5.2 Tangible and intangible assets

11. PROPERTY, PLANT AND EQUIPMENT, € 1,000  2019 2018
Land and water areas    
Cost at 1 Jan 19,116 18,070
Increases 1 Jan - 31 Dec 524 1,138
Decreases 1 Jan - 31 Dec   -92
Cost at 31 Dec 19,640 19,116
Carrying amount 31 Dec 19,640 19,116
     
Buildings and structure    
Cost at 1 Jan 305,190 279,432
Increases 1 Jan - 31 Dec 26,825 26,780
Decreases 1 Jan - 31 Dec   -1,022
Cost at 31 Dec 332,015 305,190
Accumulated depreciation 1 Jan -78,861 -69,640
Decreases, depreciation 1 Jan - 31 De   536
Depreciation 1 Jan - 31 Dec -10,086 -9,756
Carrying amount 31 Dec 243,068 226,329
     
Machinery and equipment    
Cost at 1 Jan 1,183,907 1,146,492
Increases 1 Jan - 31 Dec 50,791 43,870
Increases 1 Jan - 31 Dec   -6,455
Cost at 31 Dec 1,234,697 1,183,907
Accumulated depreciation 1 Jan -630,596 -584,443
Decreases, depreciation 1 Jan - 31 Dec   2,464
Depreciation 1 Jan - 31 Dec -43,128 -48,617
Carrying amount 31 Dec 560,973 553,310
     
Transmission lines    
Cost at 1 Jan 1,313,640 1,305,020
Increases 1 Jan - 31 Dec 36,650 10,541
Decreases 1 Jan - 31 Dec -4,810 -1,921
Cost at 31 Dec 1,345,479 1,313,640
Accumulated depreciation 1 Jan -555,155 -518,783
Decreases, depreciation 1 Jan - 31 Dec 4,404 1,081
Depreciation 1 Jan - 31 Dec -37,518 -37,453
Carrying amount 31 Dec 757,210 758,485
     
Other property, plant and equipment    
Cost at 1 Jan 118 181
Decreases 1 Jan - 31 Dec    
Cost at 31 Dec 118 118
Decreases, depreciation 1 Jan - 31 De    
Depreciation 1 Jan - 31 Dec    
Carrying amount 31 Dec 118 118
     
Prepayments and purchases in progress    
Cost at 1 Jan 59,596 83,656
Increases 1 Jan - 31 Dec 106,599 75,934
Transfers to other tangible and intangible assets 1 Jan - 31 Dec -115,901 -99,995
Cost at 31 Dec 50,294 59,596
Carrying amount 31 Dec 50,294 59,596
     
Capitalised interest    
Cost at 1 Jan 13,705 12,664
Increases 1 Jan - 31 Dec 1,016 1,042
Decreases 1 Jan - 31 Dec   -1
Cost at 31 Dec 14,721 13,705
Accumulated depreciation 1 Jan -1,910 -1,433
Depreciation on capitalised interest 1 Jan - 31 Dec -513 -478
Carrying amount 31 Dec 12,297 11,795
Carrying amount 31 Dec 62,592 71,391
Property, plant and equipment 1,643,599 1,628,749
12. INTANGIBLE ASSETS, €1,000 2019 2018
Land use rights    
Cost at 1 Jan 97,509 95,087
Increases 1 Jan - 31 Dec 2,811 2,625
Decreases 1 Jan - 31 Dec -19 -203
Cost at 31 Dec 100,301 97,509
Carrying amount 31 Dec 100,301 97,509
     
Other intangible assets    
Cost at 1 Jan 52,930 48,783
Increases 1 Jan - 31 Dec 17,086 4,148
Cost at 31 Dec 70,016 52,930
Accumulated depreciation 1 Jan -42,588 -39,229
Depreciation 1 Jan - 31 Dec -3,960 -3,358
Carrying amount 31 De 23,469 10,343
Carrying amount 31 Dec 123,770 107,852

Land use rights are not depreciated but tested annually for impairment in connection with the testing of goodwill.

