INDUSTRIAL HOLDING BULGARIA PLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 MARCH 2013

#### 2.2 Summary of significant accounting policies (continued)

k) Borrowing costs Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale to be capitalised as part of its cost. All other borrowing costs are expensed in the period in which they arise. Borrowing costs include interest and other costs that the Company incurs in obtaining borrowed funds.

l) Intangible assets Intangible assets Intangible assets acquired separately are measured initially at acquisition cost. After initial recognition, intangible assets are carried at acquisition cost less accumulated depreciation and accumulated impairment losses. The useful lives of intangible assets are assessed to be finite as follows:

Patents and trademarks	4 - 7 years
Software	4 - 7 years

Intangible assets with finite lives are amortised over their useful lives and tested for impairment whenever there is an indication that their value is impaired. The amortization period and method of amortization of intangible assets with a finite useful life are reviewed at least at each financial year. Changes in the expected useful life or pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, and treated as changes in accounting estimates.

########## m) Impairment of non-financial assets

At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, or when required annual impairment testing for an asset, the Company estimates the recoverable amount of that asset. Recoverable amount is the higher of fair value less costs to sell of an asset or cash- generating unit (CGU) and its value in use. Recoverable amount is determined for an individual asset, unless the use of that asset does not generate cash flows that are largely independent of the cash inflows from other assets or groups of assets. Where the carrying amount of an asset or CGU is higher than its recoverable amount, it is considered impaired and its carrying amount is reduced to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate before tax that reflects current market assessments of the value of money and the risks specific to the asset. Fair value less costs to sell is determined on the basis of recent market transactions, if any. If such transactions cannot be identified, apply appropriate valuation model. These calculations are corroborated by valuation multiples or other available sources of information on the fair value of an asset or cash-generating unit.

Impairment calculations are based on detailed budgets and forecast calculations are made separately for each CGU to which the individual assets are distributed. These budgets and forecast calculations generally cover a period of five years. For longer periods calculated index for long-term growth and applies it after the fifth year of the future cash flows.

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