Notes to the Financial Statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 2 MATERIAL ACCOUNTING POLICIES (CONTINUED) 2.7 Property, plant and equipment (continued) (b) Depreciation Freehold land is not depreciated as it has an indefinite life. Depreciation on capital work-inprogress commences when the assets are ready for their intended use. Depreciation is calculated to write off the depreciable amount of other property, plant and equipment on a straight line basis over their estimated useful lives. The depreciable amount is determined after deducting residual value from cost. The estimated useful lives of the property, plant and equipment are as follows: Buildings 10 - 50 years Plant, machinery, tools and equipment 2 - 25 years Electrical installations, computer and office equipment, furniture and fittings 3 - 10 years Motor vehicles 3 - 5 years Renovation, yard development and store extension 2 - 50 years Assets under construction included in plant and equipment are not depreciated as these assets are yet to be available for use. The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at the end of each financial year. 2.8 Leases The Group recognises leases as right-of-use asset and a corresponding liability at the date on which the leased asset is available for use (i.e. the commencement date). Accounting as lessee (a) Lease term The Group leases various offices, warehouses and motor vehicles. Rental contracts are typically made for fixed periods of 2 to 14 years (2022: 2 to 15 years), but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Extension and termination options are included in a number of property leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. In determining the lease term, the Group considers all facts and circumstances that create an economic incentive on whether to exercise an extension option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not to be terminated). The Group reassess the lease term upon the occurrence of a significant event or change in circumstances that is within the control of the Group and affects whether the Group is reasonably certain to exercise an option not previously included in the determination of lease term, or not to exercise an option previously included in the determination of lease term. A revision in lease term results in remeasurement of the lease liabilities – see accounting policy 2.8(d). 175 Wasco Berhad
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