2014 ANNUAL REPORT

Consolidated Financial Report |

EXPLANATORY NOTES

2014 Annual Report

Prysmian Group

144

B.7 INTANGIBLE ASSETS

Intangible assets are non-monetary assets which are sepa-

rately identifiable, have no physical nature, are under the

company’s control and are able to generate future economic

benefits. Such assets are recognised at acquisition cost and/

or production cost, including all costs directly attributable

to make the assets available for use, net of accumulated

amortisation and impairment, if any. Borrowing costs directly

attributable to the acquisition or development of qualifying

assets are capitalised and amortised over the useful life of

the asset to which they refer. Amortisation commences when

the asset is available for use and is calculated on a straight-

line basis over the asset’s estimated useful life.

(a) Goodwill

Goodwill represents the difference between the cost incurred

for acquiring a controlling interest (in a business) and the fair

value of the assets and liabilities identified at the acquisition

date. Goodwill is not amortised, but is tested for impairment

at least annually to identify any impairment losses. This

test is carried out with reference to the cash generating unit

(“CGU”) or group of CGUs to which goodwill is allocated and

at which level it is monitored. Reductions in the value of

goodwill are recognised if the recoverable amount of goodwill

is less than its carrying amount. Recoverable amount is

defined as the higher of the fair value of the CGU or group

of CGUs, less costs to sell, and the related value in use (see

Section B.8 Impairment of property, plant and equipment and

finite-life intangible assets for more details about how value

in use is calculated). An impairment loss recognised against

goodwill cannot be reversed in a subsequent period.

If an impairment loss identified by the impairment test is

higher than the value of goodwill allocated to that CGU or

group of CGUs, the residual difference is allocated to the

assets included in the CGU or group of CGUs in proportion to

their carrying amount.

Such allocation shall not reduce the carrying amount of an

asset below the highest of:

• its fair value, less costs to sell;

• its value in use, as defined above;

• zero.

(b) Patents, concessions, licences, trademarks and similar

rights

These assets are amortised on a straight-line basis over their

useful lives.

(c) Computer software

Software licence costs are capitalised on the basis of

purchase costs and costs to make the software ready for use.

These costs are amortised on a straight-line basis over the

useful life of the software. Costs relating to the development

of software programs are capitalised, in accordance with IAS

38, when it is likely that the asset’s use will generate future

economic benefits and when the conditions described below

are met (see paragraph (d) on Research and Development

costs).

(d) Research and Development costs

Research and Development costs are expensed to the income

statement when they are incurred, except for development

costs which are recorded as intangible assets when all the

following conditions are met:

• the project is clearly identified and the related costs can

be reliably identified and measured;

• the technical feasibility of the project can be demonstra-

ted;

• the intention to complete the project and to sell its output

can be demonstrated;

• there is a potential market for the output of the intangi-

ble asset or, if the intangible asset is to be used internally,

its usefulness can be demonstrated;

• there are sufficient technical and financial resources to

complete the project.

Development costs capitalised as intangible assets start to

be amortised once the output of the project is marketable.