LISI 2012 FINANCIAL REPORT
37
3
Consolidated financial statements
2.2.8 Tangible assets
2.2.8.1 ASSETS OWNED BY THE LISI GROUP
Tangible fixed assets are recorded at diminished cost with
accumulated depreciations and impairments. The cost of an
asset produced by the Group for itself includes the costs of
raw materials, direct manpower, and an estimate, if applicable,
of costs related to the removal and dismantling of the asset
and the repair of the site at which it is located, along with an
appropriate share of the general production costs.
When the components of tangible fixed assets have different
useful lives, they are recorded as separate tangible fixed assets,
as per the components method.
2.2.8.2 ASSETS FUNDED THROUGH FINANCE LEASES
Leases which transfer virtually all the risks and benefits relating
to the ownership of an asset to the Group are classed as finance
leases. Assets funded through finance leases are recognized
in the assets side of the balance sheet at the fair value of
the goods leased, or the present value of the minimum lease
payments if this is lower. These assets are depreciated over
the same period as goods of the same type which are owned
outright. The corresponding debt is entered on the liabilities
side of the balance sheet.
2.2.8.3 SUBSEQUENT EXPENDITURE
When calculating the book value of a tangible fixed asset, the
Group recognizes the cost of replacing a component of this
tangible fixed asset at the time when the cost is incurred, if it is
likely that future economic benefits associated with this asset
will flow to the Group and the cost can be reliably estimated.
All ongoing servicing and maintenance costs are recognized as
an expense when they are incurred.
2.2.8.4 DEPRECIATION
Depreciation is recognized as an expense using the straight-line
method over the estimated useful life for each component of a
tangible fixed asset.
Land is not depreciated.
Estimated useful lives are as follows:
- buildings: 20 – 40 years
- plant and machinery: 10 – 15 years
- fixtures and fittings: 5 – 15 years
- transport equipment: 5 years
- equipment and tools: 10 years
- office equipment: 5 years
- office furniture: 10 years
- IT hardware: 3 years
2.2.8.5 IMPAIRMENT OF ASSETS
Goodwill and intangible fixed assets of indefinite life-span are
submitted to a depreciation test at each annual close (see note
2.2.7.2) and each time events or market-changingmodifications
indicate a risk of impairment. Other intangible assets fixed and
tangible fixed assets are also subject to such a test at any time
when there is a risk of loss of value.
The method used involves comparing the recoverable value of
each of the Group’s cash-generating units with the net book
value of the corresponding assets (including the goodwill).
The recoverable value is calculated for each asset individually,
unless the asset under consideration does not generate cash
inflows independently of the cash inflows generated by other
assets or groups of assets. In some cases, the recoverable value
is calculated for a group of assets.
Recoverable value is defined as: whichever is the higher out of
the realizable value (less the costs of disposal) and the value in
use. The latter is calculated by discounting future cash flows,
using predicted cash flows which are consistent with the most
recent budget and business plan approved by the Executive
Committee and presented to the Board of Directors. The
discount rate applied reflects the market's current assessment
of the time value of money and the risks specific to the asset or
the group of assets.
The realizable value is defined as the sum which could be
obtained by selling the asset or group of assets in conditions
of normal competition where all parties are fully informed
and consenting, less the costs of disposal. These figures are
calculated from market values (comparison with similar listed
companies, value of recent deals and stock prices) or failing
that, from discounted future cash flows.
If the recoverable value is lower than the net book value for the
asset or group of assets tested, the discrepancy is recognized
as a loss of value. In the case of a group of assets, it should
preferably be classified as a reduction in goodwill.
Losses of value recognized under Goodwill are irreversible.
For the definition of Cash-Generating Units, the Group has
retained the strategic combination of Business Units (B.U.)
corresponding to the strategic segmenting and the reporting
structure of the LISI Group.
The LISI AEROSPACE division is split into 7 CGUs:
• Europe B.U.,
• USA B.U,
• Specialty Fasteners B.U.,
