Lenovo 2013 Annual Report Download - page 126

NOTES TO THE FINANCIAL STATEMENTS
Lenovo Group Limited 2012/13 Annual Report
124
2 Significant accounting policies (continued)
(g) Intangible assets
(i) Goodwill
Goodwill represents the excess of the consideration of an acquisition transferred over the Group’s interests in the
fair value of the acquiree’s identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill
on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates and jointly
controlled entities is included in interests in associates and jointly controlled entities.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of
the cash-generating units (“CGU”), or groups of CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the
entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating
segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances
indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the
higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense
and is not subsequently reversed.
(ii) Trademarks and trade names
Separately acquired trademarks and trade names are shown at historical cost. Trademarks and trade names
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 8 years.
(iii) Customer relationships
Customer relationships acquired in a business combination are recognized at fair value at the acquisition
date. Customer relationships have a definite useful life and are carried at cost less accumulated amortization.
Amortization is calculated using the straight-line method over their estimated useful lives.
The estimated useful lives for customer relationships at the balance sheet date are not more than 15 years.
(iv) Internal use software
Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use
the specific software.
Development costs that are directly attributable to the design and testing of identifiable and unique software
controlled by the Group are recognized as intangible assets when the following criteria are met:
– it is technically feasible to complete the software so that it will be available for use;
– management intends to complete the software and use or sell it;
– there is an ability to use or sell the software;
– it can be demonstrated how the software will generate probable future economic benefits;
– adequate technical, financial and other resources to complete the development and to use or sell the
software are available; and
– the expenditure attributable to the software during its development can be reliably measured.
Development costs include the employee costs incurred as a result of developing software and an appropriate
portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognized as an expense as incurred.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Costs associated with maintaining computer software are recognized as an expense as incurred.
Acquired computer software licenses costs and computer software development costs are amortized using the
straight-line method over their estimated useful lives of not more than 5 years.