Tiscali 2012 Annual Report Download - page 68

Annual financial report as at 31 December 2012
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Date File Name Status Page
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Annual Report as at 31
December 2012 68
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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.
Broadband service activation costs
During 2012, taking into account the contractual change made during 2011 which laid down - in the
event of withdrawal of ADSL customers - the obligation to pay a disconnection contribution in favour of
the Tiscali Group (the previous contract envisaged this obligation only if the withdrawal was exercised
within 24 months of the date of taking the contract out), the Directors analysed the expected duration
of the relationship with the customers recalculating the useful life of the acquisition and activation
costs of the customers from 24 to 36 months. This change led to a reduction during 2012 in the
amortisation charge on intangible fixed assets equal to around EUR 7.5 million.
Furthermore, within the sphere of a process for checking the functioning of the network equipment,
achieved with the support of an outside technical professional (who issued a specific report in this
connection), the Directors also reviewed the estimate of the useful life of the transmission equipment
from 5 to 7 years. This review led to a reduction during 2012 in the depreciation charge on tangible
fixed assets equal to around EUR 1.5 million.
Overall, the review of the useful lives indicated above, during 2012, led to lower
amortisation/depreciation of intangible fixed assets and tangible fixed assets for EUR 9 million.
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.