3. Summary of significant accounting policies (continued)
k. Intangible assets Intangible assets, which include computer software and mineral rights, are recorded at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are capitalized if it is probable that the asset acquired or developed will generate future economic benefits. The costs incurred to establish technological feasibility or to maintain existing levels of performance are recognized in operating and maintenance expense as incurred. Cost includes expenditures that are directly attributable to the acquisition or development of the asset. The cost of self- developed assets includes materials, services, direct labour and directly attributable overheads. Borrowing costs associated with major projects are capitalized during the development period. Major projects (or qualifying assets) are those projects that are under development for a period greater than six months. Assets under development are recorded as in progress until they are available for use. Amortization of computer software is based on the cost of the asset less its residual value and is calculated using the straight-line method over the estimated useful life of the asset from the date the asset is available for use. The amortization rates range from 10.0 to 20.0% annually. The estimated useful lives, residual values and method of amortization are reviewed annually for reasonableness. Amortization (or depletion) of mineral rights and prepaid royalties is calculated using the unit of production method based on estimated proven and probable reserves. Depletion is considered a cost of natural gas in storage when the natural gas is produced. When the natural gas in storage is sold the depletion is charged to depreciation and amortization expense. The estimated proven and probable reserves, residual values and method of depletion are reviewed annually for reasonableness.
l.
Property, plant and equipment Property, plant and equipment are recorded at cost less accumulated depreciation and any accumulated impairment losses. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The cost of major inspections or overhauls is capitalized. The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the specific item if it is probable that the part will generate future economic benefits, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The cost of the day-to-day servicing of property, plant and equipment is recognized in operating and maintenance expense as incurred. Cost includes expenditures that are directly attributable to the acquisition or construction of the asset. The cost of self-constructed assets includes materials, services, direct labour and directly attributable overheads. Borrowing costs associated with major projects are capitalized during the construction period. Major projects (or qualifying assets) are those projects that are under construction for a period greater than six months. Assets under construction are recorded as in progress until they are available for use. When property, plant and equipment is disposed of or retired, the related cost, accumulated depreciation and any accumulated impairment losses are eliminated. Any resulting gains or losses are reflected in net income in the period the asset is disposed of or retired. Depreciation is based on the cost of the asset less its residual value and is calculated using the straight-line method over the estimated useful life of the asset from the date the asset is available for use at the following annual rates (per cent): Distribution 1.5 to 5.3 Transmission and storage 2.0 to 20.0 Gathering, treatment and compression 2.0 to 33.0 Vehicles, equipment and other 2.5 to 20.0 Computer hardware 20.0 to 33.3 The estimated useful lives, residual values and method of depreciation are based on periodic depreciation studies with annual reviews for reasonableness.
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2014 Annual Report SaskEnergy
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