Annual report 2014
71
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (continued)
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
4.4 Property, plant and equipment and depreciation (continued)
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 4.8 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.
(c) Leases of land and buildings
For leases of land and buildings, the land and buildings elements are considered separately for
the purpose of lease classification and these leases are classified as operating or finance leases
in the same way as leases of other assets.
