_374 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 5 FINANCIAL PERFORMANCE 2023 consolidated financial statements 3.14 Business combinations and goodwill When the Group obtains control of an entity, the business combination is valued and accounted for by applying the acquisition method. Goodwill is calculated at the acquisition date as the difference between: ● the fair value of the consideration transferred including, if any, the fair value of any contingent consideration; and ● the fair value at the acquisition date of the identifiable acquired assets, the liabilities and contingent liabilities assumed. The valuation period for a business combination does not exceed 12 months after the acquisition date. Goodwill is allocated to cash-generating units (CGUs) or groups of CGUs that are expected to benefit from the synergies of the combination and that reflect the level at which the Group manages goodwill. Goodwill is tested for impairment annually. 3.15 Intangible assets Intangible assets are recognized at cost. The cost of an intangible asset acquired as part of a business combination is its fair value at the acquisition date. Intangible assets with indefinite useful lives are not amortized but are tested for impairment at least once a year. Those with finite useful lives are amortized on a straight-line basis over their estimated useful life: ● software: 3-7 years ● brands and trademarks: 5-20 years ● customer relationships: 5-20 years 3.15.1 CO2 emission allowances The Group participates in the European Union's Emissions Trading System (EU ETS). The emission allowances received or purchased are recognized as an intangible asset at their price on the transaction date. For emission allowances that are received rather than purchased, a government grant is recognized in liabilities for the same amount. The cost and liability corresponding to actual emissions and the income corresponding to the use of the government grant are accounted for using the price on the grant date. 3.16 Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and, when necessary, impairment. The gross carrying amount includes the cost of acquisition or production cost and other costs directly attributable to the acquisition or the construction of the asset (including borrowing costs). Investment grants are initially accounted for as deferred income and are subsequently recognized as income over the useful life of the related asset. Repair and maintenance costs are expensed as incurred. Other subsequent expenditures are included in the asset's carrying amount or recognized as a separate asset if the recognition criteria are met. Property, plant and equipment are depreciated on a straight-line basis, except land, which is not depreciated. Depreciation of property, plant and equipment reflects the pattern in which the asset's future economic benefits are expected to be consumed. Depreciation is allocated to cost of sales, sales and marketing expenses, research and development expenses or general and administrative expenses. The following depreciation periods, based on the expected useful lives of the respective assets, are applied throughout the Group: ● buildings and general installations of land and buildings: 25 years ● petrochemical equipment: 25 years ● industrial and commercial equipment: 2-12 years ● computer and telecommunication equipment: 5 years ● vehicles: 5 years ● other: 5-12 years The useful lives of the assets and their respective residual values are reviewed annually. When assets are sold or otherwise disposed of, the difference between the net proceeds and the net carrying amounts of the assets is recognized in “Other operating income and expenses”.
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