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(l)
P
lant and e
q
ui
p
ment
Plant and equipment are stated at cost less accumulated depreciation. Depreciation is generally calculated on a straight-line basis
over the expected useful lives of the plant and equipment. The expected useful lives of buildings are twenty to forty years, and of
machinery and equipment are five to ten years.
(m)
I
m
p
airment or dis
p
osal o
f
lon
g
-lived assets (
p
lant and e
q
ui
p
ment and other intan
g
ible assets)
L
on
g
-lived assets held and used
Nortel Networks S.A. tests long-lived assets or asset groups held and used for recoverability when events or changes in
circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but
are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal
factors; the accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the
asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated
with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed of significantly before
the end of its estimated useful life.
Recoverability is assessed based on the carrying amount of the asset and the sum of the undiscounted cash flows expected to result
from the use and the eventual disposal of the asset or asset group. An impairment loss is recognized when the carrying amount is
not recoverable and exceeds the fair value of the asset or asset group. The impairment loss is measured as the amount by which the
carrying amount exceeds fair value.
L
on
g
-lived assets held
f
or sale
Long-lived assets are classified as held for sale when certain criteria are met, which include: management’s commitment to a plan
to sell the assets; the availability of the assets for immediate sale in their present condition; whether an active program to locate
buyers and other actions to sell the assets have been initiated; whether the sale of the assets is probable and their transfer is expected
to qualify for recognition as a completed sale within one year; whether the assets are being marketed at reasonable prices in relation
to their fair value; and how unlikely it is that significant changes will be made to the plan to sell the assets.
Nortel Networks S.A. measures long-lived assets to be disposed of by sale at the lower of carrying amount or fair value less cost to
sell. These assets are not depreciated. Fair value is determined using quoted market prices or the anticipated cash flows discounted
at a rate commensurate with the risk involved.
L
on
g
-lived assets to be dis
p
osed o
f
other than b
y
sale
Nortel Networks S.A. classifies assets that will be disposed of other than by sale as held and used until the disposal transaction
occurs. The assets continue to be depreciated based on revisions to their estimated useful lives until the date of disposal or
abandonment.
Recoverability is assessed based on the carrying amount of the asset and the sum of the undiscounted cash flows expected to result
from the remaining period of use and the eventual disposal of the asset or asset group. An impairment loss is recognized when the
carrying amount is not recoverable and exceeds the fair value of the asset or asset group. The impairment loss is measured as the
amount by which the carrying amount exceeds fair value.
(n) Goodwill
Goodwill represents the excess of the purchase price of an acquired enterprise over the fair value of the identifiable assets acquired
and liabilities assumed. Nortel Networks S.A. tests for impairment of goodwill on an annual basis as of October 1 and at any other
time if events occur or circumstances change that would indicate that it is more likely than not that the fair value of the reporting
unit has been reduced below its carrying amount (see note 4(i)).
Circumstances that could trigger an impairment test include: a significant adverse change in the business climate or legal factors; an
adverse action or assessment by a regulator; unanticipated competition; the loss of key personnel; the likelihood that a reporting
unit or significant portion of a reporting unit will be sold or otherwise disposed of; the results of testing for recoverability of a
significant asset group within a reporting unit; and the recognition of a goodwill impairment loss in the financial statements of a
subsidiary that is a component of a reporting unit.