Kesko's Annual Report 2009
Kesko's Annual Report 2009
Kesko's Annual Report 2009
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Other intangible assets<br />
The cost of intangible assets with definite useful lives are stated<br />
in the balance sheet and recognised as expenses during their<br />
useful lives. Such intangible assets include software licences and<br />
customer relationships to which acquisition cost has been allocated<br />
upon acquisition, and leasehold interests that are amortised<br />
during their probable terms. The estimated useful lives are:<br />
Computer software and licences 3–5 years<br />
Customer and supplier relationships 10 years<br />
Research and development expenses<br />
The Group has not had such development expenditures which,<br />
under certain conditions, should be recognised as assets and<br />
written off during their useful lives in accordance with IAS 38.<br />
Therefore the costs of research and development activities have<br />
been expensed as incurred.<br />
Computer software<br />
The labour costs and other direct expenditure of the Group<br />
employees working on new software development projects are<br />
capitalised as part of the software cost. In the balance sheet,<br />
computer software is included in intangible assets and its cost is<br />
written off during the useful life of the software. Software maintenance<br />
expenditure is recognised as an expense as incurred.<br />
Property, plant and equipment<br />
Property, plant and equipment mainly comprise land, buildings,<br />
machinery and equipment. Property, plant and equipment are<br />
carried at original cost net of planned depreciation and any<br />
impairment. The property, plant and equipment of acquired<br />
subsidiaries are measured at fair value at the date of acquisition.<br />
The machinery and equipment of buildings are treated as<br />
separate assets and any significant expenditure related to their<br />
replacement is capitalised. Subsequent expenditure relating to<br />
an item of property, plant and equipment is only added to the<br />
carrying amount of the asset when it is probable that future economic<br />
benefits relating to the asset will flow to the Group and<br />
that the cost of the asset can be reliably measured. The repair,<br />
service and maintenance expenditures of other items of property,<br />
plant and equipment aer recognised as an expense as incurred.<br />
Property, plant and equipment are written off on a straightline<br />
basis during their estimated useful lives.<br />
The most common estimated useful lives are:<br />
Buildings 10–33 years<br />
Components of buildings 8–10 years<br />
Machinery and equipment 3–8 years<br />
Cars and transport equipment 5 years<br />
The residual values, useful lives and depreciation methods<br />
applied to property, plant and equipment are reviewed at least<br />
at the end of each accounting period. If the estimates of useful<br />
life and the expected pattern of economic benefits are different<br />
from previous estimates, the change in the estimate is accounted<br />
for in accordance with IAS 8.<br />
The depreciation of property, plant and equipment ceases<br />
when the asset is classified as held for sale in accordance with<br />
IFRS 5. Lands are not depreciated.<br />
Kesko financial statements <strong>2009</strong><br />
Gains and losses from sales and disposals of property, plant<br />
and equipment are recognised in the income statement and<br />
presented as other operating income and expenses.<br />
93<br />
Investment properties<br />
Investment properties are properties held by the enterprise<br />
mainly to earn rentals or for capital appreciation. The Group does<br />
not hold real estate classified as investment properties.<br />
Impairment of non-financial assets<br />
At each reporting date, the Group assesses whether there is any<br />
indication that an asset may be impaired. If any such indication<br />
exists, the recoverable amount of the asset is estimated. The<br />
recoverable amount of goodwill and intangible assets with<br />
indefinite useful lives is assessed every year whether or not there<br />
is an indication of impairment. In addition, an impairment test<br />
is performed whenever there is an indication of impairment.<br />
The recoverable amount is the higher rate of an asset's fair<br />
value less the costs of disposal, and its value in use. Often it is<br />
not possible to assess the recoverable amount for an individual<br />
asset. Then, as in the case of goodwill, the recoverable amount is<br />
determined for the cash generating unit to which the goodwill or<br />
asset belongs.<br />
An impairment loss is recognised if the carrying amount of an<br />
asset exceeds its recoverable amount. The impairment loss is disclosed<br />
in the income statement. An impairment loss recognised<br />
for an asset in prior years is reversed if there has been an<br />
increase in the reassessed recoverable amount. However, the<br />
reversal of an impairment loss of an asset should not exceed the<br />
carrying amount of the asset without an impairment loss recognition.<br />
For goodwill, a recognised impairment loss is not reversed<br />
under any circumstances.<br />
Leases<br />
In accordance with IAS 17, leases that substantially transfer all<br />
the risks and rewards incident to ownership to the Group are<br />
classified as finance leases. An asset leased under a finance lease<br />
is recognised in the balance sheet at the lower rate of its fair<br />
value at the inception date and the present value of minimum<br />
lease payments. The rental obligations of finance leases are<br />
recorded in interest-bearing liabilities in the balance sheet.<br />
Lease payments are allocated between the interest expense and<br />
the liability. Finance lease assets are amortised over the shorter<br />
period of the useful life and the lease term.<br />
Leases in which assets are leased out by the Group, and substantially<br />
all the risks and rewards incident to ownership are<br />
transferred to the lessee, are also classified as finance leases.<br />
Assets leased under such contracts are recognised as receivables<br />
in the balance sheet and are stated at present value. The financial<br />
income from finance leases is determined so as to achieve a<br />
constant periodic rate of return on the remaining net investment<br />
for the lease term.<br />
Leases in which risks and rewards incident to ownership are<br />
not transferred to the lessee are classified as operating leases.<br />
Lease payments related to them are recognised in the income<br />
statement on a straight-line basis over the lease term.<br />
In sale and leaseback transactions the sale price and the<br />
future lease payments are usually interdependent. If a sale and<br />
leaseback transaction results in a finance lease, any excess of<br />
sales proceeds over the carrying amount is not immediately