IBERSOL | 2019 Annual Report

Consolidated Financial Statements c) Other intangible Assets Research and development Research expenses are recognised as costs when incurred. Costs incurred on deve- lopment projects (for designing and testing new products or for product improve- ments) are recognised as intangible assets when it is likely that the project will be successful, in terms of its commercial and technological feasibility and when the costs may be reliably measured. Other development expenses are recognised as expenses when incurred. Developments costs previously recognised as expenses are not recognised as an asset in subsequent periods. Development costs with a finite lifetime that have been capitalised are amortised from the time the product begins commercial production according to the equal annual amounts method during the period of its expected benefit, which cannot exceed five years. The assets in progress are recorded at acquisition cost less any impairment losses. These assets are amortized as from the moment when the underlying assets are available for use. 2.8 IMPAIRMENT TANGIBLE FIXED ASSETS AND INTANGIBLE ASSETS Intangible assets with a specific lifetime are not subject to amortisation and are, instead, subject to annual impairment tests. Assets subject to amortisation are reva- luated to determine any impairment whenever there are events or alterations in the circumstances causing their accounting value not to be recoverable. An impairment loss is recognised in the consolidated statement of comprehensive income by the amount by which the recoverable amount exceeds the accounted amount. The reco- verable amount is the highest amount between an asset’s fair value minus the costs necessary for its sale and its utilisation value. To perform impairment tests, assets are grouped at the lowest level at which it may be able to separately identify cash flows (units generating cash flows). A cash-generating unit (CGU) is the smallest group of assets which includes the asset and that generates cash flows from continued use and which is generally inde- pendent from the cash input from other assets or asset groups. In the case of tangi- ble fixed assets and intangible assets, each store was identified as a cash-generating unit. Impairment tests are carried out for restaurants that, having at least 2 years of activity, present negative operating results less amortization, depreciation and im- pairment losses on tangible fixed assets, intangible assets and goodwill. Consolidation differences are distributed among the group’s cash-flow generating units (CGUs), identified according to the country of operation and the business seg- ment. The recoverable value of a CGU is determined based on calculating the utilisation value. Those calculations apply cash flow forecasts based on financial budgets ap- proved by the managers and cover a 5-year period. 222