KATHMANDU A NNUAL REPORT  2013 39 discounted cash flows, are used to determine fair value for the  remaining financial instruments. The fair value of interest rate  swaps is calculated as the present value of the estimated future  cash flows. The fair value of forward foreign exchange contracts  is determined using quoted forward exchange rates at the  balance sheet date. The carrying value less impairment provision of trade receivables  and payables are assumed to approximate their fair values. All property, plant and equipment are stated at historical cost less  depreciation and impairment. Historical cost includes expenditure  that is directly attributable to the acquisition of the items. Cost  may also include transfers from equity of any gains/losses on  qualifying cash flow hedges of foreign currency purchases of  property, plant and equipment. Subsequent costs are included in the asset’s carrying amount or  recognised as a separate asset, as appropriate, only when it is  probable that future economic benefits associated with the item  will flow to the Group and the cost of the item can be measured  reliably. All other repairs and maintenance are charged to the  income statement during the financial period in which they are  incurred. Depreciation of property, plant and equipment is calculated using  diminishing value method so as to expense the cost of the assets  over their useful lives. The rates are as follows: The assets’ residual value and useful lives are reviewed and  adjusted if appropriate at each balance sheet date. Capital work in progress is not depreciated until available for use. An asset’s carrying amount is written down immediately to its  recoverable amount if the asset’s carrying amount is greater than  its estimated recoverable amount. Gains and losses on disposals are determined by comparing  proceeds with carrying amount. These are included in the income statement. Goodwill arises on the acquisition of subsidiaries. Goodwill  represents the excess of the cost of the acquisition over the  Group’s interest in the net fair value of the assets and liabilities of  the acquiree. Separately recognised goodwill is tested annually  for impairment and carried at cost less accumulated impairment  losses. Impairment losses on goodwill are not reversed. Goodwill is allocated to cash-generating units for the purpose  of impairment testing. The allocation is made to those cash- generating units or groups of cash-generating units that are  Borrowings are classified as current liabilities unless the Group  has an unconditional right to defer settlement of the liability for  at least 12 months after the balance sheet date. Borrowings are initially recognised at fair value, net of transaction  costs incurred. Borrowings are subsequently measured at  amortised cost. Any difference between the proceeds (net of  transaction costs) and the redemption amount is recognised in  the income statement over the period of the borrowings using  the effective interest method. A provision is recognised if, as a result of a past event, the  Group has a present legal or constructive obligation that can be  estimated reliably, and it is probable that an outflow of economic  benefits will be required to settle the obligation. Provisions are  determined by discounting the expected future cash flows at a  pre-tax rate that reflects current market assessments of the time  value of money and the risks specific to the liability. These amounts represent liabilities for goods and services  provided to the Group prior to the end of financial year which  are unpaid. The amounts are unsecured and are usually paid by  the 30th of the month following recognition. Trade payables are  recognised initially at fair value and subsequently measured at  amortised cost using the effective interest method. Costs associated with developing or maintaining computer  software programs are recognised as an expense as incurred.  Costs that are directly associated with the production of  identifiable and unique software products controlled by the  Group, and that will probably generate economic benefits  exceeding costs beyond one year, are recognised as intangible  assets. Direct costs include the costs of software development  employees.  Software costs have a finite useful life. Software costs are  capitalised and written off over the useful economic life using  diminishing value method and rates of 10-60%. Acquired brands are carried at original cost based on  independent valuation obtained at the date of acquisition. The  brand represents the price paid to acquire the rights to use the  Kathmandu brand. The brand is not amortised. Instead the brand  is tested for impairment annually or more frequently if events or  changes in circumstances indicate that it might be impaired, and  is carried at cost less accumulated impairment losses. expected to benefit from the business combination in which  the goodwill arose.  (P) PROPERTY, PLANT AND EQUIPMENT (R) TRADE AND OTHER PAYABLES (S) PROVISIONS (T) BORROWINGS (Q) INTANGIBLE ASSETS Leasehold Improvements 8 – 50 % Office, Plant and Equipment 8 – 80 % Furniture and Fittings 6 – 60 % Computer Equipment 6 – 67% Motor Vehicles 15 – 30% (i) Goodwill (iii) Software costs (ii) Brand