LFV Annual report 2018 1
A CC OUNTING AND V AL U A TION PRIN CIPLE S L F V
2018 Valuation of ongoing assignments For assignments with a fixed price, the income and expenditure attributable to a completed assignment is recognised as revenue or costs relative to its degree of completion at accounting year-end (percentage of completion method). An assignment’s degree of completion is determined by comparing the costs incurred at the accounting year-end with the calculated total expenditure. In cases where the outcome of an assignment cannot be calculated with reasonable certainty, revenue is recognised only to the extent equivalent to the expenditure incurred for the assignment that will likely be reimbursed by the purchaser. Known or anticipated losses are immediately recognised as expenses. For assignments on a current account, the income attributable to a completed assignment is recognised as revenue at the rate the work is carried out and/or materials are supplied or used. GENERAL VALUATION PRINCIPLES Unless otherwise stated below, assets, liabilities, and provisions have been valued at their acquisition value. FIXED ASSETS Tangible fixed assets Tangible fixed assets are valued at their acquisition value with deductions for planned depreciation. Expenses for time spent in production of fixed assets are added to the acquisition value from January 1, 2017. Where appropriate, write-downs are performed in the manner indicated below. Planned depreciation is calculated by accruing the acquisition value linearly over the course of the estimated useful life. Depreciation begins when an asset is ready to be used for its intended purpose. When an asset includes significant components with different useful lives, so-called component depreciation rules are applied. The depreciation periods are continuously reassessed. Ongoing investment projects relating to tangible fixed assets are accounted for under the heading Fixed Assets Under Construction. Intangible fixed assets LFV applies ESV’s regulations and general advice concerning the reporting of expenditure on research and development. Expenditure on development that is of significant value to the business in future years is entered as an intangible fixed asset if all the conditions specified in the regulations are forthcoming. Intangible assets declared by LFV include expenses for purchased licenses and other software whose useful life is expected to exceed three years, as well as externally acquired materials and services for the development and production of intangible assets, if they fulfill the other criteria for being recognised as assets. Since 1 January 2017, expenditure for internally generated development (capitalised production) is added to the acquisition value if the criteria for being set up as an asset are also met. Research expenditure may not in any case be entered as an asset. Linear amortisation takes place according to the planned useful life of the asset. The useful life of an intangible fixed asset amounts to more than five years in cases where it can be determined to a reasonable degree of certainty that the useful life is longer, which is mainly the case for operational air traffic management systems. Planned depreciation Installations in the field Buildings Electrical installations 15–30 years 15–30 years 5–20 years Telecommunications equipment 5–15 years Vehicles, machinery and equipment 3–15 years Intangible assets Leased assets 3–12 years 3–5 years When there are indications that an asset’s value has decreased, the need for a writedown is determined according to ESV’s General Advice (Chapter 5, Section 5 “Write-downs”). LEASING Leasing is classified as either financial or operational leasing. Classification is made by applying the ESV’s General Advice concer ning financial leasing. Agreements classified as financial leasing (mainly vehicles) are declared as assets with a nominal acquisition value with deductions for planned depreciation, and obligations to meet future lease payments are declared as liabilities. Expenditure for operational lease agreements is written off on a straightline basis over the lease period. STOCK Stock refers to inventory valued at the lowest acquisition value and net realisable value in accordance with the lowest value principle. FINANCIAL INSTRUMENTS Financial instruments that are held primarily to generate yield or appreciation are valued at real value unless otherwise indicated below. The real value is determined based on the instrument’s market value. The change in value since the previous balance sheet date is accounted for in the profit and loss account. Financial instruments that are not held to generate yield or appreciation are valued at their accrued acquisition value at the effective rate, with the exception of shares in wholly and partly owned companies, financial guarantee contracts, and leasing agreements. The following financial instruments may not be valued at real value: 1. financial instruments held to maturity, 2. loan claims and other claims arising from the business, which are not held for trading purposes, 3. shares and participation rights in wholly or partly owned companies, and 4. liabilities, except for those included as part of a trading portfolio. 53