Annual Report 2007 - The Link REIT

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86 The Link Real Estate Investment Trust Annual Report 2007 Notes to the Consolidated Financial Statements 2 Basis of preparation (continued) The following new standards, amendments to standards and interpretations which have been published but are not yet effective, have not been early adopted in thesefinancial statements. These are mandatory for the Group’s accounting periods beginning on or after 1 April 2007. HKAS 1 (Amendment) Capital Disclosures HKFRS 7 Financial Instruments: Disclosures HKFRS 8 Operating Segments HK(IFRIC)-Int 8 Scope of HKFRS 2 HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment HK(IFRIC)-Int 11 HKFRS 2 – Group and Treasury Share Transactions HK(IFRIC)-Int 12 Service Concession Arrangements The Manager does not expect the adoption of the above to have significant impact to the consolidated financial statements of the Group. 3 Summary of significant accounting policies The significant accounting policies adopted in the preparation of the consolidatedfinancial statements are set out below: (a) Basis of consolidation The consolidatedfinancial statements incorporate the assets and liabilities of The Link REIT and all its subsidiaries as at 31 March 2007 and the results for thefinancial year then ended. Subsidiaries are those entities in which The Link REIT, directly or indirectly, controls the composition of the board of directors, controls more than half of the voting power or holds more than half of the issued share capital. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. (b) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Consistent with the Group’s internalfinancial reporting, business segment is determined as the primary segmental reporting format. Segment assets consist primarily of tangible assets and receivables and segment liabilities mainly comprise operating liabilities. No geographical segment information has been prepared as all the properties are located within Hong Kong for the currentfinancial year.
Annual Report 2007 The Link Real Estate Investment Trust 87 Notes to the Consolidated Financial Statements 3 Summary of significant accounting policies (continued) (c) Investment properties A property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Group, is classified as an investment property. Investment property comprises land held under operating leases and buildings held underfinance leases. An investment property is measured initially at its cost, including related transaction costs. After initial recognition, an investment property is carried at fair value, being the amount for which the asset can be exchanged between knowledgeable, willing parties in an arm’s length transaction. The carrying value of the investment property is reviewed every six months and is independently valued by external valuers at least annually. Changes in fair values of the investment properties are recognised in the income statement. Subsequent expenditure is added to the asset’s carrying amount only when it is probable that future economic benefits associated with the item willflow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the income statement during thefinancial year in which they are incurred. (d) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item willflow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the income statement during the financial year in which they are incurred. Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost less accumulated impairment losses over the shorter of the estimated useful lives or their lease terms (if applicable), as follows: Leasehold improvements Equipment Motor vehicles 2 to 5 years 3 to 5 years 5 years The asset’s residual value and useful life are reviewed and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
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