Annual - Johnson Electric

2. Principal accounting policies (Cont’d)
2.6 FOREIGN CURRENCY TRANSLATION (Cont’d)
NOTES TO THE ACCOUNTS
On consolidation, exchange differences arising from the translation of the net investment in foreign entities,
and of borrowings and other currency instruments designated as hedges of such investments, are taken to
equity holders’ equity. When a foreign operation is sold, such exchange differences are recognised in the
profit and loss account as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate.
2.7 PROPERTIES, PLANT AND EQUIPMENT
Properties, plant and equipment other than investment properties (note 2.8) are stated at cost less accumulated
depreciation and accumulated impairment losses. Freehold land is not amortised. No depreciation is provided
for assets under construction.
Depreciation of other properties, plant and equipment is calculated to write off the cost of assets less accumulated
impairment losses on a straight-line basis over their estimated useful lives on the following bases:
Buildings on leasehold land The unexpired term of lease
Buildings situated on freehold land 25 – 50 years
Plant and machinery, equipment, and tools and moulds 2 – 15 years
Furniture and fixtures, motor vehicles and Computers 3 – 10 years
At each balance sheet date, both internal and external sources of information are considered to assess whether
there is any indication that properties, plant and equipment are impaired. If any such indication exists, the
recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce
the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account. The
assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains or losses arising from the disposal of properties, plant and equipment are determined as the difference
between the net disposal proceeds and the carrying amounts of those assets and are recognised as income or
expense in the profit and loss account.
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