Lenovo 2011 Annual Report Download - page 80

2010/11 Annual Report Lenovo Group Limited 83
2 Significant accounting policies (continued)
(c) Translation of foreign currencies (continued)
(iii) The results and financial position of all the group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
– assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
– income and expenses for each income statement are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the rates on the dates of the transactions); and
– all resulting exchange differences are recognized in other comprehensive income.
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 other
comprehensive income. 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 historical cost less accumulated depreciation and accumulated impairment losses.
Depreciation of buildings and buildings related equipment is calculated using the straight-line method to allocate
their cost to their estimated residual value 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 using the straight-line method to allocate their cost to their
estimated residual value over the unexpired periods of the leases.
(ii) Other property, plant and equipment
Other property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated
impairment losses. Depreciation on other property, plant and equipment is calculated using the straight-line
method to allocate their cost to their estimated residual value 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)).
(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.