AGL Energy Limited Annual Report 2011 69 In the event that lease incentives are received to enter into  operating leases, such incentives are recognised as a liability. The  aggregate benefit of incentives is recognised as a reduction of  rental expense on a straight-line basis, except where another  systematic basis is more representative of the time pattern in  which economic benefits from the leased asset are consumed. Intangible assets acquired separately or in a business combination  are initially measured at cost. The cost of an intangible asset  acquired in a business combination is its fair value at the date of  acquisition. Following initial recognition, intangible assets are  carried at cost less any accumulated amortisation and any  accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite  or indefinite. Intangible assets with finite lives are amortised over  their estimated useful life and tested for impairment whenever  there is an indication that the intangible asset may be impaired. The  estimated useful life and amortisation method are reviewed at the  end of each annual reporting period. Goodwill arising in a business combination is recognised as an asset  at the date that control is acquired (the acquisition date). Goodwill is  measured as the excess of the sum of the consideration transferred,  the amount of any non-controlling interests in the acquiree, and the  fair value of the acquirer’s previously held equity interest in the  acquiree (if any) over the net of the acquisition-date amounts of  the identifiable assets acquired and the liabilities assumed. If, after reassessment, the consolidated entity’s interest in the fair  value of the acquiree’s identifiable net assets exceeds the sum of  the consideration transferred, the amount of any non-controlling  interests in the acquiree and the fair value of the acquirer’s  previously held equity interest in the acquiree (if any), the excess is  recognised immediately in profit or loss as a bargain purchase gain. Goodwill is not amortised but is reviewed for impairment at least  annually. For the purpose of impairment testing, goodwill is  allocated to each of the consolidated entity’s cash-generating units  expected to benefit from the synergies of the combination.  Cash-generating units to which goodwill has been allocated are  tested for impairment annually, or more frequently when there is an  indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than  its carrying amount, the impairment loss is allocated first to reduce  the carrying amount of any goodwill allocated to the unit and then  to the other assets of the unit pro-rata on the basis of the carrying  amount of each asset in the unit. An impairment loss recognised for  goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is  included in the determination of the profit or loss on disposal. Licences are carried at cost less any accumulated impairment  losses. Licences are considered to have indefinite useful lives, as  they were either granted in perpetuity, or there is evidence that the  licences will be renewed beyond the initial term and the cost of  renewal is not significant. Licences with indefinite useful lives are  not amortised, but are tested for impairment annually, or more  frequently if events or changes in circumstances indicate that they  might be impaired. Any impairment loss is recognised immediately  in profit or loss. Customer relationships and contracts acquired in a business  combination are carried at cost less accumulated amortisation and  any accumulated impairment losses. Amortisation is recognised as  an expense on a straight-line basis over the period during which  economic benefits are expected to be received. The direct costs of establishing customer contracts are recognised  as an asset when they relate to a specific customer acquisition  campaign. The direct costs are amortised over the minimum  contract term. Direct costs include customer acquisition fees paid  to channel partners and upfront account purchase payments. All  other customer acquisition costs are expensed as incurred. At the end of each reporting period, the consolidated entity  reviews the carrying amounts of its assets to determine whether  there is any indication that those assets have suffered an  impairment loss. If any such indication exists, the recoverable  amount of the asset is estimated in order to determine the extent  of the impairment loss (if any). Where it is not possible to estimate  the recoverable amount of an individual asset, the consolidated  entity estimates the recoverable amount of the cash-generating  unit to which the asset belongs. Intangible assets with indefinite useful lives are tested for  impairment at least annually and whenever there is an indication  that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and  value in use. In assessing value in use, the estimated future cash  flows are discounted to their present value using a pre-tax discount  rate that reflects current market assessments of the time value of  money and the risks specific to the asset for which the estimates of  future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is  estimated to be less than its carrying amount, the carrying amount  of the asset (or cash-generating unit) is reduced to its recoverable  amount. An impairment loss is recognised immediately in profit or  loss, unless the relevant asset is carried at a revalued amount, in  which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying  amount of the asset (or cash-generating unit) is increased to the  revised estimate of its recoverable amount, but so that the  increased carrying amount does not exceed the carrying amount  that would have been determined had no impairment loss been  recognised for the asset (or cash-generating unit) in prior years. A  reversal of an impairment loss is recognised immediately in profit or  loss, unless the relevant asset is carried at a revalued amount, in  which case the reversal of the impairment loss is treated as a  revaluation increase. Trade and other payables represent liabilities for goods and services  provided to the consolidated entity prior to the end of the  reporting period that are unpaid and arise when the consolidated  entity becomes obliged to make future payments in respect of the  purchase of these goods and services. The amounts are unsecured  and are usually paid within 30 days of recognition. Borrowings are initially recognised at fair value of the consideration  received, net of transaction costs incurred. After initial recognition,  borrowings are subsequently measured at amortised cost using the  effective interest method. (w) Borrowings (v) Trade and other payables (u) Impairment of non-financial assets excluding goodwill Customer relationships and contracts (t) Intangible assets Goodwill Licences