DEFINING DESIGN
QUALITY
50
2.
Summary of significant accounting policies (cont’d)
Property, plant and equipment (cont’d)
Depreciation is provided on a straight-line basis to allocate the gross carrying amounts of the assets less their residual
values over their estimated useful lives of each part of an item of these assets. Freehold land has an unlimited useful
life and therefore is not depreciated. The estimated annual rates of depreciation are as follows:
Buildings
-
2%
Machinery and exhibition equipment
-
14% - 36%
Office equipment, computers and software
-
10% - 40%
Motor vehicles, furniture and fittings and renovations
-
8% - 40%
Assets under construction included in property, plant and equipment are not depreciated as these assets are not
available for use.
An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle.
Fully depreciated assets still in use are retained in the financial statements.
The gain or loss arising from the derecognition of an item of property, plant and equipment is measured as the
difference between the net disposal proceeds, if any, and the carrying amount of the item and is recognised in profit
or loss.
The residual value, useful life and depreciation method of an asset are reviewed at least at the end of each reporting
period and, if expectations differ significantly from previous estimates, the changes are accounted for as a change in
an accounting estimate, and the depreciation charge for the current and future periods are adjusted.
Leases
Whether an arrangement is, or contains, a lease, it is based on the substance of the arrangement at the inception
date, that is, whether (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets; or (b)
the arrangement conveys a right to use the asset.
Leases are classified as finance leases if substantially all the risks and rewards of ownership are transferred to the
lessee. All other leases are classified as operating leases. At the commencement of the lease term, a finance lease
is recognised as an asset and as a liability in the statement of financial position at amounts equal to the fair value of
the leased asset or, if lower, the present value of the 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 lease, if this is not practicable to determine, the lessee’s incremental borrowing rate is used. Any initial
direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over
the recorded lease liability are treated as finance charges which are allocated to each reporting period during the
lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent
rents are charged as expenses in the reporting periods in which they are incurred. The assets are depreciated as
owned depreciable assets over the shorter of the estimated useful life of the asset and the lease term, if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term.
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets
are classified as operating leases. For operating leases, lease payments are recognised as an expense in profit or
loss on a straight-line basis over the term of the relevant lease unless another systematic basis is representative
of the time pattern of the user’s benefit, even if the payments are not on that basis. Lease incentives received are
recognised in profit or loss as an integral part of the total lease expense. Rental income from operating leases is
recognised in profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis
is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Initial direct cost
incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
Notes to the Financial Statements
31 December 2014
