Kesko's Annual Report 2009

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