useful lives may be shorter due to contractual arrangements or other specific factors such as time and location.
Intangible assets that are not affected by legal, economic, contrac- tual, or other factors that might restrict their useful lives are con- sidered to have indefinite useful lives. They are not amortised but are tested for impairment annually or whenever there are indica- tions of impairment. They generally include brand names from business combinations and goodwill, for example. Impairment test- ing is carried out in accordance with the principles described in the section headed Impairment.
Property, plant and equipment
Property, plant and equipment is carried at cost, reduced by accu- mulated depreciation and valuation allowances. In addition to dir- ect costs, production cost includes an appropriate share of allocable production overhead costs. Borrowing costs that can be allocated directly to the purchase, construction or manufacture of property, plant and equipment are capitalised. Value added tax arising in con- junction with the acquisition or production of items of property, plant or equipment is included in the cost if it cannot be deducted as input tax. Depreciation is charged using the straight-line method. The estimated useful lives applied to the major asset classes are pre- sented in the table below:
useful lives
Years 1
Buildings 20 to 50
Technical equipment and machinery 10 to 20
Aircraft 15 to 20
IT systems 4 to 5
Transport equipment and vehicle fleet 4 to 18 Other operating and office equipment 8 to 10
1 The useful lives indicated represent maximum amounts specified by the Group. The actual
useful lives may be shorter due to contractual arrangements or other specific factors such as time and location.
If there are indications of impairment, an impairment test must be carried out; see section headed Impairment.
Impairment
At each balance sheet date, the carrying amounts of intangible assets, property, plant and equipment and investment property are re- viewed for indications of impairment. If there are any such indica- tions, an impairment test is carried out. This is done by determining the recoverable amount of the relevant asset and comparing it with the carrying amount.
In accordance with IAS 36, the recoverable amount is the asset’s fair value less costs to sell or its value in use (present value of the pre-tax free cash flows expected to be derived from the asset in future), whichever is higher. The discount rate used for the value in use is a pre-tax rate of interest reflecting current market conditions. If the recoverable amount cannot be determined for an individual asset, the recoverable amount is determined for the smallest iden- tifiable group of assets to which the asset in question can be allo- cated and which generates independent cash flows (cash generating unit – CGU). If the recoverable amount of an asset is lower than its carrying amount, an impairment loss is recognised immediately in respect of the asset. If, after an impairment loss has been recognised, a higher recoverable amount is determined for the asset or the CGU at a later date, the impairment loss is reversed up to a carrying amount that does not exceed the recoverable amount. The increased carrying amount attributable to the reversal of the impairment loss is limited to the carrying amount that would have been determined (net of amortisation or depreciation) if no impairment loss had been recognised in the past. The reversal of the impairment loss is recog- nised in the income statement. Impairment losses recognised in respect of goodwill may not be reversed.
Since January 2005, goodwill has been accounted for using the impairment-only approach in accordance with IFRS 3. This stipu- lates that goodwill must be subsequently measured at cost, less any cumulative adjustments from impairment losses. Purchased good- will is therefore no longer amortised and instead is tested for im- pairment annually in accordance with IAS 36, regardless of whether any indication of possible impairment exists, as in the case of intan- gible assets with an indefinite useful life. In addition, the obligation remains to conduct an impairment test if there is any indication of impairment. Goodwill resulting from company acquisitions is allo- cated to the identifiable groups of assets (CGU s or groups of CGU s) that are expected to benefit from the synergies of the acquisition. These groups represent the lowest reporting level at which the good- will is monitored for internal management purposes. The carrying amount of a CGU to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired. Where impairment losses are recognised in connection with a CGU to which goodwill has been allocated, the existing carrying amount of the goodwill is reduced first. If the amount of the impairment loss exceeds the carrying amount of the goodwill, the difference is allocated to the remaining non-current assets in the CGU.
Finance leases
A lease is an agreement in which the lessor conveys to the lessee the right to use an asset for a specified period in return for a payment or a number of payments. In accordance with IAS 17, beneficial owner ship of leased assets is attributed to the lessee if the lessee substantially bears all risks and rewards incident to ownership of the leased asset. To the extent that beneficial owner ship is attribut- able to the Group as the lessee, the asset is capitalised at the date on which use starts, either at fair value or at the present value of the minimum lease payments if this is less than the fair value. A lease liability in the same amount is recognised under non-current liabil- ities. The lease is subsequently measured at amortised cost using the effective interest method. The depreciation methods and estimated useful lives correspond to those of compar able purchased assets.
Operating leases
For operating leases, the Group reports the leased asset at amortised cost as an asset under property, plant and equipment where it is the lessor. The lease payments recognised in the period are shown under other operating income. Where the Group is the lessee, the lease payments made are recognised as lease expenses under materials expense. Lease expenses and income are recognised using the straight-line method.
Investments accounted for using the equity method
Investments accounted for using the equity method cover associates and joint ventures. These are recognised using the equity method in accordance with IAS 28, Investments in Associates and Joint Ventures. Based on the cost of acquisition at the time of purchase of the investments, the carrying amount of the investment is in- creased or reduced annually to reflect the share of earnings, divi- dends distributed and other changes in the equity of the associates and joint ventures attributable to the investments of Deutsche Post AG or its consolidated subsidiaries. The goodwill contained in the car- rying amounts of the investments is accounted for in accordance with IFRS 3. Investments accounted for using the equity method are impaired if the recoverable amount falls below the carrying amount. Gains and losses from the disposal of investments accounted for using the equity method, as well as impairment losses and their reversals, are recognised in other operating income or other oper- ating expenses.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets include in particular cash and cash equivalents, trade receivables, originated loans and receivables, and derivative financial assets held for trading. Financial liabilities in- clude contractual obligations to deliver cash or another financial asset to another entity. These mainly comprise trade payables, li- abilities to banks, liabilities arising from bonds and finance leases, and derivative financial liabilities.
Fair value option
Under the fair value option, financial assets or financial liabilities may be measured at fair value through profit or loss on initial recog- nition if this eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatch). The Group makes use of the option in order to avoid accounting mismatches.
Financial assets
Financial assets are accounted for in accordance with the provisions of IAS 39, which distinguishes between four categories of financial instruments.
AvAILABLE-FOR-SALE FINANCIAL ASSETS
These financial instruments are non-derivative financial assets and are carried at their fair value, where this can be measured reliably. If a fair value cannot be determined, they are carried at cost. Changes in fair value between reporting dates are generally recog- nised in other comprehensive income (revaluation reserve). The reserve is reversed to income either upon disposal or if the fair value falls below cost more than temporarily. If, at a subsequent balance sheet date, the fair value of a debt instrument has increased object- ively as a result of events occurring after the impairment loss was recognised, the impairment loss is reversed in the appropriate amount. Impairment losses recognised in respect of equity instru- ments may not be reversed to income. If equity instruments are recognised at fair value, any reversals must be recognised in other comprehensive income. No reversals may be made in the case of equity instruments that were recognised at cost. Available-for-sale financial instruments are allocated to non-current assets unless the intention is to dispose of them within twelve months of the balance sheet date. In particular, investments in unconsolidated subsidiaries, marketable securities and other equity investments are reported in this category.