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Property, plant and equipment
 12 Months Ended
Dec. 31, 2012
Property, plant and equipment [Abstract]  
Property, plant and equipment

11. Property, plant and equipment

Property, plant and equipment consist of the following:

 

                                         
           
(in thousands)   Land,
  buildings and
  constructions
EUR		    

    Machinery

and

    equipment

EUR

    

Leasehold

  improvements

EUR

       Furniture,
fixtures and
other
  equipment
EUR		    

Total

EUR

  

 

  

Cost

                                        

Balance, January 1, 2011

     526,855       609,253       185,635       316,244       1,637,987  

Additions

     213,513       355,358       20,918       29,314       619,103  

Disposals

     -       (212,286)       (216)       (1,619)       (214,121)  

Effect of changes in exchange rates

     1,773       11,698       323       1,040       14,834  

 

  

Balance, December 31, 2011

     742,141       764,023       206,660       344,979       2,057,803  

Additions

     106,234       248,429       8,883       22,749       386,295  

Disposals

     (347)       (317,022)       (300)       (30,894)       (348,563)  

Effect of changes in exchange rates

     (995)       (4,671)       (391)       (59)       (6,116)  

 

  

Balance, December 31, 2012

     847,033       690,759       214,852       336,775       2,089,419  
           

Accumulated depreciation and impairment

                                        

Balance, January 1, 2011

     127,509       358,026       129,741       277,380       892,656  

Depreciation

     27,362       99,968       13,128       17,575       158,033  

Impairment charges

     -       3,508       2,789       5,975       12,272  

Disposals

     -       (64,417)       (41)       (988)       (65,446)  

Effect of changes in exchange rates

     1,006       4,715       158       799       6,678  

 

  

Balance, December 31, 2011

     155,877       401,800       145,775       300,741       1,004,193  

Depreciation

     31,598       110,571       13,416       23,668       179,253  

Impairment charges

     649       906       -       1,679       3,234  

Disposals

     (347)       (92,205)       (248)       (30,575)       (123,375)  

Effect of changes in exchange rates

     (505)       (3,090)       (165)       (49)       (3,809)  

 

  

Balance, December 31, 2012

     187,272       417,982       158,778       295,464       1,059,496  
           

Carrying amount

                                        

December 31, 2011

     586,264       362,223       60,885       44,238       1,053,610  

December 31, 2012

 

     659,761       272,777       56,074       41,311       1,029,923  

As of December 31, 2012, the carrying amount includes assets under construction for land, buildings and constructions of EUR 5.5 million (2011: EUR 165.0 million), machinery and equipment of EUR 21.8 million (2011: EUR 16.6 million), leasehold improvements of EUR 1.0 million (2011: EUR 1.3 million) and furniture, fixtures and other equipment of EUR 9.3 million (2011: EUR 8.0 million). As of December 31, 2012, the carrying amount of land amounts to EUR 60.7 million (2011: EUR 51.1 million).

The majority of the additions and disposals in 2012 and 2011 relate to machinery and equipment (including operating leases to customers, prototypes, evaluation and training systems). These systems are similar to those that ASML sells in its ordinary course of business. The systems are capitalized under property, plant and equipment because they are held for own use, for rental and for evaluation purposes. These systems are recorded at cost and depreciated over their expected useful life. From the time that these assets are no longer held by use but intended for sale in the ordinary course of business, they are reclassified from property, plant and equipment to inventory at the lower of their carrying value or fair market value. Since the transfers between inventory and property, plant and equipment are non-cash events, these are not reflected in the consolidated statements of cash flows. An amount of EUR 204.8 million (2011: EUR 300.5 million) of the additions relates to non-cash transfers from inventory and an amount of EUR 9.6 million (2011: EUR 17.7 million) relates to other non-cash movements (mainly investments not yet paid). An amount of EUR 222.9 million (2011: EUR 145.3 million) of the disposals relates to non-cash transfers to inventory. When sold, the proceeds and cost of these systems are recorded as net sales and cost of sales, respectively, identical to the treatment of other sales transactions. The cost of sales for these systems includes the inventory value and the additional costs of refurbishing (materials and labor).

