95
ANNUAL REPORT 2016
NOTES TOTHE FINANCIAL STATEMENTS
30 JUNE 2016
(Continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.4 Property, plant and equipment and depreciation (continued)
After initial recognition, property, plant and equipment except for freehold land and properties under construction, are stated at cost
less any accumulated depreciation and any accumulated impairment losses.
Properties under construction represent buildings under extension work or construction and are stated at cost.
Depreciation is calculated to write off the cost of the assets to their residual values on a straight line basis over their estimated useful
lives. The principal depreciation rates are as follows:
Buildings
2%
Electrical installations
10% - 15%
Furniture, fittings and counter fixtures
10% - 33
1
/
3
%
Motor vehicles
20%
Office equipment
10% - 50%
Plant and machinery
15% - 20%
Renovation
10% - 33
1
/
3
%
Freehold land has unlimited useful life and is not depreciated. Properties under construction are not depreciated until such time when
the asset is available for use. Leasehold land is depreciated over the leasehold period from seventy-one (71) to ninety-six (96) years.
At the end of each reporting period, the carrying amount of an item of property, plant and equipment is assessed for impairment when
events or changes in circumstances indicate that its carrying amount may not be recoverable. A write down is made if the carrying
amount exceeds the recoverable amount (see Note 4.9 to the financial statements on impairment of non-financial assets).
The residual values, useful lives and depreciation method are reviewed at the end of each reporting period to ensure that the amount,
method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future
economic benefits embodied in the items of property, plant and equipment. If expectations differ from previous estimates, the changes
are accounted for as a change in an accounting estimate.
The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits
are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the carrying amount is included
in profit or loss.
4.5 Leases and hire purchase
(a)
Finance leases and hire purchase
Assets acquired under finance leases and hire purchase which transfer substantially all the risks and rewards of ownership to the
Group are recognised initially at amounts equal to the fair value of the leased assets or, if lower, the present value of minimum
lease payments, each determined at the inception of the lease. The discount rate used in calculating the present value of the
minimum lease payments is the interest rate implicit in the leases, if this is practicable to determine; if not, the incremental
borrowing rate of the Group is used. Any initial direct costs incurred by the Group are added to the amount recognised as an
asset. The assets are capitalised as property, plant and equipment and the corresponding obligations are treated as liabilities.
The property, plant and equipment capitalised are depreciated on the same basis as owned assets.
The minimum lease payments are apportioned between the finance charges and the reduction of the outstanding liability. The
finance charges are recognised in profit or loss over the period of the lease term so as to produce a constant periodic rate of
interest on the remaining lease and hire purchase liabilities.
(b)
Operating leases
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
Lease payments under operating leases are recognised as an expense on a straight line basis over the lease term.
