RBS 2010 Annual Report Download - page 279

6. Intangible assets and goodwill
Intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and impairment losses. Amortisation is
charged to profit or loss over the assets' estimated economic lives using
methods that best reflect the pattern of economic benefits and is included
in depreciation and amortisation. The estimated useful economic lives are
as follows:
Core deposit intangibles 6 to 10 years
Other acquired intangibles 5 to 10 years
Computer software 3 to 5 years
Expenditure on internally generated goodwill and brands is written-off as
incurred. Direct costs relating to the development of internal-use
computer software are capitalised once technical feasibility and economic
viability have been established. These costs include payroll, the costs of
materials and services, and directly attributable overheads. Capitalisation
of costs ceases when the software is capable of operating as intended.
During and after development, accumulated costs are reviewed for
impairment against the projected benefits that the software is expected to
generate. Costs incurred prior to the establishment of technical feasibility
and economic viability are expensed as incurred as are all training costs
and general overheads. The costs of licences to use computer software
that are expected to generate economic benefits beyond one year are
also capitalised.
Acquired goodwill, being the excess of the cost of an acquisition over the
Group's interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities of the subsidiary, associate or joint venture
acquired, is initially recognised at cost and subsequently at cost less any
accumulated impairment losses. Goodwill arising on the acquisition of
subsidiaries and joint ventures is included in the balance sheet category
‘Intangible assets’ and that on associates within their carrying amounts.
The gain or loss on the disposal of a subsidiary, associate or joint venture
includes the carrying value of any related goodwill.
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, the 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.
277RBS Group 2010
Financial statements