Rosendahl Design Group A/S Annual Report 2023 • Accounting Policies Other financial expenses Other financial expenses comprise interest expenses, including interest expenses on payables to group enter- prises, net capital or exchange losses on securities, payables and transac- tions in foreign currencies, amortisa- tion of financial liabilities, and tax surcharge under the Danish Tax Prepayment Scheme etc. Tax on profit/loss for the year Tax for the year, which consists of current tax for the year and changes in deferred tax, is recognised in the income statement by the portion attributable to the profit for the year and recognised directly in equity by the portion attributable to entries directly in equity. Balance sheet Goodwill Goodwill is the positive difference between cost and fair value of assets and liabilities arising from acquisitions. Goodwill is amortised straight-line over its estimated useful life, which is fixed based on the experience gained by Management for each business area. For other amounts of goodwill, useful life has been determined based on an assessment of whether the enterprises are strategically acquired enterprises with a strong market position and a long-term earnings profile and whether the amount of goodwill includes intangible resources of a temporary nature that cannot be separated and recognised as separate assets. Useful lives are reassessed annually. The amortisation periods used are 10-20 years. Goodwill is written down to the lower of recoverable amount and carrying amount. Intellectual property rights etc. Intellectual property rights etc. comprise development projects completed and in progress with related intellectual property rights, acquired intellectual property rights and prepayments for intangible assets. Development projects on clearly defined and identifiable products and processes, for which the technical rate of utilisation, adequate resources and a potential future market or development opportunity in the enterprise can be established, and where the intention is to manufacture, market or apply the product or process in question, are recognised as intangible assets. Other development costs are recognised as costs in the income statement as incurred. When recognising develop- ment projects as intangible assets, an amount equalling the costs incurred less deferred tax is taken to equity in the reserve for development costs that is reduced as the development projects are amortised and written down. The cost of development projects comprises costs that are directly and indirectly attributable to the develop- ment projects. Completed development projects are amortised on a straight-line basis using their estimated useful lives which are determined based on a specific assessment of each develop - ment project. If the useful life cannot be estimated reliably, it is fixed at 10 years. For development projects protected by intellectual property rights, the maximum period of amorti- sation is the remaining duration of the relevant rights. The amortisation periods used are 5 years. Intellectual property rights acquired are measured at cost less accumu- lated amortisation. Patents are amortised on a straight-line basis over their remaining duration, and licences are amortised on a straight-line basis over the term of the agreement. Intellectual property rights etc. are written down to the lower of recovera- ble amount and carrying amount. Property, plant and equipment Land and buildings, plant and machin- ery, and other fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and impairment losses. Land is not depreciated. Cost comprises the acquisition price, costs directly attributable to the acquisition and preparation costs of the asset until the time when it is ready to be put into operation. The basis of depreciation is cost less estimated residual value after the end of useful life. Straight-line deprecia- tion is made on the basis of the following estimated useful lives of the assets: Other fixtures and fittings, tools and equipment Leasehold improvements Useful life 3-5 years 5 years For leasehold improvements and assets subject to finance leases, the depreciation period cannot exceed the contract period. Estimated useful lives and residual values are reassessed annually. Items of property, plant and equip- ment are written down to the lower of recoverable amount and carrying amount. Investments in group enterprises Investments in group enterprises are recognised and measured in the parent financial statements according to the equity method. This means that investments are measured at the pro rata share of the enterprises’ equity value plus unamortised goodwill and plus or minus unrealised intra-group profits or losses. Group enterprises with negative equity value are measured at DKK 0. Any receivables from these enter- prises are written down to net realisa- ble value based on a specific assess - ment. If the Parent has a legal or constructive obligation to cover the liabilities of the relevant enterprise, and it is probable that such obligation will involve a loss, a provision is recog- nised that is measured at present value of the costs necessary to settle the obligations at the balance sheet date. 80
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