TomTom 2005 Annual Report Download - page 65

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65
On฀21฀April฀2005,฀the฀Company฀agreed฀with฀the฀Dutch฀
tax฀authorities฀on฀the฀treatment฀of฀taxes฀for฀share฀
options฀granted฀in฀2003.฀For฀2004฀share฀option฀grants฀
the฀principle฀has฀been฀agreed฀with฀the฀Dutch฀tax฀
authorities฀that฀applicable฀taxes฀will฀be฀levied฀on฀exercise฀
of฀the฀share฀options.฀The฀Company฀has฀calculated฀the฀
corporate฀income฀tax฀for฀2004฀based฀on฀the฀agreement฀
with฀the฀Dutch฀tax฀authorities฀and฀based฀on฀currently฀
available฀information.฀
The฀tax฀benefit฀relating฀to฀the฀excess฀of฀the฀tax฀basis฀
compared฀to฀the฀commercial฀basis฀for฀stock฀options฀
issued฀to฀employees฀is฀directly฀recognised฀in฀equity.
Related฀party฀transactions
All฀related฀party฀transactions฀are฀between฀the฀Company฀
and฀its฀subsidiaries.฀These฀have฀been฀eliminated฀on฀
consolidation.
Intangible฀assets
Development฀costs
Internally฀generated฀software฀development฀costs฀arising฀
from฀the฀creation฀and฀update฀of฀the฀Company’s฀core฀
software฀technology,฀are฀recognised฀as฀an฀asset฀only฀if฀all฀
of฀the฀following฀criteria฀are฀met:
•
฀ ฀an฀asset฀is฀created฀that฀can฀be฀identified;
•
฀ ฀it฀is฀probable฀that฀the฀asset฀created฀will฀generate฀future฀
economic฀benefits;฀and
•
฀ ฀the฀development฀cost฀of฀the฀asset฀can฀be฀measured฀
reliably.
Internal฀software฀development฀costs฀related฀to฀creating฀
and฀upgrading฀the฀Company’s฀core฀software฀platform฀are฀
capitalised฀and฀amortised฀on฀a฀straight-line฀basis฀over฀the฀
useful฀economic฀life฀of฀the฀software,฀which฀is฀estimated฀
to฀be฀four฀years.฀
Internal฀software฀costs฀not฀relating฀to฀the฀Company’s฀
core฀software฀platform฀are฀expensed฀as฀incurred฀on฀the฀
basis฀that฀on฀average฀these฀costs฀have฀a฀useful฀
economic฀life฀of฀less฀than฀one฀year.
Engineering฀costs฀relating฀to฀the฀detailed฀manufacturing฀
design฀of฀new฀products฀are฀recorded฀in฀the฀income฀
statement฀as฀research฀and฀development฀expenses฀as฀
incurred.
The฀costs฀of฀tools฀and฀moulds฀used฀in฀the฀manufacturing฀
of฀the฀Company’s฀products฀are฀capitalised฀within฀
property,฀plant฀and฀equipment,฀and฀depreciated฀within฀
research฀and฀development฀costs฀over฀their฀estimated฀
useful฀economic฀lives,฀which฀is฀usually฀less฀than฀a฀year.
The฀Company฀is฀required฀to฀use฀estimates,฀assumptions฀
and฀judgements฀to฀determine฀the฀expected฀useful฀
economic฀lives฀and฀future฀economic฀benefits฀of฀these฀
costs.฀Such฀estimates฀are฀made฀on฀a฀regular฀basis฀or฀
as฀appropriate฀throughout฀the฀year฀as฀they฀can฀be฀
significantly฀affected฀by฀changes฀in฀technology฀and฀
other฀factors.฀
Acquired฀technology
Intangible฀assets฀arising฀from฀acquisitions฀are฀amortised฀
using฀the฀straight-line฀method฀over฀their฀estimated฀
economic฀lives,฀which฀is฀estimated฀to฀be฀four฀years.฀Their฀
economic฀lives฀are฀evaluated฀every฀year.฀
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฀economic฀lives฀of฀the฀assets฀
as฀follows:
Furniture฀and฀fixtures฀ 5-10฀years
Computer฀equipment฀and฀hardware฀ 2-4฀years
Software฀and฀systems฀ 2-5฀years
Vehicles,฀tools฀and฀moulds฀ 4฀years