Merck 2014 Annual Report Download - page 196

191CONSOLIDATED FINANCIAL STATEMENTS → Notes to the Group accounts
(18) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is measured at cost less depreciation
and impairments plus reversals of impairments. The component
approach is applied here in accordance with IAS16. Subsequent
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 self-constructed property, plant and
equipment is calculated on the basis of the directly attributable
unit costs and an appropriate share of overheads. If the construc-
tion of property, plant and equipment takes a substantial period of
time, the directly attributable borrowing costs incurred up until
completion are capitalized as part of the costs. In accordance with
IAS20, costs are reduced by the amount of government grants in
those cases where government grants or subsidies have been paid
for the acquisition or manufacture of assets (grants related to
assets). Grants related to expenses which no longer offset future
expenses are recognized in profit or loss. 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 25 years
Operating and office equipment; other facilities 3 to 10 years
The useful lives of the assets 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 recog-
nize impairments proceeds in the same way as for intangible assets.
If the reasons for an impairment loss no longer exist, a reversal of
the impairment loss recognized in prior periods is recorded.