2006 - TCL Communication Technology Holdings Limited

TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED
Notes to Financial Statements
31 December 2006
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment and depreciation (continued)
Construction in progress represents a building under construction, which is stated at cost less any impairment
losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on
related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate
category, plant and equipment when completed and ready for use.
Intangible assets (other than goodwill)
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are
amortised over the useful economic life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with
a finite useful life are reviewed at least at each balance sheet date.
Computer software
Purchased computer software is stated at cost, less any impairment losses, and is amortised on straight-line basis
over its estimated useful life of five years.
Intellectual property
Purchased intellectual property is stated at cost, less any impairment losses, and is amortised on the straight-line
basis over its estimated useful life.
Research and development costs
All research costs are charged to the income statement as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can
demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its
intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits,
the availability of resources to complete the project and the ability to measure reliably the expenditure during the
development. Product development expenditure which does not meet these criteria is expensed when incurred.
Leases
Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for
as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included
in non-current assets, and rentals receivable under the operating leases are credited to the income statement on
the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating
leases net of any incentives received from the lessor are charged to the income statement on the straight-line basis
over the lease terms.
Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the
straight-line basis over the lease terms. When the lease payments cannot be allocated reliably between the land and
buildings elements, the entire lease payments are included in the cost of the land and buildings as a finance lease in
property, plant and equipment.
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Annual Report 2006