DAWOOD LAWRENCEPUR LIMITED - Lahore Stock Exchange

3. SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of these financial statements are set out below. These policies havebeen consistently applied to all the years presented.3.1 Property, plant and equipment and capital work in progress3.1.1Recognition & measurementProperty, plant and equipment, except for free hold land, are stated at cost, less accumulated depreciation andaccumulated impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisitionof the asset. Capital work-in-progress is stated at cost.Disposal of assets is recognized when significant risks and rewards incidental to the ownership have beentransferred to the buyers. Gains and losses on disposal of an item of property, plant and equipment are determinedby comparing the proceeds from disposal with the carrying amount of property, plant and equipment and arerecognized in profit and loss.3.1.2Subsequent costsThe costs of replacing part of an item of property, plant and equipment is recognized in the carrying amount ofthe item, if it is probable that the future economic benefits embodied within the part will flow to the Companyand its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of theday to day servicing of property, plant and equipment are recognized in profit or loss as they are incurred3.1.2 Assets subject to finance leaseLease in terms of which the Company assumes substantially all the risks and rewards of ownership, are classifiedas finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fairvalue and present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted forin accordance with the accounting policy applicable to that asset. Outstanding obligations under the lease lessfinance cost allocated to future periods are shown as a liability.Finance cost under lease agreements are allocated to the periods during the lease term so as to produce a constantperiodic rate of markup on the remaining balance of principal liability for each period.3.1.3 DepreciationDepreciation is charged to profit and loss account applying reducing balance method, whereby the cost of anasset is written off over its estimated useful life. Depreciation on additions is charged from the date on whichasset is available for use and on disposals up to the date of deletion. Freehold land is not depreciated. Theresidual value, depreciation method and the useful lives of each part of property, plant and equipment that issignificant in relation to the total cost of the asset are reviewed, and adjusted if appropriate, at each reportingdate.3.1.4 ImpairmentAssets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are testedannually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. An impairment loss isrecognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverableamount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessingimpairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cashgeneratingunits).