Annual Report 2016
121
Financial Section
3 Principal Accounting Policies
(continued)
(f) Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses.
Historical cost includes expenditure that is directly attributable to the acquisition of assets. Subsequent costs are
included in the carrying amount of the assets or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can
be measured reliably. The carrying amount of the replaced part is derecognised. All other repair and maintenance
costs are charged in the consolidated income statement during the financial period in which they are incurred. The
carrying amount of an asset is written down immediately to its recoverable amount if the carrying value of an asset is
greater than its estimated recoverable amount.
(i)
Assets under construction
All direct costs relating to the construction of property, plant and equipment, including borrowing costs during
the construction period are capitalised as the costs of the assets.
(ii) Depreciation
No depreciation is provided on assets under construction until such time when the relevant assets are
completed and available for intended use.
Leasehold land classified as finance lease commences amortisation from the time when the land interest
becomes available for its intended use. Amortisation on leasehold land classified as finance lease and
depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual
values over their estimated useful lives, as follows:
Leasehold land classified as finance lease Shorter of remaining lease term of 10 to over 50 years or useful life
Buildings
20 to 40 years
Other assets
2 to 25 years
The residual values and useful lives of the assets are reviewed, and adjusted if appropriate, at the end of each
reporting period.
(iii) Gain or loss on disposal
The gain or loss on disposal of property, plant and equipment is determined by comparing the difference
between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the
consolidated income statement.
(g) Impairment of investments in subsidiaries, joint ventures, associated companies and
non-financial assets
Non-financial assets that have an indefinite useful life, for example goodwill, or have not yet been available for use
are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying amount
of an asset is written down immediately to its recoverable amount if the carrying amount of the asset is greater than
its estimated recoverable amount. An impairment loss is recognised in the consolidated income statement for the
amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the
higher of its fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are
grouped as cash-generating units for which there are separately identifiable cash flows. Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
Impairment testing of the interests in subsidiaries, joint ventures or associated companies is required upon receiving
dividends from these interests if the dividend exceeds the total comprehensive income of the subsidiary, joint venture
or associated companies in the period the dividend is declared or if the carrying amount of the interest in the
separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s
net assets including goodwill.
