) corresponding to the
strategicsegmentingandthereportingstructureoftheLISIGroup.
TheLISIAEROSPACEdivision issplit into7CGUs:
n
EuropeB.U.,
n
USAB.U.,
n
SpecialtyFastenersB.U.,
n
EnginesandcriticalpartsEuropeB.U.,
n
EnginesandcriticalpartsNorthAmericaB.U.,
n
AerostructureandAviationequipmentB.U.,
n
TechnicalcomponentsB.U..
TheLISIAUTOMOTIVEdivision issplit into3CGUs:
n
Threaded fastenersB.U.,
n
MechanicalcomponentsB.U.,
n
ClippedsolutionsB.U.
TheLISIMEDICALdivision iscomposedofasingleCGU.
2.2.8.6Long-term financial assets
This item is mainly comprised of capitalization contracts. It also
includes non-consolidated holdings. These are investments in unlisted
companies, for which fair value cannot be reliably estimated. As a last
resort, the Group values financial assets at their historic cost less any
potential loss of value, when no reliable fair value estimate is possible
throughanevaluationtechnique, intheabsenceofanactivemarket.
2.2.9Inventories
Stock is valued at whichever is the lower out of cost andnet realizable
value.