The impairment charges recorded in 2012 mainly related to furniture, fixture and other equipment (EUR 1.7 million). We recorded impairment charges with respect to software which are ceased to be used. The impairment charges were determined based on the difference between the assets’ estimated fair value (being EUR 0.1 million) and their carrying amount.

The impairment charges recorded in 2011 mainly related to machinery and equipment and furniture, fixture and other equipment (EUR 9.5 million). We recorded impairment charges with respect to technical equipment and software which are ceased to be used. The impairment charges were determined based on the difference between the assets’ estimated fair value (being EUR 1.9 million) and their carrying amount.

The impairment charges recorded in 2010 mainly related to buildings and constructions (EUR 6.7 million). We recorded impairment charges with respect to several technical infrastructure items which are ceased to be used due to technical changes relating to NXE (EUV) development. The impairment charges were determined based on the difference between the assets’ estimated fair value (being EUR 0.4 million) and their carrying amount.

In determining the fair value of an asset, we make estimates about future cash flows. These estimates are based on our financial plan, updated with the latest available projections of the semiconductor market conditions and our sales and cost expectations, which is consistent with what ASML uses to manage its business.

As of December 31, 2012, the carrying amount of machinery and equipment includes an amount of EUR 82.2 million with respect to evaluation and operating lease systems (2011: EUR 201.4 million).

During 2012, we recorded impairment charges of EUR 3.2 million (2011: EUR 12.3 million; 2010: EUR 8.6 million) of which we recorded EUR 1.0 million (2011: EUR 6.2 million; 2010: EUR 7.3 million) in cost of sales, EUR 0.5 million (2011: EUR 3.5 million; 2010: EUR 0.7 million) in R&D costs and EUR 1.7 million (2011: EUR 2.6 million; 2010: EUR 0.6 million) in SG&A costs.

During 2012, we recorded depreciation charges of EUR 179.3 million (2011: EUR 158.0 million; 2010: EUR 144.6 million) of which we recorded EUR 147.7 million (2011: EUR 117.7 million; 2010: EUR 108.7 million) in cost of sales, EUR 15.3 million (2011 EUR 24.9 million; 2010: EUR 16.7 million) in R&D costs and EUR 16.3 million (2011: EUR 15.4 million; 2010: EUR 19.2 million) in SG&A costs.

Variable Interest Entity

The carrying amount of land, buildings and constructions includes an amount of EUR 32.4 million (2011: EUR 33.8 million) relating to our headquarters in Veldhoven, the Netherlands, which is owned by Koppelenweg II B.V., a “VIE”.

As of 2003, we are leasing the Veldhoven headquarters for a period of 15 years (from 2003) from an entity (“lessor”) that was incorporated by a syndicate of three banks (“VIE shareholders”) solely for the purpose of leasing this building. The lessor’s shareholders’ equity amounts to EUR 1.9 million and has not changed since 2003.

The VIE shareholders each granted a loan of EUR 11.6 million and a fourth bank granted a loan of EUR 12.3 million (EUR 47.1 million in total) to the parent of the lessor. ASML provided the parent of the lessor with a subordinated loan of EUR 5.4 million and has a purchase option that is exercisable either at the end of the lease in 2018, at a price of EUR 24.5 million, or during the lease at a price equal to the book value of the assets. The total assets of the lessor entity amounted to EUR 54.5 million at inception of the lease. The entity is determined to be a VIE because the equity investors do not have sufficient equity at risk for the legal entity to finance its activities without sufficient additional subordinated support.

The primary purpose for which the VIE was created was to provide ASML with use of the building for 15 years, where ASML does not retain substantially all the risks and rewards from changes in value of the building. The main activities of the entity are to rent, re-market and ultimately sell the building that is owned by the VIE. The economic performance of the VIE is most significantly impacted by the ability of the lessee (ASML) to exercise the purchase option at any time during the lease term, and thus we could potentially benefit from increases in the fair value of the building.

While the debt holders have a variable interest, and may absorb losses, and the equity holders have a variable interest and may receive benefits, they do not have the power to direct activities that most significantly impact the entity’s economic performance and therefore, cannot be the primary beneficiary. Through the pre-determined price of the call option ASML has the power over the VIE, therefore only ASML meets both the power and losses/benefit criterion and consolidates the VIE.