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88 Annual report 2008 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2008 1. SIGNIFICANT ACCOUNTING POLICIES (cont’d) (j) Property, plant and equipment (cont’d) (ii) Depreciation Freehold land and capital work-in-progress are not depreciated. Depreciation is calculated to write off the depreciable amount of other property, plant and equipment on a straight-line basis over their estimated useful lives. The depreciable amount is determined after deducting residual value from cost. The principal annual rates used for this purpose are: Freehold buildings 1% – 2% Plant, machinery, cranes and trucks 20% Office equipment, renovations, furniture and fittings 10% – 40% Motor vehicles 16% The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. (k) Investment properties Investment properties are properties held to earn rental income or for capital appreciation or both rather than for use in the production or supply of goods and services or for administrative purposes, or sale in the ordinary course of business. (i) Measurement basis Investment properties are stated at cost less accumulated depreciation and impairment losses, if any. The cost of investment properties includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the asset will flow to the Group and the Company and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred. Investment properties are derecognised upon disposal or when they are permanently withdrawn from use and no future economic benefits are expected from their disposal. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in the income statement. (ii) Depreciation Freehold land is not depreciated. Depreciation is calculated to write off the depreciable amount of other investment properties on a straight-line basis over their estimated useful lives. Depreciable amount is determined after deducting the residual value from the cost of the investment property. The principal annual rates used for this purpose are: Freehold buildings 2% Leasehold buildings Over the remaining period of the lease The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date.
89 S P <strong>Setia</strong> <strong>Berhad</strong> Group NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2008 1. SIGNIFICANT ACCOUNTING POLICIES (cont’d) (l) Leases A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments for the right to use an asset for an agreed period of time. (i) Finance lease A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. Property, plant and equipment acquired by way of finance leases are stated at amounts equal to the lower of their fair values and the present value of minimum lease payments at the inception of the leases, less accumulated depreciation and any impairment losses. In calculating the present value of the minimum lease payments, the discount rate is the interest rate implicit in the lease, if this is determinable; if not, the Group’s incremental borrowing rate is used. (ii) Operating lease An operating lease is a lease other than a finance lease. Operating lease income or operating lease rentals are credited or charged to the income statement on a straight-line basis over the period of the lease. (m) Prepaid lease payments Leasehold land that has an indefinite economic life and title that is not expected to pass to the Group and the Company by the end of the lease term is classified as operating lease. The up-front payments for right to use the leasehold land over a predetermined period are accounted for as prepaid lease payments. (i) (ii) Measurement basis Prepaid lease payments are stated at cost less amounts amortised and impairment losses, if any. Amortisation The prepaid lease payments are amortised on a straight-line basis over the remaining period of the lease. (n) Development properties Development properties are classified under two categories i.e. land held for property development and property development costs. Land held for property development is defined as land on which development is not expected to be completed within the normal operating cycle. Usually, no significant development work would have been undertaken on these lands. Accordingly, land held for property development is classified as non-current assets on the balance sheet and is stated at cost plus incidental expenditure incurred to put the land in a condition ready for development. Land on which development has commenced and is expected to be completed within the normal operating cycle is included in property development costs. Property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities. Where the outcome of a development can be reasonably estimated, revenue is recognised on the percentage of completion method. The stage of completion is determined by the proportion that costs incurred to-date bear to estimated total costs. In applying this method of determining stage of completion, only those costs that reflect actual development work performed are included as costs incurred.
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embracing Change Annual Report 2008
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1 S P Setia Berhad Group Table of c
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Change - S P Setia Berhad

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