Tangible and intangible assets

5.2 Tangible and intangible assets
11. PROPERTY, PLANT AND EQUIPMENT, € 1,000 2018 2017
Land and water areas    
Cost at 1 Jan 15,974 15,701
Increases 1 Jan - 31 Dec 864 274
Decreases 1 Jan - 31 Dec  -89  
Cost at 31 Dec 16,749 15,974
Carrying amount 31 Dec 16,749 15,974
     
Buildings and structures    
Cost at 1 Jan 279,432 254,823
Increases 1 Jan - 31 Dec 26,780 24,614
Decreases 1 Jan - 31 Dec -1,022 -5
Cost at 31 Dec 305,190 279,432
Accumulated depreciation 1 Jan -69,640 -61,108
Decreases, depreciation 1 Jan - 31 Dec 536 5
Depreciation 1 Jan - 31 Dec -9,756 -8,538
Carrying amount 31 Dec 226,329 209,792
     
Machinery and equipment    
Cost at 1 Jan 1,146,492 1,115,218
Increases 1 Jan - 31 Dec 43,870 31,992
Decreases 1 Jan - 31 Dec -6,455 -718
Cost at 31 Dec 1,183,907 1,146,492
Accumulated depreciation 1 Jan -584,443 -536,937
Decreases, depreciation 1 Jan - 31 Dec 2,464 718
Depreciation 1 Jan - 31 Dec -48,617 -48,224
Carrying amount 31 Dec 553,310 562,049
     
Transmission lines    
Cost at 1 Jan 1,305,020 1,307,111
Increases 1 Jan - 31 Dec 10,541 -1,658
Decreases 1 Jan - 31 Dec -1,921 -433
Cost at 31 Dec 1,313,640 1,305,020
Accumulated depreciation 1 Jan -518,783 -482,073
Decreases, depreciation 1 Jan - 31 Dec 1,081 184
Depreciation 1 Jan - 31 Dec -37,453 -36,894
Carrying amount 31 Dec 758,485 786,237
     
Other property, plant and equipment    
Cost at 1 Jan 24,145 23,721
Increases 1 Jan - 31 Dec 757 424
Decreases 1 Jan - 31 Dec -3  
Cost at 31 Dec 24,899 24,145
Accumulated depreciation 1 Jan -17,085 -16,119
Depreciation 1 Jan - 31 Dec -993 -966
Carrying amount 31 Dec 6,821 7,060
     
Prepayments and purchases in progress    
Cost at 1 Jan 83,656 59,404
Increases 1 Jan - 31 Dec 76,903 94,299
Transfers to other tangible and intangible assets 1 Jan - 31 Dec -99,995 -70,047
Cost at 31 Dec 60,565 83,656
Carrying amount 31 Dec 60,565 83,656
     
Capitalised interest    
Cost at 1 Jan 12,664 11,442
Increases 1 Jan - 31 Dec 1,042 1,223
Decreases 1 Jan - 31 Dec -1  
Cost at 31 Dec 13,705 12,664
Accumulated depreciation 1 Jan -1,433 -1,021
Depreciation on capitalised interest 1 Jan - 31 Dec -478 -412
Carrying amount 31 Dec 11,795 11,232
Carrying amount 31 Dec 72,360 94,888
Property, plant and equipment 1,634,055 1,675,999
12. INTANGIBLE ASSETS, €1,000 2018 2017
     
Land use rights    
Cost at 1 Jan 95,087 94,507
Increases 1 Jan - 31 Dec 2,625 706
Decreases 1 Jan - 31 Dec -203 -126
Cost at 31 Dec 97,509 95,087
Carrying amount 31 Dec 97,509 95,087
     
Other intangible assets    
Cost at 1 Jan 36,133 31,644
Increases 1 Jan - 31 Dec 2,695 4,974
Decreases 1 Jan - 31 Dec   -485
Cost at 31 Dec 38,828 36,133
Accumulated depreciation 1 Jan -31,426 -29,571
Depreciation 1 Jan - 31 Dec -2,366 -1,855
Carrying amount 31 Dec 5,037 4,707
     
Carrying amount 31 Dec 102,546 99,795

Land use rights are not depreciated but tested annually for impairment in connection with the testing of goodwill.

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 1,824.5 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 asset 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 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.