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Intangible assets are accounted for at amortized cost. With the exception of goodwill, all intangible assets have finite useful lives and are amortized using the straight-line method. Useful lives and methods of amortization are reviewed on an annual basis.
Software for commercial and technical applications is amortized over three to five years. “Operating rights” refer to the entirety of the permits and approvals required for the operation of a power plant. Such rights are generally amortized over the economic life of the power plant in question, using the straight-line method. Easement agreements in the electricity and gas business, and other easement rights, generally have useful lives of up to 20 years. Concessions in the water business have terms of up to 50 years. Capitalized customer relations are amortized over a useful life of up to ten years. Useful lives and methods of amortization are reviewed on an annual basis.
Goodwill is not amortized; instead it is subjected to an impairment test once every year, or more frequently if there are indications of impairment.
Development costs are capitalized if a newly developed product or process can be clearly defined, is technically feasible and it is the company’s intention to either use the product or process itself or market it. Furthermore, asset recognition requires that there be a sufficient level of certainty that the development costs lead to future cash inflows. Capitalized development costs are amortized over the time period during which the products are expected to be sold. Research expenditures are recognized as expenses in the period in which they are incurred.
An impairment loss is recognized for an intangible asset, if the recoverable amount of the asset is less than its carrying amount. A special regulation applies for the case when the asset is part of a cash-generating unit. Such units are defined as the smallest identifiable group of assets which generates cash inflows that are largely independent of cash inflows from other assets or groups of assets. If the asset is a part of a cash-generating unit, the impairment loss is calculated based on the recoverable amount of this unit. If this results in the carrying amount of a cash-generating unit to which goodwill was allocated exceeding the recoverable amount, the allocated goodwill is initially written down by the difference. Impairment losses which must be recognized in addition to this are taken into account by reducing the carrying amount of the other assets of the cash-generating unit on a prorated basis. If the reason for an impairment loss recognized in prior years has ceased to exist, a write-back is performed, whereby the increased carrying amount resulting from the write-back may not exceed the amortized cost. Impairment losses on goodwill are not reversed.
