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Unformatted text preview: lated to reduce the cost of assets, other than
land which is not depreciated, to their estimated residual value, if
any, over their estimated useful lives. The cost to be capitalised
as part of the asset, includes direct and incremental costs and, for
qualifying assets, borrowing costs. Depreciation commences when
the assets are ready for their intended use. Assets held under finance leases and leasehold improvements are
depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an item
of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the
asset and is reported as “other income (expense)” in the income
statement as part of operating profit or loss.
Estimated useful life, depreciation method and residual value are
evaluated at least annually. The straight-line depreciation method is
used as this best reflects the consumption of the assets, which often
is the passage of time. Residual value is estimated to be zero for
most assets, except for commercial buildings and vehicles which the
Group does not expect to use for the assets’ whole economic lives.
Repair and maintenance is expensed as incurred. If new parts are
capitalised, replaced parts are derecognised and any remaining net
carrying amount is recognised in operating profit (loss) as loss on
An exchange of assets is recognised at fair value if the transaction
has commercial substance and the value of the assets can be
measured reliably. If these criteria are not met, the carrying amount
of the old assets is carried forward for the new assets.
Intangible assets acquired separately are measured initially at cost.
The cost to be capitalised as part of the asset, includes direct and
incremental costs and, for qualifying assets, borrowing costs. The
cost of intangible assets acquired in a business combination is the
fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and any accumulated impairment losses. /page 32/
telenor annual report 2011
notes to the financial statements / telenor group Intangible assets with finite lives are amortised over the useful
economic lives. useful lives and amortisation method for intangible
assets with finite useful life are reviewed at least annually. The
straight-line depreciation method is used for most intangible assets
as this best reflects the consumption of the assets. and the amount has been reliably estimated. Provisions are not
recognised for future operating losses. Provisions are measured
at the management’s best estimate of the expenditure required
to settle the obligation at the reporting date, and are discounted
to present value. Gains and losses arising from derecognition of an intangible asset
are measured at the difference between the net sales proceeds and
the carrying amount of the asset and are reported as “other income
(expense)” in the income statement as part of operating profit. Assets retirement obligations
An asset retirement obligation exists where the Group has a legal
or constructive obligation to remove an asset and restore the site.
Where the Group is required to settle an asset retirement obligation,
the Group has estimated and capitalised the net present value of
the obligations and increased the carrying value of the related asset.
The cash flows are discounted at a pre-tax risk-free rate as risks are
reflected in the cash flows. Subsequent to the initial recognition,
an accretion expense is recognised as finance cost relating to the
asset retirement obligation, and the capitalised cost is expensed as
ordinary depreciation with the related asset. The effects on the net
present value of any subsequent changes to the gross removal costs
or discount rates adjust the carrying value of assets and liabilities,
and are expensed over the remaining estimated useful life of the
related assets. Research and development costs
Development expenditures that meet the criteria for recognition,
i.e. that it is probable that the expected future economic benefits
that are attributable to the asset will flow to the entity and the cost
can be measured reliably, are capitalised. The assets are amortised
over their expected useful life once the asset is available for use.
Costs incurred during the research stage of a project, as well as
maintenance and training costs, are expensed as incurred. Development costs that do not meet the criteria of capitalisation are
expensed as incurred.
Impairment of property, plant and equipment and intangible
assets other than goodwill
At each reporting date the Group evaluates if there are identified
indications that property, plant and equipment or intangible
assets may be impaired. If there are such indications, the
recoverable amount of the assets is estimated in order to determine
the extent of the impairment loss (if any). Intangible assets with
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This document was uploaded on 03/21/2014.
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