future use or transfer. In case there arise doubts as to possibility to retrieve the book value of an asset, the latter is subjected to an impairment test, as described in note 4.5.
Publications, trademarks and frequencies
The useful life of publications’ mastheads, broadcasting frequencies and certain trademarks is considered as undefined. Such assets are not amortized and are instead subjected annually, or any time there is an indication that the asset may have experienced a loss in value, to an impair- ment test. Losses in value are recorded in the income statement under “Depreciation, amorti- zation and write-downs”.
Goodwill
Goodwill represents the premium paid over the fair value of the share of assets and liabilities, including potential ones, identifying at the acquisition date. Goodwill arising from the acqui- sition of associates is included in the value of the related equity investment. Goodwill acquired for a consideration is not amortized and is subjected at least annually to an impairment test. With such end, goodwill is allocated from the date of acquisition or by the end of the subse- quent financial year, to one or more cash generating units (CGUs). Reductions in value resul- ting from an impairment test do not give rise to adjustments in subsequent years and are recor- ded in the income statement under “Depreciation, amortization and write-downs”.
Other intangible assets
Other intangible assets are represented by industrial patents and intellectual property rights, concessions, licenses and similar rights, and software. They are recorded at cost, net of accu- mulated amortization calculated on a straight line basis over their expected useful life and pos- sible possible permanent impairment.
In view of the homogeneity of assets recorded in the balance sheet, barring specific relevant cases, the useful life of other intangible assets is estimated at 3 to 5 years. Amortization crite- ria applied are reviewed and redefined at least at the end of each financial period to keep into account possible significant changes.
4.2 Property, plant and equipment
Property, plant and equipment are recorded at the acquisition cost, represented by the fair value of the price paid for the acquisition of the asset, inclusive of any direct cost incurred to put the asset to use. The acquisition cost is the equivalent of price paid in cash at the time of the acquisition. In case the amount paid for the acquisition is deferred beyond normal payment terms, the difference with respect to the equivalent cash price is recorded as interest over the longer payment term. Interest charges on the acquisition are never capitalized. The capitaliza- tion of costs for the upgrade, update or improvement of structural elements owned or leased from third parties is carried out exclusively when the same fulfill the requisites that allow their separate classification as assets or part of assets. Ordinary maintenance costs are charged to the income statement.
After the initial recording, property, plant and equipment are carried at cost, net of accumula- ted depreciation (with the exception of land) and possible permanent impairment. The amorti- zable value of each significant component of a tangible asset with a different useful life is calcu- lated on a straight line basis over its expected useful life.
Depreciation criteria, the useful life of assets and their residual value are reviewed and redefi-
ned at least at the end of each financial period to keep into account possible significant chan- ges.
Capitalized costs relating to leasehold improvements are attributed to the classes of assets to which they relate and amortized over the shorter between the residual term of the lease and the residual useful life of the asset to which the leasehold improvement relates.
The book value of property, plant and equipment is in line with the amount expected to be retrieved through future use. In case doubts arise as to possibility to retrieve the book value of an asset, the latter is subjected to an impairment test, as described in note 4.5. The original value is restored when the reasons that gave rise to the impairment cease to exist.
4.3 Leases
Leases relating to assets for which the Group bears all costs and benefits deriving from owner- ship are classified as financial leases. Assets held under a financial lease are recorded at the lower between the current value of the asset leased and the present value of minimum lease payments provided for in the lease contract. Such payments are accounted for as interest and principal so as to obtain a fixed rate of interest on the residual part of the debt. Residual lease payments, net of interest, are recorded as financial debt. Interest payments are charged to the income statement over the life of the lease. Assets held under a financial lease are depreciated in line with assets owned.
Leasing contracts in which the lessor holds a significant share of risks and benefits deriving from ownership are classified as operating leases. Lease payments are recorded in the income statement in equal installments over the life of the lease contract.
In sale and lease-back operations, the difference between the sale price and the book value of the asset is not recorded, except in the case of a write-down in the value of the asset.
4.4 Grants
Grants are recorded when there exists, regardless of the formal granting of the amount, a rea- sonable certainty that the company will meet the conditions for the entitlement to the grant and that the same will actually be received.
Capital grants are recorded in the balance sheet as deferred income and not as an adjustment to the value of the item for which the grant has been obtained. The contribution is credited to the income statement based on the useful life of the asset for which it is granted by discoun- ting it so as to net out the related amortization expense recorded.
Grants receivable as compensation for expenses and costs already incurred or aimed at provi- ding immediate financial help to the company not correlated to future costs are recorded as income in the year in which they become receivable.
4.5 Loss in value of assets
A loss in value of an asset originates whenever the book value of an asset is higher than the amount expected to be retrieved from the same. At each accounting date, the presence of fac- tors indicating a possible loss in value is assessed. Whenever one of these factors is present, the retrievable value of the asset is assessed through an impairment test and the write-down is recorded where appropriate. Assets not yet available for use, those recorded in the financial statements in the current financial year, intangible assets with an indefinite useful life and good- will are subject at least annually to an impairment test, independently from the presence of fac- tors indicating possible loss in value.
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