KIM HENG OFFSHORE & MARINE HOLDINGS LIMITED
64
Notes to the financial statements
3 Significant accounting policies (Cont’d)
3.3 Property, plant and equipment (Cont’d)
(iii) 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,
that component is depreciated separately.
Depreciation is recognised as an expense in profit or loss on a straight-line basis over the estimated
useful lives of each component of an item of property, plant and equipment, unless it is included in the
carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and
their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the
lease term.
Depreciation is recognised from the date that the property, plant and equipment are installed and are
ready for use, or in respect of internally constructed assets, from the date that the asset is completed
and ready for use. Property, plant and equipment under construction are not depreciated.
The estimated useful lives for the current and comparative years are as follows:
Leasehold land and building
remaining lease term of 1 - 22 years
Renovation and improvements
5 years
Machinery and equipment
3 - 20 years
Vessels
5 - 20 years
Motor vehicles
5 years
Furniture, fittings, office equipment and computers 3 - 10 years
Depreciation methods, useful lives and residual values are reviewed at each reporting period, and
adjusted if appropriate.
3.4 Club memberships
Club memberships are stated at cost less allowance for impairment losses.
3.5 Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified
as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its
fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and are not recognised in the Group’s statement of financial position.
3.6 Inventories and work-in-progress
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the
first-in first-out principle, and includes expenditure incurred in acquiring the inventories, conversion costs and
other costs incurred in bringing them to their existing location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and estimated costs necessary to make the sale. Allowance is made for all deteriorated, damaged
and slow-moving inventories.
