Accounting principles

Property, plant, and equipment are recorded at cost less accumulated depreciation using the straight-line method. Subsequent costs are included in the asset’s carrying amount or recognized 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 repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Items of minor value are charged directly to the income statement. All gains and losses on the disposal of property, plant, and equipment are recognized in the income statement.

Accounting principles

Intangible assets are capitalized at cost, amortized using the straight-line method over their useful life.

Goodwill represents the excess of the consideration transferred, including any non-controlling interest in the acquired business, and the book value of any prior equity interest in the acquired business at the acquisition date, over the fair value of the Group’s share of the net assets acquired. It excludes the separate capitalization of intangible assets that were not previously recognized. If the purchase price includes elements contingent on future performance, these are estimated and recognized at the acquisition date. Any differences arising when the final purchase price is determined will result in an adjustment to the goodwill (refer to note on business combinations and divestments (4.3)). The estimated useful life of goodwill is determined on a case-by-case basis and does not exceed 20 years.

Development costs are recognized as an asset when specific recognition criteria are met, and it is determined that the recognized amount is recoverable through future economic benefits.

Other intangibles primarily consist of licenses, patents, and advance payments. The useful life of software, developments, and other intangible assets is determined on a case-by-case basis and ranges from 2 to 5 years.

Use of accounting estimates

Property, plant, and equipment as well as intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To determine whether impairment exists, estimates are made of the expected future cash flows arising from the use or the net selling price of the asset.