Merck 2010 Annual Report Download - page 158

Property, plant and equipment is carried at the cost of acquisi tion or manufacture less depreciation.
The component approach is applied here in accordance with IAS 16. Sub sequent acquisition and
manufacturing costs are only capitalized if it is probable that future economic benefits will arise
for the Group and the cost of the asset can be measured reliably. The cost of manufacture of self-
constructed property, plant and equipment is calculated on the basis of the directly attributable unit
costs and an appropriate share of overheads, including depreciation and write-downs. Financing
costs are capitalized if material. In accordance with IAS 20, costs of acquisition or manufacture are
reduced by the amount of government grants in those cases where government grants or subsi-
dies have been paid for the acquisition or manufacture of assets (investment grants). Grants related
to expenses which no longer offset future expenses are recognized in income. Property, plant and
equipment is depreciated by the straight-line method over the useful life of the asset concerned.
Depreciation of property, plant and equipment is based on the following useful lives:
Useful life of property, plant and equipment Useful life
Production buildings maximum of 33 years
Administration buildings maximum of 40 years
Plant and machinery 6 to 20 years
Other facilities 3 to 10 years
Operating and office equipment 3 to 10 years
The useful lives are reviewed regularly and adjusted if necessary. If indications of a decline in value
exist, an impairment test is performed. The determination of the possible need to recognize impair-
ments proceeds in the same way as for intangible assets. If the reasons for an impairment loss no
longer exist, a write-up is recorded.
Assets of this category are of minor importance to the Merck Group and are carried at cost. As of
December 31, 2010, an investment property with a value of EUR 5.5 million (2009: EUR 5.3 million)
was concerned. It was recognized under “Land, land rights and buildings including buildings on
third-party land”.
Where assets are leased and economic ownership lies with the Group company (finance lease), the
asset is recognized at the present value of the lease payments or the lower fair value in accordance
with IAS 17 and depreciated over its useful life. The corresponding payment obligations from future
lease payments are recorded as liabilities.
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154 Merck Annual Report 2010