Lenovo 2009 Annual Report Download - page 87

2008/09 Annual Report Lenovo Group Limited
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2 Significant accounting policies (continued)
(f) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiaries and associated companies at the date of acquisition. Goodwill on
acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associated companies
is included in investments in associated companies and is tested for impairment as part of the overall balance.
Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to
those cash-generating units or groups of cash-generating units that are expected to benefit from the business
combination in which the goodwill arose. The Group allocates goodwill to each geographical segment in which it
operates.
(ii) Trademarks and trade names
Trademarks and trade names are shown at historical cost.
Trademarks and trade names that have an indefinite useful life are tested annually for impairment and carried at
cost less accumulated impairment losses.
Trademarks and trade names that have a definite useful life are carried at cost less accumulated amortization. The
costs incurred to acquire trademarks and trade names are amortized over their estimated useful lives.
(iii) Internal use software
Acquired computer software licences are capitalized on the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortized over their estimated useful lives of up to 5 years.
Costs associated with developing or maintaining computer software programs are recognized as an expense
as incurred. Costs that are directly associated with the development of identifiable unique software products
controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are
recognized as intangible assets. Costs include the employee costs incurred as a result of developing software and
an appropriate portion of relevant overheads.
(iv) Patents, technology and marketing rights
Expenditure on acquired patents, technology and marketing rights is capitalized and amortized on a systematic
basis over their useful lives.
(g) Impairment of non-financial assets
Assets that have an indefinite useful life or have not yet available for use are not subject to depreciation or amortization
and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at
the lowest level for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other
than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.