TomTom 2012 Annual Report Download - page 45

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible assets other than goodwill
Internally generated intangible assets
Internal software development costs relating to core technology are recognised as an intangible asset if, and only if, all of the following
have been demonstrated:
– the technical feasibility to complete the project;
– the intention to complete the intangible asset, and use or sell it;
– the ability to use or sell the intangible asset;
– how the intangible asset will generate probable future economic benefi ts;
– the availability of adequate resources to complete the project; and
– the cost of developing the asset can be measured reliably.
Internally generated databases are capitalised until a level of completion is reached and ongoing activities focus on maintenance, at this
point capitalisation is discontinued.
The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the
intangible asset fi rst meets the recognition criteria listed above.
All expenditures on research activities are expensed in the income statement as incurred. Internal software costs relating to development of
non-core software with an estimated average useful life of less than one year and engineering costs relating to the detailed manufacturing
design of new products are expensed in the period in which they are incurred.
Acquired intangible assets
Defi nite-lived intangible assets acquired separately are initially recognised at cost. The cost of assets acquired separately includes directly
attributable costs to bring the asset to its intended use. Intangible assets acquired in a business combination are identifi ed and recognised
separately from goodwill where they satisfy the defi nition of an intangible asset and their fair values can be measured reliably. The cost of
such intangible assets is their fair value at the acquisition date.
Subsequent to initial recognition, all intangible assets other than goodwill are carried at cost less accumulated amortisation and
accumulated impairment losses.
The amortisation is recorded on a straight-line basis over the following estimated useful lives
Internally generated core technology 3-5 years
Databases and tools 5-20 years
Customer relationships 20-27 years
Computer software 2-5 years
Acquired technology 4-5 years
Customer relationships include customers for maps; there is a high cost to changing map providers and historically there is high customer
retention.
The group is required to use estimates, assumptions and judgements to determine the expected useful lives and future economic benefi ts
of these assets. Such estimates are made on a regular basis, as they can be signifi cantly affected by changes in technology and other factors.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment charges. Depreciation is recorded
on a straight-line basis over the estimated useful lives of the assets as follows:
Furniture and fi xtures 4-10 years
Computer equipment and hardware 2-4 years
Vehicles 4 years
Tools and moulds 1-2 years
Leasehold improvements 4-10 years
The estimated useful lives, residual values and depreciation methods are reviewed at each year-end, with the effect that any changes in
estimate are accounted for on a prospective basis.