Siemens 2007 Annual Report Download - page 218

218 Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts)
Goodwill – Goodwill is not amortized, but instead tested for impairment annu-
ally, as well as whenever there are events or changes in circumstances (“trigger-
ing events”) which suggest that the carrying amount may not be recoverable.
Goodwill is carried at cost less accumulated impairment losses.
The goodwill impairment test is based on cash-generating units, which at Sie-
mens are its divisions. For the purpose of impairment testing, goodwill acquired
in a business combination is allocated to the division or divisions that are
expected to benefi t from the synergies of the business combination in which the
goodwill arose. If the carrying amount of the division, to which the goodwill is
allocated, exceeds its recoverable amount goodwill allocated to this division must
be reduced accordingly. The recoverable amount is the higher of the division’s fair
value less costs to sell and its value in use. Siemens generally determines the
recoverable amount of a division based on its fair value less costs to sell. These
values are generally determined based on discounted cash fl ow calculations.
Impairment losses on goodwill are not reversed in future periods if the recover-
able amount exceeds the carrying amount of the cash-generating unit to which
the goodwill is allocated. See Note 15 for further information.
Other intangible assets – Other intangible assets consist of software and
other internally generated intangible assets, patents, licenses and similar rights.
The Company amortizes intangible assets with fi nite useful lives on a straight-line
basis over their respective estimated useful lives to their estimated residual val-
ues. Estimated useful lives for software, patents, licenses and other similar rights
generally range from three to fi ve years, except for intangible assets with fi nite
useful lives acquired in business combinations. Intangible assets acquired in
business combinations primarily consist of customer relationships and technol-
ogy. Weighted average useful lives in specifi c acquisitions ranged from nine to
twenty-two years for customer relationships and from seven to twelve years for
technology. Intangible assets which are determined to have indefi nite useful lives
as well as intangible assets not yet available for use are not amortized, but instead
tested for impairment at least annually. See Note 16 for further information.
Property, plant and equipment – Property, plant and equipment is valued at
cost less accumulated depreciation and impairment losses. If the costs of certain
components of an item of property, plant and equipment are signifi cant in rela-
tion to the total cost of the item, they are accounted for and depreciated sepa-
rately. Depreciation expense is recognized using the straight-line method. Costs
of construction of qualifying long-term assets include capitalized interest, which
is amortized over the estimated useful life of the related asset. The following use-
ful lives are assumed:
Factory and offi ce buildings 20 to 50 years
Other buildings 5 to 10 years
Technical machinery & equipment 5 to 10 years
Furniture & offi ce equipment generally 5 years
Equipment leased to others generally 3 to 5 years