FRENCKEN GROUP LIMITED
ANNUAL REPORT 2015
61
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (CONT’D)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(h) Property, plant and equipment
(i)
Measurement
All property, plant and equipment other than freehold land are stated at historical cost less accumulated
depreciation and accumulated impairment losses. Freehold land is stated at historical cost less accumulated
impairment losses.
(ii) Component of costs
The cost of an item of property, plant and equipment initially recognised includes its purchase price and
any cost that is directly attributable to bringing the asset to the location and condition necessary for it to
be capable of operating in the manner intended by management. Cost also includes borrowing costs that
are directly attributable to the acquisition, construction or production of a qualifying asset (refer to Note
2(w) on borrowing costs).
(iii) Depreciation
Freehold land and capital work-in-progress are not depreciated. Leasehold land and buildings are
depreciated on a straight line basis of the lease periods of between 60 to 99 years. Depreciation on other
property, plant and equipment is calculated using the straight line method to allocate their depreciable
amounts based on the following annual rates:
Buildings
1% to 3%
Plant, machinery and equipment and piping and electrical installation
10% to 33%
Moulds and toolings
10% to 50%
Office equipment, furniture and fittings and renovation
8% to 100%
Motor vehicles
10% to 30%
The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as
appropriate, at each balance sheet date. The effects of any revision are recognised in the income
statement when the changes arise.
(iv) Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has already been recognised
is added to the carrying amount of the asset only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably. All
other repair and maintenance expenses are recognised as expenses during the financial year in which they
are incurred.
(v) Disposal
On disposal of an item of property, plant and equipment, the difference between the disposal proceeds
and its carrying amount is recognised in the income statement.
(i) Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined on a first-in, first-out
method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct
costs and related production overheads (based on normal operating capacity) but excludes borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and applicable variable selling expenses.
