Airtel 2011 Annual Report Download - page 112

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Bharti Airtel Annual Report 2010-11
a) Goodwill
Goodwill is initially recognised at cost and is subsequently
measured at cost less any accumulated impairment losses.
Goodwill is held in the currency of the acquired entity and
revalued to the closing rate at each date of statement of financial
position.
Negative goodwill arising on an acquisition is recognised
directly in the statement of comprehensive income.
On disposal of a subsidiary or a jointly controlled entity,
the attributable amount of goodwill is included in the
determination of the profit or loss recognised in the statement
of comprehensive income on disposal.
b) Software
Software is capitalised at the amounts paid to acquire the
respective license for use and is amortised over the period of
license, generally not exceeding three years. Software up to Rs
500 thousand is amortised over a period of 1 year.
c) Bandwidth
Bandwidths capacities are capitalized at the amounts incurred
to acquire the right to use capacities and are amortised over the
period of the agreement.
d) Licenses
Acquired licenses are initially recognised at cost. Licenses
acquired in a business combination are initially recognised at
fair value at the acquisition date. Subsequently, License and
spectrum entry fees are measured at cost less accumulated
amortisation and accumulated impairment loss, if any.
Amortisation is recognised in profit or loss on a straight-
line basis over the period of the license from the date of
commencement of commercial operations in the respective
jurisdiction and is disclosed under ‘depreciation and
amortisation’. The amortisation period is determined primarily
by reference to the unexpired license period.
The revenue-share fee on license and spectrum is computed as
per the licensing agreement and is expensed as incurred, since
it is not possible to reliably estimate the total amount payable
on revenue share fees at the time of acquiring the license.
e) Other intangible assets
Other intangible assets comprising brands, customer
relationships and distribution networks, are capitalised at fair
values on the date of acquisition.
Amortisation is recognised in profit or loss on a straight-line
basis over the estimated useful lives of intangible assets from
the date they are available for use or placed in service. Other
finite lived intangible assets are amortised as below:
Brand: Over the period of their expected benefits, not exceeding
the life of the licenses and are written off in their entirety when
no longer in use.
Distribution network: Over estimated useful life
Customer base: The estimated life of such relationships
3.7 Property, plant and equipment (‘PPE’)
Plant and equipment is stated at cost, net of accumulated
depreciation and/or accumulated impairment losses, if any.
Such cost includes the cost of replacing part of the plant and
equipment and borrowing costs for long-term construction
projects if the recognition criteria are met. When significant
parts of property, plant and equipment are required to be
replaced in intervals, the Group recognizes such parts as
separate component of assets with specific useful lives and
provides depreciation over their useful life. Subsequent costs
are included in the asset’s carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognized. All
other repair and maintenance costs are recognized in profit or
loss as incurred.
Where assets are installed on the premises of customers
(commonly called Customer premise equipment -“CPE”), such
assets continue to be treated as PPE so long the management is
confident of exercising control over them.
The Group also enters into multiple element contracts whereby
the vendor supplies plant and equipment and IT related
services. These are recorded on the basis of relative fair value.
Gains and losses arising from retirement or disposal of property,
plant and equipment are determined as the difference between
the net disposal proceeds and the carrying amount of the asset
and are recognized in profit or loss on the date of retirement
and disposal.
Assets are depreciated to the residual values on a straight-line
basis over the estimated useful lives. The assets’ residual values
and useful lives are reviewed, and adjusted if appropriate,
at each date of statement of financial position. Land is not
depreciated. Estimated useful lives of the assets are as follows:
Years
Buildings 20
Network equipment 3-20
Computer equipment 3
Office furniture and equipment 2-5
Vehicles 3-5
Leasehold improvements Remaining period of the lease
or 10/20 years, as applicable,
whichever is less
Customer Premises Equipment 5-6
Assets individually costing ` five thousand or less are fully
depreciated over a period of 12 months from the date placed in
service.
3.8 Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill,
are not subject to amortisation and are tested annually for
impairment. Assets that are subject to depreciation and
amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount