NOTES TO THE FINANCIAL STATEMENTS
31 December 2014
2.
Summary of significant accounting policies (cont’d)
2.7 Joint arrangements (cont’d)
b)
Joint ventures
The Group recognises its interest in a joint venture as an investment and accounts for the investment using the equity
method from the date on which it becomes a joint venture.
Under the equity method, the investment in joint ventures are carried in the balance sheet at cost plus post-acquisition
changes in the Group’s share of net assets of the joint ventures. The profit or loss reflects the share of results of the
operations of the joint ventures. Distributions received from joint ventures reduce the carrying amount of the investment.
Where there has been a change recognised in other comprehensive income by the joint venture, the Group recognises its
share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between
the Group and joint venture are eliminated to the extent of the interest in the joint ventures.
When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does not
recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the joint
venture. After application of the equity method, the Group determines whether it is necessary to recognise an additional
impairment loss on the Group’s investment in joint ventures. The Group determines at the end of each reporting period
whether there is any objective evidence that the investment in the joint venture is impaired. If this is the case, the Group
calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its
carrying value and recognises the amount in profit or loss.
The financial statements of the joint ventures are prepared as the same reporting date as the Company. Where necessary,
adjustments are made to bring the accounting policies in line with those of the Group.
.
2.8 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment
are measured at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost
of replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying property, plant and equipment. The accounting policy for borrowing costs is set out in
Note 2.19. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:
Machinery and equipment
-
10 years
Motor vehicles
-
5 years
Office equipment
-
3 years
Furniture and fittings
-
10 years
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable.
The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if
appropriate.
An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected from
its use or disposal. Any gain or loss arising on de-recognition of the asset is included in the profit or loss in the year in which
the asset is de-recognised.
Hock Lian Seng Holdings Limited
Annual report 2014
51
