notes to the financial statements - Singapore Technologies ...

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124 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(c)Financial instruments (continued)(iii)Derivative financial instruments and hedge accounting (continued)Cash flow hedges (continued)Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when hedgedfinancial income or financial expense is recognised or when a forecast sale or purchase occurs. When the hedged item is a nonfinancialasset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss. Ifthe hedging instrument expires or is sold, terminated, or exercised without replacement or rollover, or if its designation as a hedge isrevoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is notexpected to occur, the amount is then transferred to profit or loss.Hedge of net investment in foreign operationsThe Group has foreign currency differences arising from the translation of financial liabilities that are designated as net investmenthedges of foreign operations. These hedging instruments are accounted for similarly to cash flow hedges. The currency translationdifferences on the financial liabilities relating to the effective portion of the hedge are recognised in other comprehensive income andpresented in the foreign currency translation reserve in equity, while the ineffective portion of the hedge are recognised immediately inprofit or loss. On the disposal or partial disposal of the foreign operation, the amounts previously recognised in equity are transferredto profit or loss as part of the gain or loss on disposal.Separable embedded derivatives and other derivativesAny gains or losses arising from changes in fair value on derivatives that are not designated in hedging relationships are recognisedimmediately in profit or loss.(d)Property, plant and equipment and depreciation(i)Recognition and measurementAll items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment isrecognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group andthe cost of the item can be measured reliably.Cost includes expenditure that is directly attributable to the acquisition of the asset and capitalised borrowing costs. The cost of selfconstructedassets also includes the cost of material and direct labour, any other costs directly attributable to bringing the assets to aworking condition for their intended use and the costs of dismantling and removing the items and restoring the site on which they arelocated. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchasesof property, plant and equipment.Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder ofthat asset, that component is depreciated separately.
SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011125NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(d)Property, plant and equipment and depreciation (continued)(i)Recognition and measurement (continued)Subsequent to initial measurement, except for certain property, plant and equipment which were subject to a one-time revaluation in1972 (“the 1972 assets”), property, plant and equipment are measured at cost, net of depreciation and any impairment loss. The 1972assets stated at valuation are exempted from conducting a regular frequency of revaluation but are measured net of depreciation, andany impairment loss.The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal withthe carrying amount of property, plant and equipment, and is recognised net within other income in profit or loss.The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it isprobable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably.The carrying amount of the replaced component is derecognised.(ii)DepreciationDepreciation is based on the cost of an asset less its residual value.Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each item of property, plant andequipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certainthat the Group will obtain ownership by the end of the lease term. Property, plant and equipment purchased specifically for projectsare depreciated over the useful life of the class of property, plant and equipment or the duration of the project, whichever is shorter.Construction-in-progress is not depreciated until each stage of development is completed and becomes ready for use. Freehold landis not depreciated.The estimated useful lives for the current period are as follows:Buildings – 15 to 50 yearsLeasehold land – Over the period of the lease of between 5 to 50 yearsImprovements to premises – 3 to 30 yearsWharves and slipways – 20 yearsSyncrolift and floating docks – 15 yearsBoats and barges – 10 yearsPlant and machinery – 5 to 25 yearsProduction tools and equipment – 3 to 15 yearsFurniture, fittings, office equipment and computers – 2 to 5 yearsTransportation equipment and vehicles – 5 yearsAircraft and aircraft engines – 15 to 30 yearsThe residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method andperiod of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefitsembodied in the items of property, plant and equipment. Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset is accounted for by changing the depreciation period or method, as appropriate, andtreated as changes in accounting estimates.
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