BIRLESIM_2022 ANNUAL REPORT

BİRLEŞİM MÜHENDİSLİK 2022 FAALİYET RAPORU 143 Birleşim Mühendislik Isıtma Soğutma Havalandırma Sanayi Ticaret Anonim Şirketi and Its Subsidiaries (Currency in Turkish Lira (“TL”) unless otherwise stated). Notes to the Consolidated Financial Statements for the Year Ended 31 December 2022 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (Continued) 2.8 Summary of Significant Accounting Policies (Continued) Intangible assets Intangible assets are carried at cost at first and carried at cost less accumulated amortization and impairment for the following periods. An intangible asset is recognized if it meets the identifiability criterion of intangibles, control exists over the asset; it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the costs can be measured reliably. Amortization of intangible assets is allocated on a systematic pro-rata basis using the straight-line method. Intangible assets including acquired rights, information systems and computer software are amortized using the straight-line method over their estimated useful economic lives of 3-15 years. Goodwill Goodwill arising from acquisitions of subsidiaries is presented in intangible assets. The amount of goodwill arising on the acquisition transaction is valued at the acquisition date after deducting the provision for impairment. For impairment testing, goodwill is allocated to cash-generating units (or groups of cash-generating units) that are expected to benefit from the synergy of the Group. The cash-generating unit, where the goodwill is allocated, is tested for impairment annually. If there is any indication that the unit is impaired, the impairment test is performed more frequently. If the recoverable amount of the cash-generating unit is less than the carrying amount, then the provision for impairment is first set aside from the goodwill allocated to the unit, then the carrying amount of the assets within the unit is reduced. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated income statement. Goodwill impairment provision is not reversed in subsequent periods. During the sale of the relevant cash-generating unit, the amount determined for goodwill is included in the calculation of profit/loss in the sales transaction. Impairment of assets excluding goodwill At each balance sheet date, the Group assesses whether there is any indication that the carrying value of tangible and intangible assets is reduced by deducting accumulated depreciation from their cost value. If there is such an indication, the recoverable amount of the asset is estimated in order to determine the amount of the impairment. In cases where it is not possible to calculate the recoverable amount of an asset alone, the recoverable amount of the cash-generating unit to which the asset belongs is calculated. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When calculating the value in use, the future cash flows are discounted to their present value using a pre-tax discount rate that reflects the time value of money and the risks specific to the asset. The main assumptions used in these studies are the inflation expectations in the coming years, the expected increases in sales and costs, the expected changes in the internal market composition and the expected country growth rates. If the recoverable amount of the asset (or cash-generating unit) is less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognized in the consolidated statement of profit or loss. The increase in the carrying value of the asset (or cash-generating unit) due to the cancellation of the impairment should not exceed the carrying amount of the asset (net amount remaining after depreciation) if the impairment loss was not included in the financial statements in previous years. An impairment loss is recognized in the consolidated statement of profit or loss. Impairment is not reversible in future periods.