2012 Annual Report - ZTE

ANNUAL REPORT 2012Notes to Financial Statements (continued)(Prepared in accordance with PRC ASBEs)(All amounts in RMB’000 unless otherwise stated)(English translation for reference only)II.PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)13. Investment propertiesInvestment properties are properties held to earn rentals and/or for capital appreciation.Investment properties of the Group included houses and buildings leased to other parties and buildingsunder construction for lease to other parties in future.Investment properties are initially measured at cost. Subsequent expenses relating to the investmentproperties are charged to investment property costs if there is a probable inflow of economic benefitsrelating to the asset and its cost can be reliably measured; otherwise, those expenditure are recognisedin profit or loss as incurred.New investment properties of the Group added during the year represented owned properties reclassifiedto investment properties measured at fair value. The amount of fair value in excess of the book valueas at the date of reclassification is included in the capital reserve. After initial recognition, investmentproperties will be subsequently measured and presented in fair value. The difference between the fairvalue and the original book value shall be included in current profit and loss. Fair values are assessedand determined by independent valuers based on open market prices of properties of the same natureor similar and other relevant information.14. Fixed AssetsA fixed asset is recognized when, and only when, it is probable that future economic benefits that areassociated with the fixed asset will flow to the Group and the cost can be measured reliably. Subsequentexpenditures related to a fixed asset are recognized in the carrying amount of the fixed asset if theabove recognition criteria are met, and the book value of the replaced part is derecognized; otherwise,those expenditures are recognized in profit or loss as incurred.Fixed assets are initially recognized at cost taking into account the impact of expected future disposalexpenditure. Cost of purchased fixed assets includes purchasing price, relevant taxes, and any directlyattributable expenditure for bringing the asset to working conditions for its intended use.Fixed assets are depreciated on a straight-line basis, and the respective estimated useful lives,estimated residual values and annual depreciation rates are as follows:Useful lifeEstimatedresidualvalue ratioAnnualdepreciationrateFreehold land Indefinite — N/ABuildings 30 years 5% 3.17%Electronic equipment 5–10 years 5% 9.5%–19%Machinery equipment 5–10 years 5% 9.5%–19%Motor vehicles 5–10 years 5% 9.5%–19%Other equipment 5 years 5% 19%177