CONTENTS - Investing In Africa

NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31st December 2007
iv)
Rental income
Rental income is accounted for on a straight-line
basis over the lease terms on ongoing leases.
(e) Property, equipment and depreciation
Property and equipment are stated at cost or
valuation, excluding the costs of day-to-day servicing,
less accumulated depreciation and accumulated
impairment in value.
Changes in the expected useful life are accounted for
by changing the amortisation period or method, as
appropriate, and treated as changes in accounting
estimates.
Depreciation is calculated on the straight line basis at
annual rates estimated to write off the carrying values
of the assets over their expected useful lives. The
annual depreciation rates in use are:-
Freehold land
Leasehold improvements
Motor vehicles 25%
Furniture and fittings 10%
Office equipment 20%
Computers 20%
Nil
Rates based on the
shorter of the lease
term or estimated
useful lives
Property and equipment are periodically reviewed
for impairment. If any such indication exists and
where the carrying values exceed the estimated
recoverable amount, the assets are written down to
their recoverable amount. The recoverable amount
is the greater of net selling price and value in use. In
assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to
the asset. Impairment losses are recognised in the
income statement.
(f) Provisions
Provisions are recognised when the Group has a
present legal or constructive obligation as a result of
past events, for which it is probable that an outflow
of economic benefits will be required to settle the
obligation, and a reliable estimate can be made of the
amount of the obligation.
The estimated monetary liability for employees’
accrued annual leave entitlement at the balance sheet
date is recognised as an expense accrual.
(g) Financial instruments
i) Loans and advances to customers
Loans and advances to customers are financial
assets with fixed or determinable payments
and are not quoted in an active market. After
initial measurement at cost, loans and advances
to customers are subsequently measured at
amortised cost using the effective interest
rate method, less allowance for impairment.
Amortised cost is calculated by taking into
account any discount or premium on acquisition
and fees and costs that are an integral part of
the effective interest rate.
ii)
Investments held for trading
Investments held for trading are those which
were either acquired for generating a profit
from short-term fluctuations in price or dealer’s
margin, or are securities included in a portfolio
in which a pattern of short-term profit-taking
exists. Investments held for trading are initially
recognised at cost and subsequently remeasured
at fair value based on quoted bid
prices or dealer price quotations, without any
deduction for transaction costs. All related
realised and unrealised gains and losses are
included in the income statement. Interest earned
whilst holding held for trading investments is
reported as interest income.
Property and equipment is de-recognised upon
disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on de-recognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is
included in the income statement in the year the item
is de-recognised.
iii)
Held to maturity investments
Held to maturity financial investments are those
which carry fixed or determinable payments and
have fixed maturities and which the Group has
the intention and ability to hold to maturity. After
initial measurement, held to maturity financial
investments are subsequently measured at
amortised cost using the effective interest
rate method, less allowance for impairment.
44 KCB ANNUAL REPORT & FINANCIAL STATEMENTS 2007