RBS 2009 Annual Report Download - page 252

RBS Group Annual Report and Accounts 2009250
7. Property, plant and equipment
Items of property, plant and equipment (except investment property –
see accounting policy 9) are stated at cost less accumulated
depreciation and impairment losses. Where an item of property, plant
and equipment comprises major components having different useful
lives, they are accounted for separately.
Depreciation is charged to profit or loss on a straight-line basis so as to
write-off the depreciable amount of property, plant and equipment
(including assets owned and let on operating leases) over their
estimated useful lives.
The depreciable amount is the cost of an asset less its residual value.
Land is not depreciated. Estimated useful lives are as follows:
Freehold and long leasehold buildings 50 years
Short leaseholds unexpired period
of the lease
Property adaptation costs 10 to 15 years
Computer equipment up to 5 years
Other equipment 4 to 15 years
8. Impairment of intangible assets and property, plant and
equipment
At each reporting date, the Group assesses whether there is any
indication that its intangible assets, or property, plant and equipment are
impaired. If any such indication exists, the Group estimates the
recoverable amount of the asset and the impairment loss if any.
Goodwill is tested for impairment annually or more frequently if events or
changes in circumstances indicate that it might be impaired. If an asset
does not generate cash flows that are independent from those of other
assets or groups of assets, recoverable amount is determined for the
cash-generating unit to which the asset belongs. The recoverable
amount of an asset is the higher of its fair value less cost to sell and its
value in use. Value in use is the present value of future cash flows from
the asset or cash-generating unit discounted at a rate that reflects
market interest rates adjusted for risks specific to the asset or cash-
generating unit that have not been reflected in the estimation of future
cash flows. If the recoverable amount of an intangible or tangible asset
is less than its carrying value, an impairment loss is recognised
immediately in profit or loss and the carrying value of the asset reduced
by the amount of the loss. A reversal of an impairment loss on
intangible assets (excluding goodwill) or property, plant and equipment
is recognised as it arises provided the increased carrying value does
not exceed that which it would have been had no impairment loss been
recognised. Impairment losses on goodwill are not reversed.
9. Investment property
Investment property comprises freehold and leasehold properties that
are held to earn rentals or for capital appreciation or both. It is not
depreciated but is stated at fair value based on valuations by
independent registered valuers. Fair value is based on current prices for
similar properties in the same location and condition. Any gain or loss
arising from a change in fair value is recognised in profit or loss. Rental
income from investment property is recognised on a straight-line basis
over the term of the lease. Lease incentives granted are recognised as
an integral part of the total rental income.
10. Foreign currencies
The Group’s consolidated financial statements are presented in sterling
which is the functional currency of the company.
Transactions in foreign currencies are translated into sterling at the
foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated
into sterling at the rates of exchange ruling at the balance sheet date.
Foreign exchange differences arising on translation are reported in
income from trading activities except for differences arising on cash flow
hedges and hedges of net investments in foreign operations. Non-
monetary items denominated in foreign currencies that are stated at fair
value are translated into sterling at foreign exchange rates ruling at the
dates the values were determined. Translation differences arising on
non-monetary items measured at fair value are recognised in profit or
loss except for differences arising on available-for-sale non-monetary
financial assets, for example equity shares, which are included in the
available-for-sale reserve in equity unless the asset is the hedged item
in a fair value hedge.
The assets and liabilities of foreign operations, including goodwill and
fair value adjustments arising on acquisition, are translated into sterling
at foreign exchange rates ruling at the balance sheet date. The revenues
and expenses of foreign operations are translated into sterling at
average exchange rates unless these do not approximate to the foreign
exchange rates ruling at the dates of the transactions. Foreign
exchange differences arising on the translation of a foreign operation
are recognised directly in equity and included in profit or loss on its
disposal.
11. Leases
Contracts to lease assets are classified as finance leases if they transfer
substantially all the risk s and rewards of ownership of the asset to the
customer. Other contracts to lease assets are classified as operating
leases.
Finance lease receivables are stated in the balance sheet at the amount
of the net investment in the lease being the minimum lease payments
and any unguaranteed residual value discounted at the interest rate
implicit in the lease. Finance lease income is allocated to accounting
periods so as to give a constant periodic rate of return before tax on the
net investment. Unguaranteed residual values are subject to regular
review to identify potential impairment. If there has been a reduction in
the estimated unguaranteed residual value, the income allocation is
revised and any reduction in respect of amounts accrued is recognised
immediately.
Rental income from operating leases is credited to the income statement
on a receivable basis over the term of the lease. Operating lease assets
are included within Property, plant and equipment and depreciated over
their useful lives (see accounting policy 7).
Accounting policies continued