NewWorld Development Company Limited
FINANCIAL SECTION
116
3 PRINCIPAL ACCOUNTING POLICIES
(continued)
(b) Intangible assets
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(vi) Operating right
Operating right primarily resulted from the acquisition of right to operate facilities rental and other
businesses. Operating right is carried at cost less accumulated amortisation and impairment. Amortisation
is calculated using the straight-line method to allocate the cost over the period of the operating right.
(vii) Intangible concession rights
The Group has entered into contractual service arrangements (“Service Concessions”) with local
government authorities for its participation in the development, financing, operation and maintenance
of various infrastructures for public services, such as toll roads and bridges, power plants and water
treatment plants (the “Infrastructures”). The Group carries out the construction or upgrade work of
Infrastructures for the granting authorities in exchange for the right to operate the Infrastructures
concerned and the right to collect the fees for a specified period of time. The fees collected during the
operating periods are attributable to the Group. The relevant Infrastructures are required to be returned to
the local government authorities upon the expiry of the operating rights without significant compensation
to the Group.
The Group applies the intangible asset model to account for the Infrastructures where they are paid by
the users of the Infrastructures and the concession grantors (the respective local governments) have
not provided any contractual guarantees in respect of the amounts of construction costs incurred to be
recoverable.
Land use rights acquired in conjunction with the Service Concessions which the Group has no discretion
or latitude to deploy for other services other than the use in the Service Concessions are treated as
intangible assets acquired under the Service Concessions.
Amortisation of intangible concession rights is calculated to write off their costs, where applicable, on
an economic usage basis for roads and bridges whereby the amount of amortisation is provided based
on the ratio of actual volume compared to the total projected volume or on a straight-line basis for water
treatment plants over the periods which the Group is granted the rights to operate these Infrastructures.
The total projected volume of the respective Infrastructures is reviewed regularly with reference to both
internal and external sources of information and appropriate adjustments will be made should there be a
material change.
(c) Non-current assets (or disposal groups) classified as assets held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to
be recovered principally through a sale transaction and a sale is considered highly probable. They are stated
at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered
principally through a sale transaction rather than through continuing use. Investment properties classified as
non-current assets held for sale are stated at fair value at the end of the reporting period.
(d) Land use rights
The upfront prepayments made for the land use rights held under operating leases are expensed in the
consolidated income statement on a straight-line basis over the period of the lease or when there is
impairment, the impairment is expensed in the consolidated income statement.
