Mercedes 2013 Annual Report Download - page 195

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F | Consolidated Financial Statements | Notes to the Consolidated Financial Statements
Property, plant and equipment. Property, plant and equip-
ment are measured at acquisition or manufacturing costs
less accumulated depreciation. If necessary, accumulated
impairment losses are recognized.
The costs of internally produced equipment and facilities
include all direct costs and allocable overheads. Acquisition
or manufacturing costs include the estimated costs, if any,
of dismantling and removing the item and restoring the site.
Plant and equipment under finance leases are stated at the
lower of present value of minimum lease payments or fair value
less the respective accumulated depreciation and any accu-
mulated impairment losses. Depreciation expense is recognized
using the straight-line method. The residual value of the asset
is considered.
Property, plant and equipment are depreciated over the useful
lives as shown in table  F.12.
Leasing. Leasing includes all arrangements that transfer
the right to use a specified asset for a stated period of time
in return for a payment, even if the right to use such asset
is not explicitly described in an arrangement. The Group is a
lessee of property, plant and equipment and a lessor of its
products. It is evaluated on the basis of the risks and rewards
of a leased asset whether the ownership of the leased asset
is attributed to the lessee (finance lease) or to the lessor (oper-
ating lease). Rent expense on operating leases by which
the Group is lessee is recognized over the respective lease terms
on a straight-line basis. Equipment on operating leases by which
the Group is lessor is carried initially at its acquisition or manu-
facturing costs and is depreciated to its expected residual values
over the contractual term of the lease, on a straight-line basis.
The same accounting principles apply to assets if Daimler sells
such assets and leases them back from the buyer.
Impairment of non-current non-financial assets. Daimler
assesses at each reporting date whether there is an indication
that an asset may be impaired. If such indication exists,
Daimler estimates the recoverable amount of the asset. The
recoverable amount is determined for each individual asset
unless the asset generates cash inflows that are not largely
independent of those from other assets or groups of assets
(cash-generating units). In addition, goodwill and other intangible
assets with indefinite useful lives are tested annually for
impairment; this takes place at the level of the cash-generating
units. If the carrying amount of an asset or of a cash-
generating unit exceeds the recoverable amount, an impair-
ment loss is recognized for the difference.
The recoverable amount is the higher of fair value less costs
of disposal and value in use. For cash-generating units, which
at Daimler correspond to the reportable segments, Daimler
in a first step determines the respective recoverable amount
as value in use and compares it with the respective carrying
amount (including goodwill). Value in use is measured by
discounting expected future cash flows from the continuing use
of the cash-generating units using a risk-adjusted interest
rate. Future cash flows are determined on the basis of the long-
term planning, which is approved by the Board of Manage-
ment and which is valid at the date when the impairment test
is conducted. This planning is based on expectations regard-
ing future market share, the growth of the respective markets
as well as the products’ profitability. The multi-year planning
comprises a planning horizon until 2020 and therefore
mainly covers the product life cycles of our automotive business.
The rounded risk-adjusted interest rates used to discount
cash flows, which are calculated for each segment, are currently
unchanged from the previous year at 8% after taxes for the
cash-generating units of the industrial business and 9% after
taxes for Daimler Financial Services. Whereas the discount
rate for Daimler Financial Services represents the cost of equity,
the risk-adjusted interest rate for the cash-generating units
of the industrial business is based on the weighted average cost
of capital (WACC). These are calculated based on the capital
asset pricing model (CAPM) taking into account current market
expectations. In calculating the risk-adjusted interest rate
for impairment test purposes, specific peer group information
for beta factors, capital structure data and cost of debt are
used. Periods not covered by the forecast are taken into account
by recognizing a residual value (terminal value), which gener-
ally does not consider any growth rates. In addition, several sensi-
tivity analyses are conducted. These show that even in case
of more unfavorable premises for main influencing factors with
respect to the original planning, no need for impairment exists.
If value in use is lower than the carrying amount, fair value
less costs of disposal is additionally calculated to determine
the recoverable amount.
Useful lives of property, plant and equipment
Buildings and site improvements 10 to 50 years
Technical equipment and machinery 6 to 25 years
Other equipment, factory and office equipment 3 to 30 years
F.12