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Subsequent expenditure
Subsequent expenditure in respect of intangible assets is
capitalized only when it increases the future economic
benefits specific to the related asset. All other expenditure
is expensed as incurred.
Amortization
Amortization is charged to the income statement using
the straight-line method over the expected useful life of
the intangible assets. Intangible assets are amortized from
the date they are ready for use. Their estimated useful life
is 3 to 10 years. The residual value, useful lives and
depreciation methods are reviewed annually. The Group
has no other intangible assets with indefinite useful life.
INVENTORIES
Inventories are measured at the lower of cost or net
realizable value. The net realizable value is equal to the
estimated sale price, less the estimated costs of comple-
tion and selling expenses.
The cost of inventories includes the costs incurred in
acquiring the inventories and bringing them to their
present location and condition. Inventories are measured
using the FIFO method.
IMPAIRMENT
Non-financial assets
The carrying amounts of the Group’s non-financial assets,
other than inventories and deferred tax assets are
reviewed at each balance sheet date to determine
whether there is any indication of impairment. When there
is an indication of impairment, the recoverable amount of
the asset is estimated. In case of goodwill and intangible
assets with an indefinite useful life or which are not yet
ready for use, the recoverable amount is estimated at the
same date each year. An impairment loss is recorded
whenever the carrying amount of an asset, or the cash
generating unit to which the asset belongs, is higher than
the recoverable amount.
The recoverable amount is the higher of the value in use or
the fair value less costs to sell. When determining the
value in use, the discounted value of the estimated future
cash flows is calculated using a proposed weighted
average cost of capital, that reflects both the current
market rate and the specific risks with regard to the asset
or the cash generating unit. Where an asset does not
generate significant cash flows by itself, the recoverable
amount is determined based on the cash generating unit
to which the asset belongs. Goodwill acquired in a
business combination is allocated to groups of cash
generating units that are expected to benefit from the
synergies of the combination.
Impairment losses are charged to the income statement.
Impairment losses recorded in respect of cash generating
units are first deducted from the carrying amount of any
goodwill assigned to cash generating units (or groups of
units) and then proportionally from the carrying amount
of the other assets of the unit (or group of units).
An impairment is reversed when the reversal can be
objectively linked to an event occurring after the impair-
ment was recorded. A previously recorded impairment is
reversed where a change has occurred in the estimates
used in determining the recoverable amount, but not in a
higher amount than the net carrying amount that would
have been determined if no impairment had been
recorded in previous years. Goodwill impairments are not
reversed.
Non-derivative financial assets
Financial assets that are not measured at fair value with
recognition of changes in value in the income statement,
including investments that are recognized using the equity
method, are assessed at every balance sheet date to
determine whether there are objective indications that
they have been impaired. A financial asset is deemed to be
impaired if there are objective indications that an event
has occurred after the initial recognition of the assets that
has had a negative impact on the expected future cash
flows of that asset and for which a reliable estimate can
be made.
Objective indications that financial assets are impaired
include the non-fulfilment of payment obligations by and
overdue payments of a debtor, restructuring of an amount
owed to the Group under conditions that the Group
otherwise would not have considered, indications that a
debtor or issuer will go bankrupt, detrimental changes in
the payment status of debtors or issuers, economic
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05 / FINANCIAL REPORT
KINEPOLIS GROUP
ANNUAL REPORT 2014