Adcock Ingram Integrated Report 2018

133 ADCOCK INGRAM  Integrated Report 2018 Annexure I – Accounting policies continued INTANGIBLE ASSETS Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset acquired in a business combination is the fair value at the date of acquisition. Subsequently, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, are not capitalised and expenditure is charged to profit or loss in the year in which the expense is incurred. The useful lives of intangible assets are either finite or indefinite. Intangible assets with finite lives are amortised over their useful life and assessed for impairment when there is an indication that the asset may be impaired due to a change in circumstances. The amortisation period and the amortisation method are reviewed at each year-end. The following useful lives have been estimated: Trademarks 15 years or indefinite Customer, supplier and licence- related intangibles 1 – 15 years Amortisation is recognised in profit or loss in fixed and administrative expenses. Intangible assets with indefinite useful lives are not amortised but are tested bi-annually for impairment and the useful lives are also reviewed to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment to a finite life is accounted for prospectively. Certain trademarks have been assessed to have indefinite useful lives, as presently there is no foreseeable limit to the period over which the assets can be expected to generate cash flows for the Group. An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. RESEARCH AND DEVELOPMENT COSTS Research costs, being costs from the investigation undertaken with the prospect of gaining new knowledge and understanding, are recognised in profit or loss as they are incurred. IMPAIRMENT OF NON-FINANCIAL ASSETS The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If such an indication exists, or when impairment testing is required, as is the case with goodwill and intangible assets with indefinite useful lives, the Group estimates the recoverable amount. An asset’s recoverable amount is the higher of the fair value less costs of disposal and its value in use. The recoverable amount is determined for individual assets, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying value exceeds the recoverable amount, the asset is considered impaired and is written down to the recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGU’s to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of ten years. Ten years are used in instances where the Group believes that assets have a value in use of 10 or more years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the tenth year. The following assets have specific characteristics for impairment testing: GOODWILL Goodwill is tested for impairment: • annually at the reporting date; and • when circumstances indicate that the carrying value may be impaired. INTANGIBLE ASSETS Intangible assets with indefinite useful lives are tested for impairment: • bi-annually as at 31 December and 30 June; and • when circumstances indicate that the carrying value may be impaired on an individual basis or at the CGU level. Impairment losses relating to goodwill and intangible assets cannot be reversed in future periods.