Annual Report and Accounts 2012 - Speedy Hire plc

60 Financial statements
Notes to the financial statements
continued
1 Accounting policies continued
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes
expenditure that is directly attributable to the acquisition of the asset and refurbishments to assets where the refurbishment extends the
asset’s useful economic life.
Depreciation of property, plant and equipment is charged to the income statement so as to write off the cost of the assets over the
estimated useful economic lives after taking account of estimated residual values. Residual values and estimated useful economic lives are
reassessed annually. Land is not depreciated. Hire equipment assets are depreciated so as to write them down to their residual value
over their normal working lives which range from three to 15 years depending on the category of the asset.
The principal rates and methods of depreciation used are as follows:
> > Hire equipment
> > Tools and general equipment – between three and seven years straight-line
> > Access equipment – five to ten years straight-line
> > Surveying equipment – five years straight-line
> > Power equipment – between five and ten years straight-line
> > Accommodation and storage units – between eight and 15 years straight-line
> > Non-hire assets
> > Freehold buildings, and long leasehold improvements – over the shorter of the lease period and 50 years straight-line
> > Short leasehold property improvements – over the period of the lease
> > Fixtures and fittings and office equipment (excluding IT) – 25%-45% per annum reducing balance
> > IT equipment and software – between three and five years straight-line, or over the period
of software licence (if shorter)
> > Motor vehicles – 25% per annum reducing balance
Planned disposals of hire equipment are transferred, at net book value, to inventory prior to sale.
Start-up expenses and lease incentives
Legal and start-up expenses incurred in respect of new hire depots are written off as incurred.
Premiums paid or incentives received (including rent-free periods extending beyond a depot’s opening date) on the acquisition of trading
locations are written off over the period of the lease.
Leases
Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. These assets
are included in the balance sheet at the lower of the fair value or present value of minimum lease payments at inception and are
depreciated accordingly. The capital element of the corresponding financing commitments is included in the balance sheet.
Lease payments in respect of finance leases are apportioned between the finance charge and the reduction of the outstanding liability.
The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease
incentives received are recognised in the income statement as an integral part of the total lease expense.
Financing income and costs
Financing costs comprise interest payable on borrowings, and gains and losses on financial instruments that are recognised in the
income statement.
Interest income is recognised in the income statement as it accrues, using the effective interest rate.
Interest payable on borrowings includes a charge in respect of attributable transaction costs, which are recognised in the income
statement over the period of the borrowings on an effective interest basis. The interest expense component of finance lease payments
is recognised in the income statement using the lease’s implicit interest rate.
Speedy Hire Plc Annual Report and Accounts 2012