Financial Reporting - Rexel

indication that the cash-generating unit may be impaired (the impairment testing policy is described in note
2.8).
When goodwill is allocated to a cash-generating unit (or group of cash-generating units) and part of the
operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in
the carrying amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured based on the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
Other Intangible Assets
Intangible assets other than goodwill are stated at cost less accumulated amortization (see below) and
impairment losses (see note 2.8).
Identifiable intangible assets existing at the date of acquisition in a business combination are recognized as
part of the purchase accounting and measured at fair value. Intangible assets are considered identifiable if
they arise from contractual or legal rights or are separable.
Strategic partnerships acquired in business combinations arise from contractual rights. Their valuation is
determined on the basis of a discounted cash flow model.
Distribution networks are considered separable assets as they could be franchised. They correspond to the
value added to each branch through the existence of a network, and include notably banners and
catalogues. Their measurement is performed using the royalty relief method based on royalty rates used for
franchise contracts, taking their profitability into account. The royalty rate ranges from 0.4% to 0.8% of sales
depending on each country.
Strategic partnerships and distribution networks are regarded as having an indefinite useful life when there is
no foreseeable limit to the period over which they are expected to generate net cash inflows for the Group.
They are not amortized and are tested for impairment annually or as soon as there is an indication that these
assets may be impaired.
Customer relationships are recognized when the acquired entity establishes relationships with key customers
through contracts. Customer relationships are measured using an excess profit method and are amortized
over their useful lives based on historical attrition.
Computer software purchased for routine processing operations is recognized as an intangible asset.
Internally developed software which enhances productivity is capitalized.
Amortization
Amortization is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are tested
for impairment at each annual balance sheet date, at least. The useful life of an intangible asset with an
indefinite useful life is reviewed annually to determine whether the assessment of indefinite useful life for this
asset continues to be justified. If not, a change in the useful life assessment from indefinite to finite is made
on a prospective basis. Other intangible assets are amortized from the date that they are available for use.
Estimated useful lives of capitalized software development costs range from 5 to 10 years.
2.6 | Property, Plant and Equipment
Owned Assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and
impairment losses (see note 2.8).
When parts of an item of property, plant and equipment have different useful lives, those components are
accounted for as separate items of property, plant and equipment.
Leased Assets
Lease contracts which substantially transfer to the Group all of the risks and rewards of ownership are
classified as finance leases. All other leases are classified as operating leases.
Assets held under finance leases are stated at an amount equal to the fair value of the leased property or, if
this is lower, the present value of the minimum lease payments at inception of the lease, less accumulated
depreciation (see below) and impairment losses (see note 2.8). Minimum lease payments are apportioned
between the finance expense and the reduction of the outstanding liability. The finance expense is allocated
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