Pg 147 - Berjaya Corporation Berhad

Berjaya Land Berhad (201765-A)
Annual Report 2005
49
2 SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(b) Basis of Consolidation (Cont’d)
In the preparation of the consolidated financial statements, the financial statements of all subsidiary companies are adjusted for the
material effects of dissimilar accounting policies. Intragroup transactions, balances and unrealised gains are eliminated on
consolidation and the consolidated financial statements reflect external transactions only. Unrealised losses are eliminated on
consolidation unless cost cannot be recovered.
Minority interests in the consolidated balance sheet consist of the minorities’ share of fair value of the identifiable assets and
liabilities of the acquiree as at acquisition date and the minorities’ share of movements in the acquiree’s equity since then.
(c)
Associated Companies
Associated companies are companies in which the Group has a long-term equity interest and where it exercises significant
influence over its financial and operating policies through Board representation. Investments in associated companies are accounted
for in the consolidated financial statements by the equity method of accounting based on the latest audited or management financial
statements of the associated companies made up to the Group’s financial year-end.
Under the equity method of accounting, the Group’s share of results of associated companies during the financial year is included
in the consolidated financial statements. The Group’s share of results of associated companies acquired or disposed of during the
year, is included in the consolidated income statement from the date that significant influence effectively commences or until the
date that significant influence effectively ceases, as appropriate.
Unrealised gains on transactions between the Group and the associated companies are eliminated to the extent of the Group’s
interest in the associated companies. Unrealised losses are eliminated unless cost cannot be recovered.
The Group’s interest in associated companies is carried in the consolidated balance sheet at cost plus the Group’s share of postacquisition
retained profits or accumulated losses and other reserves, less impairment losses.
(d) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses with the exception of hotel
properties.
Hotel properties comprise hotel land, building and integral plant and machinery. It is the Group’s practice to maintain these
properties at a high standard and condition such that residual values are at least equal to book values and consequently,
depreciation would be insignificant. Accordingly, no depreciation is provided on freehold hotel properties or those hotel properties
with unexpired lease tenure of 50 years or more. The related maintenance expenditure is dealt with in the income statement.
To establish whether the residual values of the hotel properties are at least equal to their respective book values, all hotel properties
are appraised by independent professional valuers at least once in every five years based on open market value. Where the
residual values of the hotel properties are less than their respective book values, a write down of book values to its recoverable
amounts will be made. The amount of reduction will be recognised as an expense in the income statement.
Freehold land, long term leasehold land (with an unexpired lease period of 50 years or more) and capital work-in-progress are not
depreciated. The Directors are of the opinion that the long term leasehold land has a residual value that will not be materially different
from its cost. The depreciation charges are not expected to be material in view of its long useful life. Had the long term leasehold land
been amortised over its useful life, there will be an additional depreciation charge of RM700,000 to the income statement. Short term
leasehold land, if any, is amortised on a straight line basis over the remaining period of the lease. All other property, plant and
equipment are depreciated over their estimated useful lives on a straight-line basis.