Lenovo 2010 Annual Report Download - page 84

2009/10 Annual Report Lenovo Group Limited
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NOTES TO THE FINANCIAL STATEMENTS (continued)
2009/10 Annual Report Lenovo Group Limited
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2 Significant accounting policies (continued)
(e) Construction-in-progress
Construction-in-progress is stated at cost. Cost comprises all direct and indirect costs of acquisition or construction
or installation of buildings, plant and machinery or internal use software as well as interest expenses and exchange
differences on the related funds borrowed during the construction, installation and testing periods and prior to the
date when the assets were put into use, less any accumulated impairment losses. No depreciation or amortization is
provided for on construction-in-progress. On completion, the buildings, plant and machinery or internal use software
are transferred to property, plant and equipment or intangible assets at cost less accumulated impairment losses.
(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 interests 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 identified according to operating segment.
(ii) Trademarks and trade names
Trademarks and trade names are shown at historical cost. Trademarks and licenses acquired in a business
combination are recognized at fair value at the acquisition date.
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.
Amortization is calculated using the straight-line method to allocate the cost of trademarks and trade names
over their estimated useful lives of up to 5 years.
(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 using the straight-line method over their estimated useful
lives of up to 5 years.
Costs associated with 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.
In addition to the review of the residual values and useful lives of property, plant and equipment as mentioned
in Note 2(d)(iii), the Group has reviewed the same for its internal use software, and has resulted in accelerated
amortization/impairment charge of approximately US$0.8 million for the year.
(iv) Patents, technology and marketing rights
Expenditure on acquired patents, technology and marketing rights is capitalized and amortized on a straight-
line basis over their useful lives of up to 5 years.