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Annual Report & Accounts 2012 - NOTES
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ANNUAL REPORT 2012 GVC H o l d i n g s 1. SIGNIFICANT ACCOUNTING POLICIES (continued) 1.5 Property, Plant and Equipment 1.5.1 Owned Assets Property, plant and equipment is stated at cost, less accumulated depreciation (see 1.5.2 below) and impairment losses (see accounting policy 1.7). Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. 1.5.2 Depreciation Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Fixtures and fittings: 3 years Plant and equipment: 3 years The residual value, if significant, is reassessed annually. 1.6 Intangible Assets 1.6.1 Goodwill Acquired goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree at the date of acquisition. Goodwill is tested at least annually for impairment and carried at cost less accumulated impairment losses. At the date of acquisition, goodwill is allocated to cash generating units for the purpose of impairment testing. Any negative goodwill arising on an acquisition would be recognised directly in profit or loss. 1.6.2 Other Intangible Assets Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see 1.6.4) and impairment losses (see accounting policy 1.7). The cost of intangible assets acquired in a business combination is the fair value at acquisition date. The valuation methodology used for each type of identifiable asset category is detailed below: Asset category Valuation methodology Consulting and magazine Income (cost saving) Software licence Income (incremental value plus loss of profits) Trademarks Relief from royalty Trade name Relief from royalty Non Contractual customer relationships Excess earnings Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense is incurred. 1.6.3 Subsequent Expenditure Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. This includes legal and similar expenditure incurred in registering brands and trade names, which is capitalised, all other expenditure is expensed as incurred. 1.6.4 Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and trademarks with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Consulting agreements 3-5 years Capitalised development costs 2-4 years Software licence agreements 2-15 years Non-contractual customer relationships 4 years 28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued for the year ended 31 December 2012