Audi 2009 Annual Report Download - page 197

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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 comprises real estate held as a financial investment and vehicles leased as
part of operating lease agreements with a contractual term of more than one year.
Real estate held as investment property is reported in the Balance Sheet at amortized cost.
Buildings are depreciated on a straight-line basis over a useful life of 33 years.
Leased vehicles, in the case of operating lease agreements, are capitalized at cost of sales and
depreciated to the calculated residual value on a straight-line basis over the contractual term.
Unscheduled reductions for impairment and adjustments to depreciation rates are made to take
account of impairment losses calculated on the basis of impairment testing pursuant to IAS 36.
Based on local factors and historical values from used car marketing, updated internal and ex-
ternal information on residual value developments is incorporated into the residual value fore-
casts on an ongoing basis.
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.
IMPAIRMENT TESTS
Fixed assets are tested regularly for impairment as of the balance sheet date. Impairment tests
are carried out for development activities and property, plant and equipment on the basis of
expected product life cycles, the respective revenue and cost situation, current market expecta-
tions and currency-specific factors.
Expected future cash flows to intangible assets and fixed tangible assets are discounted with
country-specific discount rates that adequately reflect the risk and amount to 9.1 percent be-
fore tax.
Impairment losses pursuant to IAS 36 are recognized where the recoverable amount, i.e. the
higher amount from either the use or disposal of the asset in question, has declined below its
carrying amount.