Annual Report 2010/11 - Sonova

oTHeR CuRReNT FINANCIAL ASSeTS
other current financial assets consist of financial assets
held for trading. Marketable securities within this category
are classified as financial assets at fair value through
profit or loss (see Note 3.4). derivatives are classified as
held for trading unless they are designated as hedges
(see Note 3.5).
TRAde ReCeIvABLeS
Trade receivables are recorded at original invoice amount
less provision made for doubtful accounts. A provision for
doubtful accounts is recorded when there is objective evidence
that the Group will not be able to collect all amounts
due according to the original terms of the invoice. The
amount of the provision is the difference between the carrying
amount and the recoverable amount, being the present
value of expected cash flows.
INveNToRIeS
Purchased raw materials, components and finished goods
are valued at the lower of cost or net re alizable value. To
evaluate cost, the standard cost method is applied, which
approximates historical cost determined on a first­in firstout
basis. Stan dard costs take into account normal levels of
materials, supplies, labor, efficiency, and capacity utilization.
Standard costs are regularly reviewed and, if necessary,
revised in the light of current conditions. Net realizable
value is the estimated selling price in the ordinary course
of business less the estimated costs of completion (where
appli cable) and selling expenses. Manufactured finished
goods and work­in­process are valued at the lower of
production cost or net realizable value. Provisions are
established for slow­moving, obsolete and phase­out
inventory.
PRoPeRTy, PLANT ANd equIPMeNT
CoNSoLIdATed FINANCIAL STATeMeNTS
Property, plant and equipment is valued at purchase or
manufacturing cost less accumulated depre ciation and any
impairment in value. depreciation is calculated on a
straight­line basis over the ex pected useful lives of the
individual assets or asset categories. Where an asset
comprises several parts with different useful lives, each
part of the asset is depreciated separately over its applicable
useful life. The applicable useful lives are 25–40 years
for buildings and 3–10 years for production facilities,
machinery, equipment, and vehicles. Land is not depreciated.
Leasehold improvements are depreciated over the
shorter of useful life or lease term.
Borrowing costs incurred for the construction of any qualifying
asset are capitalized during the period of time that is
required to complete and prepare the asset for its intended
use. Subsequent expenditure on an item of tangible assets
is capitalized at cost 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 reli ably.
expenditures for repair and maintenance which do not in­
crease the estimated useful lives of the related assets
are recognized as an expense in the period in which they
are incurred.
ReSeARCH ANd deveLoPMeNT
Research costs are expensed as incurred. development
costs are capitalized only if the identifiable asset is commercially
and technically feasible, can be completed, its costs
can be measured reliably and will generate probable future
economic benefits. Group expenditures which fulfill these
criteria are limited to the development of tooling and equipment
as well as costs relating to the development of hearing
implants. All other development costs are expensed as
incurred. In addition to the internal costs (direct personnel
and other operating costs, de preciation on research and
development equipment and allocated occupancy costs),
total costs also include externally contracted development
work. Such capitalized intangibles are recognized at cost
less accumulated amortization and impairment losses.
Amortization starts when the capitalized as set is ready for
use. These assets are generally amortized over the estimated
useful life applying the straight­line method. Capitalized
in progress development costs are tested for impairment
annually.
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