Vetoquinol - Universal Registration Document - 2021

CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements Vetoquinol Universal Registration Document 2020 Financial report 91 6 6.5.21.1 R&D expenses Under IAS 38, research costs are expensed as incur- red, whereas internal development costs are capitalized as intangible assets, but only if all six criteria set forth in IAS 38 are met. Owing to the risks and uncertainties associated with regulatory approvals and the research and development process, the capitalization criteria are not deemed to have been met until the Group obtains marketing authorization for the drugs. Payments made to separately acquire research and development work are recognized as other intangible assets when they meet the definition of an intangible asset, i.e. a controlled resource with probable future eco- nomic benefits to Vetoquinol that is identifiable, either being separable or arising from contractual or other legal rights. In application of paragraph 25 of IAS 38, the first recognition criterion related to the probability of the intangible asset generating future economic benefits is presumed to be met when research and develop- ment work is acquired separately. Accordingly, amounts paid to third parties in the form of an upfront payment or milestone payments for proprietary drugs that have not yet received market authorization are recognized on the asset side of the balance sheet. As soon as market authorization has been granted, these rights are amor- tized on a straight line basis over the duration of their useful lives. Payments related to research and development agree- ments on access to technology or databases as well as payments related to generic in-licensing are also capi- talized. They are amortized over the useful life of the intangible asset from when the agreement begins to apply. Subcontracting agreements and expenditure under research and development service contracts or pay- ments related to ongoing research and development collaborations, regardless of the outcome, are reco- gnized as expenses throughout the period during which the services are received. 6.5.21.2 Other intangible assets Intangible assets are carried at cost on the balance sheet and are systematically amortized over their useful life, except for rights, trademarks and other items compri- sing the Equistro ® range, which have an indefinite useful life; an impairment test is carried out at least once a year to determine whether an impairment charge needs to be recorded. The same amortization periods are used throughout the Group: Categories Method Period Licenses and patents Straight line 5-15 years Software Straight line 3-5 years Products and/or MAs Straight line 10-15 years Other inc. customer relations Straight line 10 years 6.5.22 Property, plant and equipment Property, plant and equipment is carried at acquisi- tion cost (initially the purchase price, plus any ancillary expenses and purchase-related costs) or at produc- tion cost, less accumulated depreciation. Straight line depreciation is the method considered to be most econo- mically justifiable. Upon recognition of assets following a business combination (revised IFRS 3), fixed assets are remeasured at fair value. Land is not depreciated. The Group uses the following depreciation periods for pro- perty, plant and equipment: Categories Method Period Buildings Straight line 15-40 years Fixtures Straight line 10-20 years Production equipment Straight line 6-15 years Vehicles/office equipment/research Straight line 5-8 years Other PP&E Straight line 5 years