Sunny Tew

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(c)Property, plant and equipment (Continued)Subsequent expenditure relating to the property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it isprobable that the future economic benefits, in excess of the standard of performance of the asset before the expenditure was made, will flow to the Group and theCompany, and the cost can be reliably measured. Other subsequent expenditure is recognised as an expense during the financial year in which it is incurred.On disposal of an item of property, plant and equipment, the difference between the net disposal proceeds and its carrying amount is taken to the incomestatement.(d)Impairment of non-financial assetsNon-financial assets other than goodwillThe carrying amounts of the Group’s and the Company’s non-financial assets are reviewed at each balance sheet date to determine whether there is any indicationof impairment in value and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such indication exists, theassets’ recoverable amount is estimated.An impairment in value is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unitis the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment in value is recognised in theincome statement unless it reverses a previous revaluation, credited to equity, in which case it is charged to equity.The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its value in use. Recoverable amount is determined forindividual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. The fair value less coststo sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less costsof disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end ofits useful life, discounted at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generatingunit for which the future cash flow estimates have not been adjusted.46 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007