IBERSOL | Annual Report 2021

ANNUAL REPORT 2021 Direct costs include personnel costs for developing software and the share in rel- evant general expenses. Software development costs recognised as assets are amortised during the soft- ware’s estimated lifetime (not exceeding 5 years). a.3) Brands Brands acquired in business combinations are reflected at fair value at the date of the concentration (Eat Out Group). Brands life cycle was determined considering the benchmark of the sector for brands of this dimension, which in general point to a life cycle of 20 years. b) Other Intangible assets Assets in progress 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. 2.9 IMPAIRMENT OF GOODWILL, RIGHTS OF USE, PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS Intangible assets that do not have a defined useful life are not subject to amorti- zation but are subject to annual impairment tests (or in each reporting period in which there are signs of impairment). Assets subject to amortization are revaluated to determine any impairment whenever events or changes in circumstances occur that result in the amount at which they are recorded may not be recoverable. An impairment loss is recognized in the consolidated income statement and other com- prehensive income for the amount in excess of the asset’s carrying amount over its recoverable amount. The recoverable amount is the highest of an asset’s fair value less the costs inherent in its sale and its value in use. For carrying out impairment tests, assets are grouped at the lowest level at which cash flows (cash flow generat- ing units) can be separately identified. Restaurants negative returns are an indication of impairment, and the subsequent impairment analysis considers the projected cash flows of each store. In the case of recent openings, such initial negative returns may not be representative of the ex- pected return pattern for that store and may not constitute an indication of impair- ment if such behaviour was expected for that period. When an asset has an operating performance that exceeds the projections that previ- ously supported the recording of an impairment loss, such loss is reversed to the extent that the value in use based on the updated projections exceeds the carrying amount. A cash-generating unit (CGU) is the smallest group of assets that includes the asset and that generates cash inflows from continued use that are largely independent of the cash inflows from other assets or groups of assets. In the case of property, plant and equipment, intangible assets and rights of use, each restaurant was generally identified as a cash-generating unit. There are, however, other property, plant and equipment and intangible assets that are not associated with CGU - restaurants. 347