10. Tangible assets
| Notes | Forests | Buildings & land |
Machinery & equipment |
Total | |
| €'000 | €'000 | €'000 | €'000 | ||
| A. Group | |||||
| Cost | |||||
| At 1 January 2009 | (i) | 1,343,316 | 31,561 | 110,898 | 1,485,775 |
| Additions | (ii) | 31,525 | 4,221 | 4,952 | 40,698 |
| Depletion | (iii) | (18,439) | - | - | (18,439) |
| Disposals | (454) | (258) | (371) | (1,083) | |
| At 31 December 2009 | 1,355,948 | 35,524 | 115,479 | 1,506,951 | |
| Accumulated depreciation | |||||
| At 1 January 2009 | 8,925 | 9,401 | 55,247 | 73,573 | |
| Charge for year | (iv) | - | 6,057 | 2,976 | 9,033 |
| Provision for Impairment | (vi) | 1,700 | 1,400 | - | 3,100 |
| Disposals | - | (115) | (310) | (425) | |
| At 31 December 2009 | 10,625 | 16,743 | 57,913 | 85,281 | |
| Net book amounts: | |||||
| At 31 December 2009 | 1,345,323 | 18,781 | 57,566 | 1,421,670 | |
| At 31 December 2008 | 1,334,391 | 22,160 | 55,651 | 1,412,202 | |
| B. Company | |||||
| Cost | |||||
| At 1 January 2009 | (i) | 1,331,036 | 13,759 | 27,301 | 1,372,096 |
| Additions | (ii) | 31,525 | 37 | 3,727 | 35,289 |
| Depletion | (iii) | (18,439) | - | - | (18,439) |
| Disposals | (454) | (7) | (201) | (662) | |
| At 31 December 2009 | 1,343,668 | 13,789 | 30,827 | 1,388,284 | |
| Accumulated depreciation | |||||
| At 1 January 2009 | 8,365 | 3,224 | 23,903 | 35,492 | |
| Charge for year | (iv) | - | 286 | 1,335 | 1,621 |
| Provision for Impairment | (vi) | 1,700 | 1,400 | - | 3,100 |
| Disposals | - | (1) | (173) | (174) | |
| At 31 December 2009 | 10,065 | 4,909 | 25,065 | 40,039 | |
| Net book amounts | |||||
| At 31 December 2009 | 1,333,603 | 8,880 | 5,762 | 1,348,245 | |
| At 31 December 2008 | 1,322,671 | 10,535 | 3,398 | 1,336,604 |
(i) Tangible assets taken over from the Department of Agriculture, Fisheries and Food on Vesting Day (1 January 1989) are stated at cost, based on the amount agreed between the Group and the Minister for Agriculture, Fisheries and Food. Subsequent additions are stated at cost.
(ii) Additions to forests and land comprised €0.63m (2008:€0.86m) for afforestation, €17.83m (2008:€24.25m) for reforestation, €11.30m (2008:€13.71m) for other capital work and €1.74m (2008:€2.0m) paid for land.
(iii) Depletion represents the cost of forests clearfelled during the year, calculated as the proportion that the area harvested bears to the total area of similar forests. The depletion amount is charged to the profit and loss account and is based on cost, as defined in (i) above.
(iv) The estimated useful lives of tangible assets by reference to which depreciation has been calculated are as follows:
Buildings 20 to 50 years
Machinery and equipment 4 to 20 years
(v) Included in the net book amount of tangible assets is an amount for capitalised leased assets of €18,000 (2008: €147,000). The depreciation charge for capitalised leased assets for the year ended 31 December 2009 was €30,000 (2008: €263,000).
(vi) Tangible assets are reviewed for impairment if events or changes in circumstances indicate that their carrying value may be impaired. In 2008, the Group carried out an impairment review of the carrying value of tangible assets in its Panel Products Division by estimating the recoverable amount of the income generating units (IGUs) to which the assets belong:
- SmartPly Europe Limited
- Medite Europe Limited
The recoverable amount of all IGUs was based on a value in use calculation using cash flow projections based on the latest 5 year plan approved by management and extrapolated for a further 8 years. An appropriate terminal value was then added for each IGU. The estimated future cash flows were discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the IGU.
In 2009, in accordance with the standard, the Group carried out a ‘look back’ review of these impairment calculations and it is the Board’s view that in the cases of both SmartPly Europe Limited and Medite Europe Limited, no further provision for impairment is required. The analysis continues to be sensitive to a number of key assumptions:
- Long term growth rates
- Discount rate
- Foreign currency exchange rates
Long term growth rates
Although the demand for OSB and MDF was in line with forecast, the expectation is that demand will remain weak until 2011. Thereafter growth rates are expected to be in line with industry growth forecasts. Changes in selling price and direct costs are based on past practices and expectations of future changes in the market.
Discount rate
Future cash flows are discounted using a discount rate of 10% reflecting the Group’s weighted average cost of capital and the nature of the business and the markets in which the IGUs operate. A movement in the discount rate of 0.50% would increase or decrease the recoverable amount of SmartPly Europe Limited by €0.9m and Medite Europe Limited by €3.2m respectively but would not be sufficient to cause an impairment loss in either IGU.
Foreign currency exchange rates
The IGUs have significant exposure to the UK market and the sterling exchange rate. The cash flow forecasts have been converted, based on third party forecasts, for exchange rate expected to be in place at the time of the transactions. A £0.01p movement in the exchange rate over the life of the asset would increase or decrease the recoverable amount of SmartPly Europe Limited by €3.1m and Medite Europe Limited by €6.5m respectively but would not be sufficient to cause an impairment loss in either IGU.
Other forestry assets
The Group carried out an impairment review of the carrying value of its investment in certain forestry assets. As a consequence of the review, the Group has written down the assets to their recoverable amount by including an impairment charge of €3.1m in the Group profit and loss account.