Audi 2014 Annual Report Download - page 231

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RECOGNITION AND MEASUREMENT PRINCIPLES
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Goodwill from business combinations has an indefinite useful
life and is subject to regular impairment testing.
Brand names from business combinations generally have an
indefinite useful life and are not amortized. They are tested
regularly for impairment.
Research costs are treated as current expenses in accordance
with IAS 38. The development expenditure for products going
into series production is recognized as an intangible asset,
provided that the sale of these products is likely to bring eco-
nomic benefit to the Audi Group. If the conditions stated in
IAS 38 for capitalization are not met, the costs are expensed in
the Income Statement in the year in which they occur.
Capitalized development costs encompass all direct and indi-
rect costs that can be directly allocated to the development
process. No interest was capitalized in relation to borrowing
costs due to the fact that there was no significant borrowed
capital as defined in the criteria of IAS 23 given that the Audi
Group maintains sufficient levels of net liquidity at all times.
Capitalized development costs are amortized on a straight-line
basis from the start of production over the anticipated model
life of the developed products.
Depreciation, allocated to the corresponding functional areas,
is primarily based on the following useful lives, which are
reassessed yearly:
Useful life
Concessions, industrial property rights and similar
rights and assets 3–15 years
of which software 3 years
of which customer base 2–8 years
Capitalized development costs 4–9 years
/ PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are measured at cost of purchase
or construction, with straight-line depreciation applied pro rata
temporis over the expected useful life.
The cost of purchase includes the purchase price, ancillary
costs and cost reductions.
In the case of self-constructed fixed assets, the cost of construc-
tion includes both the directly attributable material and labor
costs as well as indirect material and indirect labor costs that
must be capitalized, including pro rata depreciation. No inter-
est was capitalized in relation to borrowing costs due to the
fact that there was no significant borrowed capital as defined
in the criteria of IAS 23 given that the Audi Group maintains
sufficient levels of net liquidity at all times.
Depreciation 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
Property, plant and equipment used on the basis of lease
agreements is capitalized in the Balance Sheet if the condi-
tions of a finance lease are met in accordance with IAS 17, i.e.
if the significant opportunities and risks which result from the
use of an asset have passed to the lessee. Capitalization is
performed at fair value or the lower present value of the min-
imum lease payments. The straight-line depreciation method
is based on the shorter of economically useful life or term of
lease contract.
Where Group companies have entered into operate leases as
the lessee, i.e. if not all opportunities and risks associated with
title have passed to them, leasing installments and rents are
expensed directly in the Income Statement.
/ INVESTMENT PROPERTY
Land or buildings held with the intention of generating rental
income are reported in the Balance Sheet at amortized cost. The
amortization periods applied are, as a general rule, those applied
to property, plant and equipment used by the Group itself. In
the case of measurement at amortized cost, the fair values
calculated as a general rule using internal calculations based on
the discounted cash flow method are also to be stated.
/ 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. This means that changes in equity are reflected
on a pro rata basis in the carrying amount of the participation.
The share of the profit of the associated company is reported
under the financial result.