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Notes to the Consolidated Financial Statements

31st March 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.5 Leasehold land and land use rights

Leasehold land and land use rights classified as operating leases are stated at cost less
accumulated amortisation and accumulated impairment losses. Cost mainly represents
consideration paid for the rights to use the land from the date the respective rights were granted.
Amortisation of leasehold land and land use rights is calculated on a straight-line basis over the
period of the rights.

2.6 Property, plant and equipment

Leasehold land classified as finance lease and all other property, plant and equipment are stated
at historical cost less depreciation and impairment losses. Historical cost includes expenditure that
is directly attributable to the acquisition of the items. Subsequent costs are included in an asset’s
carrying amount or recognised as a separate asset, as appropriate, only when 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. The carrying amount of the replaced part is derecognised. All other
repairs and maintenance are charged to the consolidated income statement during the financial
period in which they are incurred.

Leasehold land classified as finance lease commences amortisation from the time when the land
interest becomes available for its intended use. Amortisation on leasehold land classified as finance
lease and depreciation on other assets is calculated using the straight-line method to allocate their
cost to their residual values over the shorter of the unexpired lease term or their estimated useful
lives.

Depreciation on leasehold improvements, buildings and moulds is calculated using the straight-
line method to allocate their costs over their estimated useful lives of 15 years, 40 years and 4
years respectively. Other property, plant and equipment are depreciated at rates sufficient to write
off their cost less accumulated impairment losses over their estimated useful lives on a reducing
balance basis. The principal depreciation rates are as follows:

Furniture, fixtures and equipment 20%
Plant and machinery 14.5% to 20%
Motor vehicles 20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (Note 2.9).

Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognised in the consolidated income statement.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2017 59