2. SUMMARY OF MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.6 Property and equipment (continued) (a) Recognition and measurement (continued) When significant parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment and is recognised net within “other income” and “other expenses” respectively in profit or loss. (b) Subsequent costs The cost of replacing a component of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group and the Bank, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred. (c) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group and the Bank will obtain ownership by the end of the lease term. Freehold land is not depreciated. Depreciation on management information system under development commences when the assets are ready for their intended use. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The estimated useful lives for the current and comparative periods are as follows: • Long term leasehold land 50 years • Building improvement and renovations 10 years • Furniture, fixtures and fittings 2-10 years • Office equipment 6 years • Motor vehicles 5 years • Computer equipment 5-7 years Depreciation methods, useful lives and residual values are reassessed at end of the reporting period, and adjusted as appropriate. 287 1 2 3 4 5 6 7 8 9 www.bankislam.com FINANCIAL STATEMENTS
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