REC Silicon Annual Report 2019

37 Notes to the consolidated financial statements, REC Silicon Group REC Silicon Annual Report 2019 An operating segment is a distinguishable component of the Group that is engaged in providing products that are subject to similar risks and returns and corresponds to management reporting. 2.4 FOREIGN CURRENCYTRANSLATION (A) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Group’s reporting currency continues to be USD. Accordingly, these consolidated financial statements are presented in USD. (B) Transactions and balances Transaction in foreign currencies are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates on the reporting date. Foreign exchange gains and losses resulting from the settlement or the translation of monetary assets and liabilities are recognized in the statement of income, except when deferred in equity as qualifying hedges or as a part of a net investment. (C) Group companies The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) Assets and liabilities for each statement of financial position presented are translated at the closing rate; (ii) Income and expenses for each statement of income are translated at average exchange rates for the reporting period (based on monthly average rates); and (iii)All esulting exchange differences from translation are recognized as a separate component of other comprehensive income (OCI). On consolidation, exchange differences arising from the translation of the net investment in subsidiaries, including monetary items that are regarded as a part of the net investment, are included in OCI. When a subsidiary is disposed of, exchange differences are recognized in the statement of income as part of the gain or loss on sale. At December 31, 2019 and 2018, an intercompany loan to REC Silicon, Inc. of USD 132million was regarded as a part of the net investment in REC Silicon Inc. 2.5 CURRENT/NON-CURRENT Assets and liabilities are classified as current when they are expected to be realized or settled within 12months after the reporting date. 2.6 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation and un-reversed impairment losses. Cost includes expenditures that are directly attributable to the acquisition, construction or installation of the item. Borrowing costs incurred for the construction of qualifying assets are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Costs are included in an asset’s carrying amount when it is probable that future economic benefits associatedwith the item will flow to the Group and costs can bemeasured reliably. Depreciation is calculated using the straight-line method based on the costs of the assets less any residual value over their estimated useful lives. 2.7 INTANGIBLE ASSETS (A) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets. Goodwill is carried at cost less accumulated impairment losses. Goodwill related to equity accounted investments is included in the carrying value of investments. At December 31, 2019 and 2018 the Group had no goodwill. (B) Other intangible assets Other intangible assets that have finite useful lives are carried at cost less accumulated amortization and un-reversed impairment. Amortization is calculated using the straight-line method on the costs of assets over their estimated useful lives from the date they are available for use. The Group has no intangible assets with indefinite useful lives. (C) Research and development Research expenditures are recognized in expense as incurred. Development expenditures (relating to the design, construction and testing of a chosen alternative for new or improved materials, devices, products, processes or systems) are capitalized when it is probable that the project will be successful considering its commercial and technological feasibility. Costs expensed in prior reporting periods are not later capitalized. Other development expenditures are recognized in expense as incurred. 2.8 IMPAIRMENTOF ASSETS Assets are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amountsmay not be recoverable. An impairment loss is recognized in the statement of income for the amount bywhich the asset’s carrying amount exceeds its estimated recoverable amount.The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. For the purpose of assessing impairment, assets are grouped at the lowest level forwhich cash inflows that are largely independent fromthe cash inflows fromother assets can be identified (cash-generating units). Generally, any impairment is allocated togoodwill first, then proportionately toother non-current assetswithin a cash-generating unit. Assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reportingdate. Impairment includes losses associatedwith assets determined to have no future economic benefits and assets that are replacedprior to the endof their useful lives.