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LISI 2016 FINANCIAL REPORT
Subsequent expenditure relating to an intangible fixed asset is only
capitalized if it increases the future economic benefits that are
attributable to the specific asset in question. Other expenditure is
recognized as an expense when incurred.
Depreciation is recognized as an expense using the straight-line
method over the estimated useful life of the intangible fixed assets
except when this is indefinite.
Estimated useful lives are as follows:
–
–
Trademarks: 10 – 20 years
–
–
Software programs: 1 – 5 years
2.2.8
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Tangible assets
2.2.8.1 Assets owned by the LISI Group
Tangible fixed assets are recorded at diminished cost with
accumulated depreciations and impairments. The cost of an asset
produced by the Group for itself includes the costs of raw materials,
direct manpower, and an estimate, if applicable, of costs related to
the removal and dismantling of the asset and the repair of the site
at which it is located, along with an appropriate share of the general
production costs.
When the components of tangible fixed assets have different useful
lives, they are recorded as separate tangible fixed assets, as per the
components method.
2.2.8.2 Assets funded through finance leases
Leases which transfer virtually all the risks and benefits relating to the
ownership of an asset to the Group are considered as finance leases.
Assets funded through finance leases are recognized in the assets
side of the balance sheet at the fair value of the goods leased, or the
present value of the minimum lease payments if this is lower. These
assets are depreciated over the same period as goods of the same
type which are owned outright. The corresponding debt is entered on
the liabilities side of the balance sheet.
2.2.8.3 Subsequent expenditure
When calculating the book value of a tangible fixed asset, the Group
recognizes the cost of replacing a component of this tangible fixed
asset at the time when the cost is incurred, if it is likely that future
economic benefits associated with this asset will flow to the Group
and the cost can be reliably estimated. All ongoing servicing and
maintenance costs are recognized as an expense when they are
incurred.
2.2.8.4 Depreciation
Depreciation is recognized as an expense using the straight-line
method over the estimated useful life for each component of a
tangible fixed asset.
Land is not depreciated.
Estimated useful lives are as follows:
–
–
buildings: 20 – 40 years;
–
–
plant and machinery: 10 – 15 years;
–
–
fixtures and fittings: 5 – 15 years;
–
–
transport equipment: 5 years;
–
–
equipment and tools: 10 years;
–
–
office equipment: 5 years;
–
–
office furniture: 10 years;
–
–
IT hardware: 3 years.
2.2.8.5 Impairment of assets
Goodwill and intangible fixed assets of indefinite life-span are submitted
to an impairment test at each annual close (see note 2.2.7.1) and
each time events or market-changing modifications indicate a risk of
impairment. Other intangible assets fixed and tangible fixed assets
are also subject to such a test at any time when there is a risk of loss
of value.
The method used involves comparing the recoverable value of each
of the Group’s cash-generating units with the net book value of the
corresponding assets (including the goodwill).
The recoverable value is calculated for each asset individually,
unless the asset under consideration does not generate cash inflows
independently of the cash inflows generated by other assets or
groups of assets. In some cases, the recoverable value is calculated
for a group of assets.
Recoverable value is defined as: whichever is the higher out of the
realizable value (less the costs of disposal) and the value in use. The
latter is calculated by discounting future cash flows, using predicted
cash flows which are consistent with the most recent budget and
business plan approved by the Executive Committee and presented to
the Board of Directors. The discount rate applied reflects the market’s
current assessment of the time value of money and the risks specific
to the asset or the group of assets.
The realizable value is defined as the sum which could be obtained
by selling the asset or group of assets in conditions of 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, value of recent deals and
stock prices) or failing that, from discounted future cash flows.
If the recoverable value is lower than the net book value for the asset
or group of assets tested, the discrepancy is recognized as a loss
of value. In the case of a group of assets, it should preferably be
classified as a reduction in goodwill.
Losses of value recognized under Goodwill are irreversible.
CONSOLIDATED FINANCIAL STATEMENTS
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