2012 Annual Report - ZTE

ANNUAL REPORT 2012Notes to Financial Statements(Prepared under Hong Kong Financial Reporting Standards)31 December 20122.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Property, plant and equipment and depreciation (continued)Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant andequipment to its residual value over its estimated useful life. The principal estimated useful lives used forthis purpose are as follows:Freehold landBuildingsLeasehold improvementsMachinery, computers and office equipmentMotor vehiclesNot depreciated30 yearsOver the shorter of the lease terms and 10 years5 to 10 years5 to 10 yearsWhere parts of an item of property, plant and equipment have different useful lives, the cost of that item isallocated on a reasonable basis among the parts and each part is depreciated separately. Residual values,useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financialyear end.An item of property, plant and equipment including any significant part initially recognised is derecognisedupon disposal or when no future economic benefits are expected from its use or disposal. Any gain or losson disposal or retirement recognised in profit or loss in the year the asset is derecognised is the differencebetween the net sales proceeds and the carrying amount of the relevant asset.Construction in progress represents buildings, plant and machinery and other fixed assets under constructionor installation, which is stated at cost less any impairment losses, and is not depreciated. Cost comprisesthe direct costs of construction or installation during the period of construction. Construction in progress isreclassified to the appropriate category of property, plant and equipment when completed and ready for use.Investment propertiesInvestment properties are interests in land and buildings (including the leasehold interest under an operatinglease for a property which would otherwise meet the definition of an investment property) held to earn rentalincome and/or for capital appreciation, rather than for use in the production or supply of goods or servicesor for administrative purposes; or for sale in the ordinary course of business. Such properties are measuredinitially at cost, including transaction costs. Subsequent to initial recognition, investment properties are statedat fair value, which reflects market conditions at the end of the reporting period.Gains or losses arising from changes in the fair values of investment properties are included in profit or lossin the year in which they arise.Any gains or losses on the retirement or disposal of an investment property are recognised in profit or lossin the year of the retirement or disposal.335