CA Indosuez (Switzerland) SA Annual Report 2022 62 trading activities and the fair value option". Hedging transactions The Bank also uses derivative instruments for the purposes of asset and liability management to hedge against interest rate and currency risks. Hedging transactions are measured in a manner similar to hedged positions. Income from the hedge is recognised under the same income statement heading as the hedged transaction. As long as no value adjustment of the underlying transaction is recognised, the gains and losses from measuring hedging products are entered in the netting account. The net balance of the netting account is recorded under "Other assets" or "Other liabilities". The Bank documents hedges and the goals and strategies of hedging transactions at their conclusion. It regularly reviews the effectiveness of the hedge. If the hedge is no longer or only partially effective, the portion of the hedging transaction that is no longer effective is treated like a trading transaction. Financial investments Long-term investments include debt securities, equity investments and physical stocks of precious metals. As regards financial investments measured at the lower of the historical cost and the acquisition cost, if the fair value increases again after dropping below the acquisition cost, they should be remeasured at the maximum historical or acquisition cost. The resulting variation is recorded under "Other ordinary expenses" or "Other ordinary income". Held-to-maturity debt securities are measured according to the accrual method. The corresponding premiums and discounts are apportioned over the residual period to maturity under "Accrued income and prepaid expenses" or "Accrued expenses and deferred income". If held-to-maturity financial investments are sold or reimbursed early, the realised gains and losses, which correspond to the interest component, are accrued/ deferred over the residual term to maturity of the transaction under "Other assets" or "Other liabilities". Equity interests and stocks of precious metals held in physical form and for the Bank's proprietary interests Equity interests are measured at the lower of the acquisition cost and market value. Physical inventories of precious metals, intended to hedge liabilities in the metals account, are measured at fair value. Value adjustments are recorded under "Other ordinary expenses" or "Other ordinary income". Participating interests Equity interests held by the Bank include shares of companies that are held for long-term investment purposes, irrespective of any voting rights. These interests are measured individually at their acquisition cost, less any value adjustments. The Bank reviews participating interests for impairment at every reporting date. Realised gains and losses from the sale of participating interests are respectively recorded under "Extraordinary income" and "Extraordinary expenses". Property, plant and equipment Property, plant and equipment are recognised at their acquisition cost and depreciated on a straightline basis over their estimated useful life under line item "Value adjustments to equity investments, impairment losses on fixed and intangible assets". The estimated useful lives are as follows: • Tablets and mobile phones 3 years • Vehicles and IT equipment 5 years • Furniture and fixtures 5 years • Mainframe IT system 5 years • Fitting-out of office space 10 years • Buildings used by the Bank (1.5% p.a.) 66.5 years On each balance sheet date, the Bank determines whether the value of property, plant and equipment has been impaired. This assessment is based on indications suggesting that an impairment loss may have occurred. Where evidence of impairment exists, the Bank calculates a recoverable amount for each individual asset. The value of an asset is impaired when its carrying amount exceeds its recoverable amount. If the asset is impaired, the book value is written down to the recoverable value and the impairment is charged to the item "Value adjustments on participating interests, and depreciation and amortisation of property, plant and equipment, and intangible assets". If the impairment test shows that the useful life has changed, the Bank amortises the residual carrying amount over the newly estimated useful lifetime. Realised gains and losses from the sale of fixed assets are recorded respectively under "Extraordinary income" and "Extraordinary expenses". Intangible assets and Goodwill Intangible assets are acquired and carried on the assets side of the balance sheet when they provide the Bank with economic benefits over several years. They are carried on the balance sheet and valued at acquisition cost. Intangible assets are amortised on a straight-line basis on the line "Value adjustments on equity interests, and depreciation and amortisation of property, plant and equipment and intangible assets" according to the estimated useful lifetime. The Bank estimates the useful lifetime of intangible assets at 7 years. For the acquisition of business activities and companies, assets and liabilities are measured at their current value. When this measurement reveals that the acquisition price exceeds net assets, the difference is deemed to be goodwill and recorded as an intangible asset. The opposite situation involves negative goodwill. This "badwill", corresponding to a "lucky buy" acquisition, must immediately be recognised under Extraordinary income. Goodwill is capitalised and written down over its estimated useful life. The Bank estimates the goodwill's useful life to be five years.
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