Tangible and intangible assets

5.2 Tangible and intangible assets
11. PROPERTY, PLANT AND EQUIPMENT, € 1,000 2017 2016
Land and water areas    
Cost at 1 Jan 15,701 15,349
Increases 1 Jan - 31 Dec 274 393
Decreases 1 Jan - 31 Dec   -41
Cost at 31 Dec 15,974 15,701
Carrying amount 31 Dec 15,974 15,701
     
Buildings and structures    
Cost at 1 Jan 254,823 220,357
Increases 1 Jan - 31 Dec 24,614 34,634
Decreases 1 Jan - 31 Dec -5 -168
Cost at 31 Dec 279,432 254,823
Accumulated depreciation 1 Jan -61,108 -53,077
Decreases, depreciation 1 Jan - 31 Dec 5 73
Depreciation 1 Jan - 31 Dec -8,538 -8,103
Carrying amount 31 Dec 209,792 193,716
     
Machinery and equipment    
Cost at 1 Jan 1,115,218 1,053,479
Increases 1 Jan - 31 Dec 31,992 61,839
Decreases 1 Jan - 31 Dec -718 -100
Cost at 31 Dec 1,146,492 1,115,218
Accumulated depreciation 1 Jan -536,937 -485,852
Decreases, depreciation 1 Jan - 31 Dec 718 8
Depreciation 1 Jan - 31 Dec -48,224 -51,094
Carrying amount 31 Dec 562,049 578,281
     
Transmission lines    
Cost at 1 Jan 1,307,111 1,238,261
Increases 1 Jan - 31 Dec -1,658 74,414
Decreases 1 Jan - 31 Dec -433 -5,565
Cost at 31 Dec 1,305,020 1,307,111
Accumulated depreciation 1 Jan -482,073 -448,647
Decreases, depreciation 1 Jan - 31 Dec 184 3,944
Depreciation 1 Jan - 31 Dec -36,894 -37,370
Carrying amount 31 Dec 786,237 825,038
     
Other property, plant and equipment    
Cost at 1 Jan 23,721 22,756
Increases 1 Jan - 31 Dec 424 966
Cost at 31 Dec 24,145 23,721
Accumulated depreciation 1 Jan -16,119 -15,208
Depreciation 1 Jan - 31 Dec -966 -911
Carrying amount 31 Dec 7,060 7,602
     
Prepayments and purchases in progress    
Cost at 1 Jan 59,404 120,816
Increases 1 Jan - 31 Dec 94,299 116,534
Transfers to other tangible and intangible assets 1 Jan - 31 Dec -70,047 -177,946
Cost at 31 Dec 83,656 59,404
Carrying amount 31 Dec 83,656 59,404
     
Capitalised interest    
Cost at 1 Jan 11,442 9,426
Increases 1 Jan - 31 Dec 1,223 2,016
Cost at 31 Dec 12,664 11,442
Accumulated depreciation 1 Jan -1,021 -676
Depreciation on capitalised interest 1 Jan - 31 Dec -412 -345
Carrying amount 31 Dec 11,232 10,421
Carrying amount 31 Dec 94,888 69,825
Property, plant and equipment 1,675,999 1,690,162
12. INTANGIBLE ASSETS, €1,000 2017 2016
     
Land use rights    
Cost at 1 Jan 94,507 92,749
Increases 1 Jan - 31 Dec 706 2,022
Decreases 1 Jan - 31 Dec -126 -263
Cost at 31 Dec 95,087 94,507
Carrying amount 31 Dec 95,087 94,507
     
Other intangible assets    
Cost at 1 Jan 31,644 30,853
Increases 1 Jan - 31 Dec 4,974 848
Decreases 1 Jan - 31 Dec -485 -57
Cost at 31 Dec 36,133 31,644
Accumulated depreciation 1 Jan -29,571 -28,173
Depreciation 1 Jan - 31 Dec -1,855 -1,398
Carrying amount 31 Dec 4,707 2,073
     
Carrying amount 31 Dec 99,795 96,580

Land use rights are not depreciated but tested annually for impairment in connection with the testing of goodwill. No need for impairment has been noted as a result of the testing.

