Electrolux 2012 Annual Report Download - page 36

annual report 2012 notes all amounts in SEKm unless otherwise stated
tax-consolidation schemes, etc., have a legally enforceable right
to set off tax assets against tax liabilities.
Deferred income tax is provided on temporary differences aris-
ing on investments in subsidiaries and associates, except where
the timing of the reversal of the temporary difference is controlled
by the Group and it is probable that the temporary difference will
not be reversed in the foreseeable future.
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 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 trade-
marks are amort ized over their useful lives, estimated to 5 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 12 years for the system.
Client relationships
Client relationships are recognized at fair value in connection with
acquisitions. The values of these relationships are amortized over
the estimated useful lives, between 5 and 15 years, using the
straight-line method.
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 is 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-financial 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 esti-
mates 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 carrying amount of an asset exceeds its recoverable
amount. The discount 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
• 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.
Cont. Note 1
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