Page 71 - Paragon Annual Report 2

Notes to the consolidated financial statements (continued) 2 Significant accounting policies (continued)
(c) Intangible assets
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of the acquisition over the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary at the date of the acquisition.
Fair value is finalised within 12 months of the date of the acquisition. Goodwill is not amortised but reviewed for impairment annually in accordance with the impairment of goodwill policy set out below.
Bargain Purchase
If the fair value of the net identifiable assets of the subsidiary acquired is in excess of the cost of the acquisition and the measurement of all amounts has been reviewed, the difference is recognised directly in Consolidated Income Statement as a bargain purchase.
Other intangible assets – computer software
Computer software that is not integral to an item of property, plant or equipment is classified as an intangible asset and is held on the Consolidated Statement of Financial Position at cost. These assets are amortised on a straight line basis over their estimated useful lives, which is generally three to five years.
Other intangible assets – development expenditure
Expenditure incurred in the development of products or enhancements to existing product ranges is capitalised as an intangible asset only when the future economic benefits expected to arise are deemed probable and the costs can be reliably measured. Development costs not meeting these criteria are expensed in the Consolidated Income Statement as incurred. Capitalised development costs are amortised on a straight line basis over their estimated useful economic lives, which vary between three and five years, once the product or enhancement is available for use. Product research costs are written off as incurred.
Other intangible assets – customer relationships
Customer relationships identified as separable intangible assets in the context of business combinations are capitalised at their fair value at the date of acquisition. They are fully amortised over their estimated useful lives which is generally two to ten years.
Other intangible assets – licences
Licences are recorded at fair value at the date of acquisition. They are fully amortised over their estimated useful lives which is generally three to five years.
Other intangible assets – Patents
Patents are recorded at fair value at the date of acquisition. They are fully amortised over their estimated useful lives which is generally three to twenty years.
(d) Property, plant and equipment
Property, plant and equipment held for use in the production or supply of goods, or for administration purposes is stated in the Consolidated Statement of Financial Position at cost less any accumulated depreciation and impairment losses.
Costs are recognised as an asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance costs are charged to the Consolidated Income Statement during the period in which they are incurred.
Freehold land is not depreciated.
Depreciation is charged, other than on freehold land, so as to write off the cost or valuation of assets evenly over their estimated useful lives, as follows:
• Freehold buildings
• Plant and machinery
• Fixture, fittings and equipment
10 to 40 years 3 to 20 years 10 to 20 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying
amount of the asset and is recognised in the Consolidated Income Statement.
(e) Investments in joint ventures and associates
Entities in which the Group holds an interest on a long term basis and are jointly controlled by the Group and one or more others ventures under a contractual arrangement are treated as joint ventures. In the Group financial statements joint ventures are accounted for using the gross equity method.
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