Notes to the consolidated financial statements
30 June 2014
2 Summary of significant accounting policies (continued)
(iii) Derivatives that do not qualify for hedge accounting
(o) Property, plant and equipment
20 to 66 years
Plant and equipment
1 to 20 years
1 to 40 years
(p) Intangible assets
(ii) Patents, trademarks and brand names
(iii) Customer relationships
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-
generating units or groups of cash-generating units that are expected to benefit from the business combination in which the
goodwill arose, identified according to operating segments (note 5).
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that
does not qualify for hedge accounting are recognised immediately in the income statement and are included in other income or
other expenses.
Patents are carried at fair value at acquisition and amortised on a straight line basis over the life of the patent. Trademarks are
carried at their fair value at acquisition less impairment losses and amortised over 5 years with amortisation calculated on a
straight line basis. Brand names are not amortised if they continue to be used and add value. Discontinued brand names are
amortised over a period of 10 years as they are phased out.
Goodwill is measured as described in note 2(h). Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal
of an entity include the carrying amount of goodwill relating to the entity sold.
Customer relationships acquired as part of a business acquisition are recognised separately from goodwill. The customer
relationships are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses.
Amortisation is calculated based on their estimated useful lives, which currently vary from 10 to 20 years.
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is
calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life. Assets are
depreciated or amortised from the date of acquisition, or in respect of internally constructed assets, from the time an asset is
completed and held ready for use. Depreciation is calculated using the straight line method to allocate their cost, net of their
residual values, over their estimated useful lives, as follows:
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, 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
reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount (note 2(i)).
All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying
cash flow hedges of foreign currency purchases of property, plant and equipment.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or
loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest
rate swaps hedging variable rate borrowings is recognised in the income statement within "finance costs". The gain or loss
relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in the income
statement within "sales". However, when the forecast transaction that is hedged results in the recognition of a non-financial
asset (for example, inventory or a non-financial liability), the gains and losses previously deferred in equity are transferred from
equity and included in the measurement of the initial cost or carrying amount of the asset or liability.
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