RBS 2013 Annual Report Download - page 381
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Accounting policies
379
The charge to profit or loss for pension costs (recorded in operating
expenses) comprises:
• the current service cost
• interest, computed at the rate used to discount scheme liabilities, on
the net defined benefit liability or asset
• past service cost resulting from a scheme amendment or curtailment
• gains or losses on settlement.
A curtailment occurs when the Group significantly reduces the number of
employees covered by a plan. A plan amendment occurs when the Group
introduces, or withdraws, a defined benefit plan or changes the benefits
payable under an existing defined benefit plan. Past service cost may be
either positive (when benefits are introduced or changed so that the
present value of the defined benefit obligation increases) or negative
(when benefits are withdrawn or changed so that the present value of the
defined benefit obligation decreases). A settlement is a transaction that
eliminates all further obligation for part or all of the benefits.
Actuarial gains and losses (i.e. gains or and losses on re-measuring of
the net defined benefit asset or liability) are recognised in full in the
period in which they arise in other comprehensive income.
6. Intangible assets and goodwill
Intangible assets 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 included in
Depreciation and amortisation. These estimated useful economic lives
are:
Core deposit intangibles 6 to 10 years
Other acquired intangibles 5 to 10 years
Computer software 3 to 12 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 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.
Intangible assets include goodwill arising on the acquisition of
subsidiaries and joint ventures. Goodwill on the acquisition of a
subsidiary is the excess of the fair value of the consideration transferred,
the fair value of any existing interest in the subsidiary and the amount of
any non-controlling interest measured either at fair value or at its share of
the subsidiary’s net assets over the Group's interest in the net fair value
of the subsidiary’s identifiable assets, liabilities and contingent liabilities.
Goodwill arises on the acquisition of a joint venture when the cost of
investment exceeds the Group’s share of the net fair value of the joint
venture’s identifiable assets and liabilities. Goodwill is measured at initial
cost less any subsequent impairment losses. Goodwill arising on the
acquisition of associates is included 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. Freehold land is not depreciated. The estimated useful
lives of the Group’s property, plant and equipment are:
Freehold buildings 50 years
Long leasehold property (leases
with more than 50 years to run) 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
The residual value and useful life of property, plant and equipment are
reviewed at each balance sheet date and updated for any changes to
previous estimates.
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.