Loreal 2011 Annual Report Download - page 155

153REGISTRATION DOCUMENT − L’ORÉAL 2011
2011 parent company Financial Statements
5
Notes to the parent company  nancial statements
1.4. Income tax
The Company has opted for the French tax group regime.
French companies included in the scope of tax consolidation
recognise an income tax charge in their own accounts on the
basis of their own taxable profits and losses.
L’Oréal, as the parent company of the tax group, recognises as
tax income the difference between the aggregate tax charges
recognised by the subsidiaries and the tax due on the basis of
consolidated taxable profit or loss of the tax group.
1.5. Intangible assets
Intangible assets are recorded in the balance sheet at purchase
cost.
The value of newly acquired trademarks is calculated based
on a multi-criteria approach taking into consideration their
reputation and their future contribution to profits.
In accordance with regulation no.2004-06 on assets, certain
trademarks have been identified as amortisable in accordance
with their estimated useful life.
Non-amortisable trademarks are tested for impairment at least
once a year on the basis of the valuation model used at the
time of their acquisition. A provision for impairment is recorded
where appropriate.
Initial trademark registration costs have been recorded as
expenses since2005.
Patents are amortised over a period ranging from two to ten
years.
Business goodwill is not amortised. It is written down whenever
the present value of future cash flows is less than the book value.
Software of material value is amortised using the straight-line
method over its probable useful life, generally between five
and seven years. It is also subject to accelerated tax-driven
amortisation, which is recognised over a 12-month period.
Other intangible assets are usually amortised over periods not
exceeding 20years.
1.6. Tangible assets
Tangible assets are recognised at purchase cost, including
acquisition expenses.
The useful lives of tangible assets are as follows:
Useful lives
Buildings 20-50years
Fixtures and fittings 5-10years
Industrial machinery and equipment 10years
Other tangible assets 3-10year
Both straight-line and declining-balance depreciation is
calculated over the actual useful lives of the assets concerned.
Exceptionally, industrial machinery and equipment is
depreciated using the straight-line method over a period of ten
years, with all additional depreciation classified as accelerated
tax-driven depreciation.
1.7. Financial assets
1.7.1. Investments and advances
These items are recognised in the balance sheet at purchase
cost excluding incidental expenses.
Their value is assessed annually by reference to their value in use,
which is mainly based on the current and forecast profitability
of the subsidiary concerned and the share of equity owned. If
the value in use falls below the purchase cost, a provision for
impairment is recognised.
1.7.2. Other financial assets
Loans and other receivables are valued at their nominal
amount. Loans and other receivables denominated in foreign
currencies are translated at the exchange rate prevailing at the
end of the financial year. If necessary, provisions are recognised
against these items to reflect their value in use at the end of
the financial year.
Treasury stock acquired in connection with buyback
programmes is recognised in other long-term investments.
At the end of the financial year, other long-term investments
are compared with their probable sale price and a provision
for impairment recognised where appropriate.
1.8. Inventories
Inventories are valued using the weighted average cost method.
A provision for impairment of obsolete and slow-moving
inventories is recognised by reference to their probable net
realisable value, which is measured on the basis of historical
and forecast data.
1.9. Trade accounts receivable
andother receivables
Trade accounts receivable and other receivables are recorded
at their nominal value. Where appropriate, a provision is
recognised based on an assessment of the risk of non-recovery.
1.10. Marketable securities
Marketable securities are recognised at purchase cost and
are valued at the end of the financial year at their probable
sale price.
Treasury stock held that is specifically allocated to employee
stock option plans is recognised in marketable securities.