The entire business of the Fingrid Group is grid operations in Finland with system responsibility, which the full goodwill of the Group in the balance sheet is fully allocated to. The goodwill included in the balance sheet amounts to EUR 87.9 million and has not changed during the periods under review. Since, per the regulation, the fair value of the net assets included in the company’s grid assets is approximately EUR 2,800.0 million compared to the carrying amount of EUR 1,863.7 million in net assets, which includes land use rights and goodwill, the book value of the asset items has not decreased.


 Accounting principles

Propert, plant and equipment
Grid assets form most of the property, plant and equipment. Grid assets include, among other things, 400 kV, 220 kV, 110 kV transmission lines, direct current lines, transmission line right-of-ways, substations and the areas they encompass (buildings, structures, machinery and equipment, substation access roads), gas turbine power plants, fuel tanks, generators and turbines.

Property, plant and equipment are valued in the balance sheet at the original acquisition cost less accumulated depreciation and potential impairment. If an asset is made up of several parts with useful lives of different lengths, the parts are treated as separate items and are depreciated over their separate useful lives.

When a part of property, plant and equipment that is treated as a separate item is replaced, the costs relating to the new part are capitalised. Other subsequent costs are capitalised only if it is likely that the future economic benefit relating to the asset benefits the Group and the acquisition cost of the asset can be determined reliably. Repair and maintenance costs are recognised in the income statement when they are incurred.

Borrowing costs, such as interest costs and arrangement fees, directly linked with the acquisition, construction or manufacture of a qualifying asset form part of the acquisition cost of the asset item in question. A qualifying commodity is one that necessarily requires a considerably long time to be made ready for its intended purpose. Other borrowing costs are recognised as an expense. Borrowing costs included in the acquisition cost are calculated on the basis of the average borrowing cost of the Group.

Property, plant and equipment is depreciated over the useful life of the item using the straight-line method. Depreciation on property, plant and equipment taken into use during the financial year is calculated on an item-by-item basis from the month of introduction. Land and water areas are not depreciated. The expected economic lives are verified at each closing date, and if they differ significantly from the earlier estimates, the depreciation periods are amended accordingly.
 

The depreciation periods of property, plant and equipment are as follows:

Buildings and structure  40 years
Substation buildings and separate buildings  30 years
Buildings and structures at gas turbine power plants  20-40 years
Separate structures  15 years

Transmission lines

Transmission lines 400 kV  40 years
Direct current lines  40 years
Transmission lines 110-220 kV  30 years
Creosote-impregnated towers and related disposal costs  30 years
Aluminium towers of transmission lines (400 kV)  10 years
Optical ground wires  10-20 years

Machinery and equipment

Substation machinery  10-30 years
Gas turbine power plants  20 years
Other machinery and equipment  3-5 years

Gains or losses from the sale or disposition of property, plant and equipment are recognised in the income statement under either other operating income or expenses. Property, plant and equipment are derecognised in the balance sheet when their economic useful life has expired, the asset has been sold, scrapped or otherwise disposed of to an outsider.

Goodwill and other intangible assets

Goodwill created as a result of the acquisition of enterprises and businesses is composed of the difference between the acquisition cost and the net identifiable assets of the acquired business valued at fair value. Goodwill is allocated to cash-generating units and is tested annually for impairment. With associated companies, goodwill is included in the value of the investment in the associated company.

Other intangible assets consist of computer software and land use and emission rights. Computer software is valued at its original acquisition cost and depreciated on a straight line basis during its estimated useful life. Land use rights, which have an indefinite useful life, are not depreciated but are tested annually for impairment. 

More on emission rights in chapter 7.2.

Subsequent expenses relating to intangible assets are only capitalised if their economic benefits to the company increase beyond the former performance level. In other cases, expenses are recognised in the income statement when they are incurred.