Audi 2008 Annual Report Download - page 203

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The amortization is allocated to the corresponding functional areas.
Goodwill created or acquired in a business combination is recognized and tested for impairment
regularly, as of the balance sheet date, pursuant to IAS 36. If necessary, an unscheduled im-
pairment loss resulting from this test is recognized.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are measured at acquisition cost or cost of construction, with
scheduled straight-line depreciation 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 directly
attributable cost of materials and cost of labor as well as indirect materials and indirect labor
costs, which must be capitalized, including pro rata depreciation. Interest on borrowings is not
included.
The depreciation plan is generally based on the following useful lives, which are reassessed
yearly:
Useful life
Buildings 14–50 years
Land improvements 10–33 years
Plant and machinery 6–12 years
Plant and office equipment including special tools 3–15 years
In accordance with IAS 17, property, plant and equipment used on the basis of lease agree-
ments is capitalized in the Balance Sheet if the conditions of a finance lease are met; in other
words if the significant risks and opportunities which result from its use have passed to the
lessee. Capitalization is performed at the time of the agreement, at the lower of fair value or
present value of the minimum lease payments. The straight-line depreciation method is based
on the shorter of economic life or term of lease contract. The payment obligations resulting
from the future lease installments are recognized as a liability at the present value of the leas-
ing installments.
Where Group companies have entered into operating leases as the lessee, in other words if not
all risks and opportunities associated with title have passed to them, leasing installments and
rents are expensed directly in the Income Statement.
INVESTMENT PROPERTY
Investment property is measured at amortized cost. Buildings are depreciated on a straight-line
basis over a useful life of 33 years.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Companies in which AUDI AG is directly or indirectly able to exercise significant influence on
financial and operating policy decisions (associated companies) are accounted for using the
equity method. The pro rata equity of these companies is regularly recorded under long-term
investments and the share of earnings recorded as income under the financial result.