Tangible and intangible assets

4.2 Tangible and intangible assets
11. PROPERTY, PLANT AND EQUIPMENT, € 1,000
  2016 2015
     
Land and water areas    
Cost at 1 Jan 15,349 14,974
Increases 1 Jan - 31 Dec 393 442
Decreases 1 Jan - 31 Dec -41 -67
Cost at 31 Dec 15,701 15,349
Carrying amount 31 Dec 15,701 15,349
     
Buildings and structures    
Cost at 1 Jan 220,357 202,370
Increases 1 Jan - 31 Dec 34,634 18,214
Decreases 1 Jan - 31 Dec -168 -227
Cost at 31 Dec 254,823 220,357
Accumulated depreciation 1 Jan -53,077 -45,829
Decreases, depreciation 1 Jan - 31 Dec 73 59
Depreciation 1 Jan - 31 Dec -8,103 -7,307
Carrying amount 31 Dec 193,716 167,280
     
Machinery and equipment    
Cost at 1 Jan 1,053,479 1,015,283
Increases 1 Jan - 31 Dec 61,839 38,826
Decreases 1 Jan - 31 Dec -100 -630
Cost at 31 Dec 1,115,218 1,053,479
Accumulated depreciation 1 Jan -485,852 -438,393
Decreases, depreciation 1 Jan - 31 Dec 8 306
Depreciation 1 Jan - 31 Dec -51,094 -47,765
Carrying amount 31 Dec 578,281 567,627
     
Transmission lines    
Cost at 1 Jan 1,238,261 1,213,542
Increases 1 Jan - 31 Dec 74,414 30,003
Decreases 1 Jan - 31 Dec -5,565 -5,283
Cost at 31 Dec 1,307,111 1,238,261
Accumulated depreciation 1 Jan -448,647 -415,422
Decreases, depreciation 1 Jan - 31 Dec 3,944 3,223
Depreciation 1 Jan - 31 Dec -37,370 -36,448
Carrying amount 31 Dec 825,038 789,614
     
Other property, plant and equipment    
Cost at 1 Jan 22,756 22,232
Increases 1 Jan - 31 Dec 966 524
Cost at 31 Dec 23,721 22,756
Accumulated depreciation 1 Jan -15,208 -14,326
Depreciation 1 Jan - 31 Dec -911 -882
Carrying amount 31 Dec 7,602 7,548
     
Prepayments and purchases in progress    
Cost at 1 Jan 120,816 78,687
Increases 1 Jan - 31 Dec 116,534 134,335
Transfers to other tangible and intangible assets 1 Jan - 31 Dec -177,946 -92,206
Cost at 31 Dec 59,404 120,816
Carrying amount 31 Dec 59,404 120,816
     
Capitalised interest    
Cost at 1 Jan 9,426 7,735
Increases 1 Jan - 31 Dec 2,016 1,690
Cost at 31 Dec 11,442 9,426
Accumulated depreciation 1 Jan -676 -399
Depreciation on capitalised interest 1 Jan - 31 Dec -345 -276
Carrying amount 31 Dec 10,421 8,750
Carrying amount 31 Dec 69,825 129,566
Property, plant and equipment 1,690,162 1,676,984
12. INTANGIBLE ASSETS, €1,000
  2016 2015
     
Land use rights    
Cost at 1 Jan 92,749 91,920
Increases 1 Jan - 31 Dec 2,022 2,758
Decreases 1 Jan - 31 Dec -263 -1,929
Cost at 31 Dec 94,507 92,749
Carrying amount 31 Dec 94,507 92,749
     
Other intangible assets    
Cost at 1 Jan 30,853 29,829
Increases 1 Jan - 31 Dec 848 1,118
Decreases 1 Jan - 31 Dec -57 -95
Cost at 31 Dec 31,644 30,853
Accumulated depreciation 1 Jan -28,173 -26,732
Depreciation 1 Jan - 31 Dec -1,398 -1,441
Carrying amount 31 Dec 2,073 2,680
     
Carrying amount 31 Dec 96,580 95,428

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 87,920 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 1,874.7 million in net assets, which includes land use rights and goodwill, the book value of the asset items has not decreased.

Accounting principles

Property, 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

Substation buildings and separate buildings = 40 years
Substation structures = 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 6.2.

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.