Eng - IOI Group

Notes To The Financial Statements cont’d5. SIGNIFICANT ACCOUNTING POLICIES cont’d5.3 Property, Plant and Equipment and DepreciationAll items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributableto the acquisition of the items. The cost of self-constructed assets includes the cost of materials and direct labour, any othercosts directly attributable to bringing the assets to working condition for its intended use, and the costs of dismantling andremoving the items and restoring the site on which they are located.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only whenthe cost is incurred and it is probable that future economic benefits associated with the item will flow to the Group and thecost of the item can be measured reliably. The cost of the day-to-day servicing of property, plant and equipment are chargedto the income statement during the financial period in which they are incurred.Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item andwhich have different useful lives, are depreciated separately.After initial recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulatedimpairment losses.Freehold land and construction in progress are not depreciated.Other property, plant and equipment are depreciated on the straight-line method so as to write off the cost of the assets overtheir estimated useful lives. The principal annual depreciation rates are as follows:Buildings and improvements 2% - 10%Plant and machinery 4% - 20%Motor vehicles 10% - 20%Furniture, fittings and equipment 5% - 33%Golf Course 2%Depreciation on assets under construction commences when the assets are ready for their intended use.At each balance sheet date, the carrying amount of an item of property, plant and equipment is assessed for impairmentwhen events or changes in circumstances indicate that its carrying amount may not be recoverable.The residual values, useful lives and depreciation method are reviewed at each financial year end to ensure that the amount,method and period of depreciation are consistent with previous estimates and expected pattern of consumption of the futureeconomic benefits embodied in the items of property, plant and equipment.The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economicbenefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the carryingamount is recognised in the income statement.151ANNUAL REPORT 2007IOI Corporation Berhad