Lenovo 2010 Annual Report Download - page 83

2009/10 Annual Report Lenovo Group Limited
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2009/10 Annual Report Lenovo Group Limited
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2 Significant accounting policies (continued)
(c) Translation of foreign currencies (continued)
(iii) (continued)
On consolidation, exchange differences arising from the translation of the net investment in foreign operations,
and of borrowings and other currency instruments designated as hedges of such investments, are taken to
shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were
recorded in equity are recognized in the income statement 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.
(d) Property, plant and equipment
(i) Buildings, buildings related equipment and leasehold improvements
Buildings comprise mainly factory and office premises. Buildings, buildings related equipment and leasehold
improvements are stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation of buildings and buildings related equipment is calculated to write off their cost to their estimated
residual value on the straight-line basis over the unexpired periods of the leases or their expected useful lives
to the Group ranging from 10 to 50 years whichever is shorter.
Depreciation of leasehold improvements is calculated to write off their cost to their estimated residual value on
the straight-line basis over the unexpired periods of the leases.
(ii) Other property, plant and equipment
Other property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses. Depreciation on other property, plant and equipment is calculated to write off their cost
to their estimated residual value on the straight-line basis over their expected useful lives to the Group. The
principal annual rates used for this purpose are:
Plant and machinery
Tooling equipment 50%
Other machinery 14-20%
Furniture and fixtures 20-25%
Office equipment 20-33%
Motor vehicles 20%
(iii) Carrying value of property, plant and equipment
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet
date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (note 2(g)). The Group has reviewed the residual
values and useful lives of each category of property, plant and equipment. Management considered the current
estimates on residual values and useful lives are more appropriate and consistent within the Group. The change
has resulted in accelerated depreciation/impairment charge of approximately U$5.8 million for the year.
(iv) Gain or loss on disposal of property, plant and equipment
Gain or loss on disposal of a property, plant and equipment is the difference between the net sales proceeds
and the carrying amount of the relevant asset, and is recognized in the income statement.
(v) Subsequent costs
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, 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. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged in the income statement during the financial
period in which they are incurred.