Tiscali 2009 Annual Report Download - page 92

91
Other intangible assets
Computer software – Development costs
Acquired computer software licenses are capitalised and included among intangible assets at purchase cost
and are amortised on a straight-line basis over their estimated useful lives.
Internally-generated intangible assets arising from costs supported for the development of applications
software under Group control and directly associated with the production of services, in particular with
regard to ‘technological platforms’ for access and management of the Tiscali network, are recognised if:
• the following general conditions indicated by IAS 38 are observed for the capitalization of the intangible
assets: (a) the asset created can be identified; (b) it is likely that the asset created will generate future
economic benefits; (c) the development cost of the asset can be reliably gauged;
• the Group can demonstrate the technical possibility of completing the intangible asset so as to make
it available for use or for sale, its intention to complete said asset so as to use or sell it, the ways in
which it will generate probable future economic benefits, the availability of technical, financial or other
resources for completing its development and its ability to reliably assess the cost attributable to the
asset during its development.
During the development period, the asset is reviewed annually for the purpose of revealing any impairment
losses. Subsequent to initial statement, the development costs are valued at the decreased cost of the
amortisation and any other accumulated loss. Amortisation of the asset commences when the development
has been completed and the asset is available for use. The cost is amortised with reference to the period
when it is expected that the related project will generate revenues for the Group.
Costs associated with the development and the ordinary maintenance of software not meeting the above
mentioned requirements, and with research costs, are charged in full to the income statement in the period
in which they are incurred.
Long-term rights of use (IRU – ‘Indefeasible Right of Use’)
The IRU are classified in the category “concessions and similar rights” and comprise costs sustained for the
purchase of long-term rights of use for the fibre optics network, i.e. the ‘transmission capacity’ and related
charges. Amortisation is calculated using the straight-line method, either over the remaining life of the
agreement or the estimated utilisation period of the right, whichever is the shorter. The amortisation period
varies on average between 12 and 15 years.
Broadband service activation costs
These assets refer to equity investments incurred for the activation of broadband (ADSL) services, such as
contributions for connection to the Tiscali network to ‘network operators’ in the various geographic areas and
related user equipment. As at 30/6/2009, these costs were amortised based on the minimum legal duration
of the contract, which is 12 months. In 2009 the structure of the ADSL services contract was amended to
provide a minimum contract term of 24 months. The company adjusted the amortization period used for
costs to activate such services as a result of the amended contract term and taking into account the expected
average duration of customer contracts for ADSL services. As described in the notes describing the contract
amendment, it also resulted in determining deferred income and prepaid expenses, respectively, with
regards to revenues for activation fees charged to customers and costs incurred for customer acquisition
(Subscriber Acquisition Costs – SACs), over a period of 24 months instead of 12 months.
Consolidated Financial Statements and Explanatory Notes