The entire business of the Fingrid Group is grid operations in Finland with system responsibility, which the full goodwill of the Group in the balance sheet is fully allocated to. The goodwill included in the balance sheet amounts to EUR 87.9 million and has not changed during the periods under review. Since, per the regulation, the fair value of the net assets included in the company’s grid assets is approximately EUR 2,800.0 million compared to the carrying amount of EUR 1,855.3 million in net assets, which includes land use rights and goodwill, the book value of the asset items has not decreased.


  Accounting principles

Property, plant and equipment

Grid assets form most of the property, plant and equipment. Grid assets include, among other things, 400 kV, 220 kV, 110 kV transmission lines, direct current lines, transmission line right-of-ways, substations and the areas they encompass (buildings, structures, machinery and equipment, substation access roads), gas turbine power plants, fuel tanks, generators and turbines.

Property, plant and equipment are valued in the balance sheet at the original acquisition cost less accumulated depreciation and potential impairment. If an asset is made up of several parts with useful lives of different lengths, the parts are treated as separate items and are depreciated over their separate useful lives.

When a part of property, plant and equipment that is treated as a separate item is replaced, the costs relating to the new part are capitalised. Other subsequent costs are capitalised only if it is likely that the future economic benefit relating to the asset benefits the Group and the acquisition cost of the asset can be determined reliably. Repair and maintenance costs are recognised in the income statement when they are incurred.

Borrowing costs, such as interest costs and arrangement fees, directly linked with the acquisition, construction or manufacture of a qualifying asset form part of the acquisition cost of the asset item in question. A qualifying asset is one that necessarily requires a considerably long time to be made ready for its intended purpose. Other borrowing costs are recognised as an expense. Borrowing costs included in the acquisition cost are calculated on the basis of the average borrowing cost of the Group.

Property, plant and equipment is depreciated over the useful life of the item using the straight-line method. Depreciation on property, plant and equipment taken into use during the financial year is calculated on an item-by-item basis from the month of introduction. Land and water areas are not depreciated. The expected economic lives are verified at each closing date, and if they differ significantly from the earlier estimates, the depreciation periods are amended accordingly.

The depreciation periods of property, plant and equipment are as follows:

Buildings and structure

Substation buildings and separate buildings  40 years
Substation structures  30 years
Buildings and structures at gas turbine power plants  20-40 years
Separate structures  15 years

 

Transmission lines

 

Transmission lines 400 kV  40 years
Direct current lines  40 years
Transmission lines 110-220 kV  30 years
Creosote-impregnated towers and related disposal costs  30 years
Aluminium towers of transmission lines (400 kV)  10 years
Optical ground wires  10-20 years

 

Machinery and equipment

 

Substation machinery  10-30 years
Gas turbine power plants  20 years
Other machinery and equipment  3-5 years

 

Gains or losses from the sale or disposition of property, plant and equipment are recognised in the income statement under either other operating income or expenses. Property, plant and equipment are derecognised in the balance sheet when their economic useful life has expired, the asset has been sold, scrapped or otherwise disposed of to an outsider.

Goodwill and other intangible assets 

Goodwill created as a result of the acquisition of enterprises and businesses is composed of the difference between the acquisition cost and the net identifiable assets of the acquired business valued at fair value. Goodwill is allocated to cash-generating units and is tested annually for impairment. With associated companies, goodwill is included in the value of the investment in the associated company.

Other intangible assets consist of computer software and land use and emission rights. Computer software is valued at its original acquisition cost and depreciated on a straight line basis during its estimated useful life. Land use rights, which have an indefinite useful life, are not depreciated but are tested annually for impairment. 

More on emission rights in chapter 7.2.

Subsequent expenses relating to intangible assets are only capitalised if their economic benefits to the company increase beyond the former performance level. In other cases, expenses are recognised in the income statement when they are incurred.