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NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2013
80 INDOFOOD AGRI RESOURCES LTD • ANNUAL REPORT 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.10 Intangible assets
(i) Research and development costs
Research costs are expensed as incurred. Deferred development costs arising from development expenditures on an
individual project are recognised as an intangible asset only when the Group can demonstrate the technical feasibility
of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use
or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the
ability to measure reliably the expenditure during the development.
Following initial recognition of the development costs as an intangible asset, it is carried at cost less accumulated amortisation
and any accumulated losses. Amortisation of the intangible asset begins when development is complete and the asset
is available for use. Development costs have a finite useful life and are amortised over the period of expected sales from
the related project on a straight line basis.
2.11 Impairment of non-financial assets
The Group assesses at each annual reporting period whether there is an indication that an asset may be impaired. If any
such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount.
An asset's recoverable amount is the higher of an asset's or cash-generating unit's ("CGUs") fair value less costs of disposal
and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or group of assets. Where the carrying amount of an asset or cash-generating unit
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing
value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using
a pre-tax 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, an appropriate valuation model is used. These calculations are corroborated by
valuation multiples or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for
each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations are generally
covering a period of ten years. For longer periods, a long term growth rate is calculated and applied to project future cash flows
after the tenth year.
Impairment losses of continuing operations are recognised in the consolidated statement of comprehensive income in those
expense categories consistent with the function of the impaired asset, except for assets that are previously revalued where the
revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive
income up to the amount of any previous revaluation.
For assets excluding goodwill, an assessment is made at each annual reporting period as to whether there is any indication that
previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication
exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss for an asset other
than goodwill is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount
since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset previously. Such reversal is recognised in the consolidated statement of
comprehensive income unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation
increase.