12. Property, plant and equipment

Accounting policy, significant judgements and estimates

Items of PP&E are measured at cost less accumulated depreciation and accumulated impairment losses. Gains and losses on disposals of items of PP&E are recognised in profit or loss as part of other income or expenses.

The cost of an acquired or self-constructed item of PP&E includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. The cost of the Group’s filling lines and other related equipment also includes the estimated cost of dismantling to the extent such an amount is recognised as a provision. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group and the cost can be measured reliably. The costs of the day-to-day servicing of PP&E are recognised in profit or loss as incurred.

Items of PP&E are depreciated on a straight-line basis over their estimated useful lives, with depreciation generally recognised in profit or loss. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows:

• Buildings 15 to 40 years
• Plant and equipment:
  • Production-related equipment and machinery 4 to 25 years
  • Furniture and fixtures 3 to 8 years
• Filling lines (leased assets, SIG as lessor) 10 years

In connection with the building of the Group’s first Mexican aseptic carton sleeves plant and the future project to build an aseptic carton sleeves plant in India, the Group reassessed and extended the useful life of core production-related equipment and machinery from 12 to 25 years as of 1 July 2022. The change has been accounted for on a prospective basis as of 1 July 2022. For the year ended 31 December 2022, the change resulted in a €5.7 million lower amount of depreciation (net of tax) for the core production-related equipment and machinery that were in use as of 1 July 2022. The average annual decrease in depreciation for this equipment over the next three years is approximately €10 million (net of tax). The future annual impact will decline as this equipment (with different remaining useful lives) will reach the end of its respective useful life at different times.

The Group as lessor – filling lines

The Group mainly deploys aseptic carton filling lines under contracts that qualify to be accounted for as operating leases (see note 5.5.2 for additional details). As further described in this accounting policy section, the filling lines are measured at cost and depreciated from the deployment date over their estimated useful life of ten years and tested for impairment when there is an impairment indicator.

Impairment of PP&E

Items of PP&E are reviewed regularly and at least annually to identify whether there is an indication of impairment. If an impairment indicator exists, the asset’s recoverable amount is estimated. See note 5.5.3 for details about impairment testing of non-financial assets.

A change in the Group’s intended use of certain assets, such as a decision to rationalise production locations, may trigger a future impairment. Value in use calculations require management to estimate the future cash flows expected to arise from an individual asset or CGU and to determine a suitable discount rate to calculate present value.