Electrolux 2010 Annual Report Download - page 130

Intangible fixed assets
Goodwill
Goodwill is reported as an indefinite life intangible asset at cost
less accumulated impairment losses.
Trademarks
Trademarks are reported at historical cost less amortization and
impairment. The Electrolux trademark in North America, acquired
in May 2000, is regarded as an indefinite life intangible asset and
is not amortized. One of the Group’s key strategies is to develop
Electrolux into the leading global brand within the Group’s product
categories. This acquisition has given Electrolux the right to use
the Electrolux brand worldwide, whereas it previously could be
used only outside of North America. All other trademarks are
amort ized over their useful lives, estimated to 10 years, using the
straight-line method.
Product development expenses
Electrolux capitalizes expenses for certain own development of
new products provided that the level of certainty of their future
economic benefits and useful life is high. The intangible asset
is only recognized if the product is sellable on existing markets
and that resources exist to complete the development. Only
expenditures which are directly attributable to the new product’s
development are recognized. Capitalized development costs are
amortized over their useful lives, between 3 and 5 years, using
the straight-line method.
Computer software
Acquired computer software licenses are capitalized on the basis
of the costs incurred to acquire and bring to use the specific soft-
ware. These costs are amortized over useful lives, between 3 and 5
years, using the straight-line method with the exception for the
development costs of the Group’s common business system,
which amortization is based on the usage and go-live dates of the
entities and continues over useful life. The applied principle gives an
amortization period of approximately 10 years for the system.
Property, plant and equipment
Property, plant, and equipment are stated at historical cost less
straight-line accumulated depreciation, adjusted for any impair-
ment charges. Historical cost includes expenditures that are
directly attributable to the acquisition of the items including bor-
rowing costs where applicable. Subsequent costs are included in
the asset’s carrying amount only when it is probable that future
economic benefits associated with the item will flow to the Group
and are of material value. Each part of an item of property, plant
and equipment with a cost that is significant in relation to the total
cost of the item are depreciated separately. This applies mainly to
components for machinery. All other repairs and maintenance are
charged to the income statement during the period in which they
are incurred. Land is not depreciated as it is considered to have
an unlimited useful life. All other depreciation is calculated using
the straight-line method and is based on the following estimated
useful lives:
Buildings and land improvements 10–40 years
Machinery and technical installations 3–15 years
Other equipment 3–10 years
Impairment of non-current assets
At each balance sheet date, the Group assesses whether there is
any indication that any of the company’s non-current assets are
impaired. If any such indication exists, the company estimates the
recoverable amount of the asset. The recoverable amount is the
higher of an asset’s fair value less cost to sell and value in use. An
impairment loss is recognized by the amount of which the carry-
ing amount of an asset exceeds its recoverable amount. The dis-
count rates used reflect the cost of capital and other financial
parameters in the country or region where the asset is in use. For
the purposes of assessing impairment, assets are grouped in
cash-generating units, which are the smallest identifiable groups
of assets that generate cash inflows that are largely independent
of the cash inflows from other assets or groups of assets.
The value of goodwill and other intangible assets with indefinite
life is continuously monitored, and is tested for yearly impairment
or more often if there is indication that the asset might be impaired.
Goodwill is allocated to the cash generating units that are
expected to benefit from the combination.
Non-financial/current assets (other than goodwill) that suffered
impairment are reviewed for possible reversal of the impairment at
each reporting date
Classification of financial assets
The Group classifies its financial assets in the following categories:
Financial assets at fair value through profit or loss
Loans and receivables
Held-to-maturity investments
Available-for-sale financial assets
The classification depends on the purpose for which the invest-
ments were acquired. Management determines the classification
of its investments at initial recognition. See also Note 18 on page
51 where the fair value and the carrying amount of financial assets
and liabilities are listed according to classification.
Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held-for-
trading, and those designated at fair value through profit or loss at
inception. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term or if so des-
ignated by management. Derivatives are also categorized as held-
for-trading, presented under derivatives in the balance sheet,
unless they are designated as hedges. Assets in this category are
classified as current assets if they either are held-for-trading or are
expected to be realized within 12 months of the balance-sheet date.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities
annual report 2010 | part 2 | notes, all amounts in SEKm unless otherwise stated
Cont. Note 1
34