Audi 2007 Annual Report Download - page 188
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185
Operating expenses are recognized when the service is rendered or at the time they are
incurred economically.
Intangible assets acquired for consideration are recognized at cost of purchase, taking into
account ancillary costs and cost reductions, and are amortized on a scheduled straight-line
basis over their useful life.
Concessions, rights and licenses relate to purchased computer software and subsidies
paid.
Research costs are treated as current expenses in accordance with IAS 38. The develop-
ment expenditure for products going into production is recognized as an intangible asset,
provided that production of these products is likely to bring economic benefit to the Audi
Group. If the conditions stated in IAS 38 for recognition as an intangible asset are not met,
the expenditure is expensed in the Income Statement in the year in which it occurs.
Development expenditure recognized as an intangible asset comprises all direct costs
and overheads directly attributable to the development process. Borrowing costs are not
capitalized. Amortization is performed on a straight-line basis from the start of production,
over the anticipated model life of the developed products.
The amortization plan is based principally on the following useful lives:
Useful life
Concessions, industrial property rights and similar rights and values 3–15 years
of which software 3 years
Development expenditure recognized as an intangible asset 5–10 years
The amortization is allocated to the corresponding functional areas.
Goodwill created or acquired in a business combination is recognized and tested for im-
pairment regularly, as of the balance sheet date, pursuant to IAS 36. If necessary, an im-
pairment loss resulting from this test is recognized.
Property, plant and equipment are measured at cost, with straight-line depreciation being
applied according to the pro rata temporis method.
The costs of purchase include the purchase price, ancillary costs and cost reductions.
In the case of self-constructed fixed assets, the cost of construction includes both the di-
rectly attributable cost of materials and cost of labor as well as indirect materials and indi-
rect labor, which must be capitalized, together with pro rata depreciation. Interest on bor-
rowings is not included.
Intangible assets
Property, plant and
equipment