South West London CCG Annual Report and Accounts 2020/21

1.13 Property, Plant & Equipment 1.13.1 Recognition Property, plant and equipment is capitalised if: • It is held for use in delivering services or for administrative purposes; • It is probable that future economic benefits will flow to, or service potential will be supplied to the clinical commissioning group; • It is expected to be used for more than one financial year; • The cost of the item can be measured reliably; and, • The item has a cost of at least £5,000; or, • Collectively, a number of items have a cost of at least £5,000 and individually have a cost of more than £250, where the assets are functionally interdependent, they had broadly simultaneous purchase dates, are anticipated to have simultaneous disposal dates and are under single managerial control; or, • Items form part of the initial equipping and setting-up cost of a new building, ward or unit, irrespective of their individual or collective cost. Where a large asset, for example a building, includes a number of components with significantly different asset lives, the components are treated as separate assets and depreciated over their own useful economic lives. 1.13.2 Measurement All property, plant and equipment is measured initially at cost, representing the cost directly attributable to acquiring or constructing the asset and bringing it to the location and condition necessary for it to be capable of operating in the manner intended by management. IT equipment and furniture and fittings that are held for operational use are valued at depreciated historic cost where these assets have short useful economic lives or low values or both, as this is not considered to be materially different from current value in existing use. NHS South West London CCG does not own any land or buildings. On the dissolution of former NHS Primary Care Trusts, all land and buildings were transferred to NHS Property Services or Community Health Partnerships. 1.13.3 Subsequent Expenditure Where subsequent expenditure enhances an asset beyond its original specification, the directly attributable cost is capitalised. Where subsequent expenditure restores the asset to its original specification, the expenditure is capitalised and any existing carrying value of the item replaced is written- out and charged to operating expenses. 1.14 Intangible Assets 1.14.1 Recognition Intangible assets are non-monetary assets without physical substance, which are capable of sale separately from the rest of the clinical commissioning group’s business or which arise from contractual or other legal rights. They are recognised only: • When it is probable that future economic benefits will flow to, or service potential be provided to, the clinical commissioning group; • Where the cost of the asset can be measured reliably; and, • Where the cost is at least £5,000. Software that is integral to the operating of hardware, for example an operating system, is capitalised as part of the relevant item of property, plant and equipment. Software that is not integral to the operation of hardware, for example application software, is capitalised as an intangible asset. Expenditure on research is not capitalised but is recognised as an operating expense in the period in which it is incurred. Internally-generated assets are recognised if, and only if, all of the following have been demonstrated: • The technical feasibility of completing the intangible asset so that it will be available for use; • The intention to complete the intangible asset and use it; • The ability to sell or use the intangible asset; • How the intangible asset will generate probable future economic benefits or service potential; • The availability of adequate technical, financial and other resources to complete the intangible asset and sell or use it; and, • The ability to measure reliably the expenditure attributable to the intangible asset during its development. 1.14.2 Measurement Intangible assets acquired separately are initially recognised at cost. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the criteria above are initially met. Where no internally-generated intangible asset can be recognised, the expenditure is recognised in the period in which it is incurred. Following initial recognition, intangible assets are carried at current value in existing use by reference to an active market, or, where no active market exists, at the lower of amortised replacement cost or the value in use where the asset is income generating . Internally-developed software is held at historic cost to reflect the opposing effects of increases in development costs and technological advances. Revaluations and impairments are treated in the same manner as for property, plant and equipment. 1.14.3 Depreciation, Amortisation & Impairments Freehold land, properties under construction, and assets held for sale are not depreciated. Otherwise, depreciation and amortisation are charged to write off the costs or valuation of property, plant and equipment and intangible non-current assets, less any residual value, over their estimated useful lives, in a manner that reflects the consumption of economic benefits or service potential of the assets. The estimated useful life of an asset is the period over which the clinical commissioning group expects to obtain economic benefits or service potential from the asset. This is specific to the clinical commissioning group and may be shorter than the physical life of the asset itself. Estimated useful lives and residual values are 182 | NHS South West London Clinical Commissioning Group