Lenovo 2014 Annual Report Download - page 138

136 Lenovo Group Limited 2013/14 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 Significant accounting policies (continued)
(e) Property, plant and equipment (continued)
Depreciation on other property, plant and equipment is calculated using the straight-line method to allocate their costs
to their estimated residual values over their estimated useful lives to the Group. The principal annual rates used for this
purpose are:
Plant and machinery
Tooling equipment 50%
Other machinery 14 – 20%
Furniture and fixtures 20 – 25%
Office equipment 20 – 33%
Motor vehicles 20%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An
asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 2(h)).
Gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the
carrying amount of the relevant asset, and is recognized within “Other operating income/(expense) – net” in the income
statement.
(f) Construction-in-progress
Construction-in-progress represents buildings, plant and machinery and internal use software under construction and
pending installation and is stated at historical cost, less any accumulated impairment losses. Historical cost comprises
all direct and indirect costs of acquisition or construction or installation of buildings, plant and machinery or internal use
software as well as interest expenses and exchange differences on the related funds borrowed during the construction,
installation and testing periods and prior to the date when the assets were available for use. No depreciation or
amortization is provided for on construction-in-progress. On completion, the carrying values of the buildings, plant and
machinery or internal use software are transferred from construction-in-progress to property, plant and equipment or
intangible assets.
(g) Intangible assets
(i) Goodwill
Goodwill represents the excess of the consideration of an acquisition transferred over the Group’s interests in the
fair value of the acquiree’s identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill on
acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates and joint ventures
is included in interests in associates and joint ventures.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-
generating units (“CGU”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each
unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances
indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the
higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense
and is not subsequently reversed.
(ii) Trademarks and trade names
Separately acquired trademarks and trade names are shown at historical cost. Trademarks and trade names acquired
in a business combination are recognized at fair value at the acquisition date.
Trademarks and trade names that have an indefinite useful life are tested annually for impairment and carried at cost
less accumulated impairment losses.
Trademarks and trade names that have a definite useful life are carried at cost less accumulated amortization.
Amortization is calculated using the straight-line method to allocate the cost of trademarks and trade names over
their estimated useful lives of up to 8 years.