Lenovo 2016 Annual Report Download - page 172

170 Lenovo Group Limited 2015/16 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated
impairment losses.
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.
Freehold land and buildings comprise mainly factories and office premises. All freehold lands are located
outside Hong Kong and are not depreciated. Depreciation of buildings, buildings related equipment and
leasehold improvements is calculated using the straight-line method to allocate their costs to their estimated
residual values 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 on other property, plant and equipment is calculated using the straight-line method to allocate
their costs to their estimated residual values over their estimated useful lives to the Group. The principal
annual rates used for this purpose are:
Plant and machinery
Tooling equipment 50% – 100%
Other machinery 14% – 20%
Furniture and fixtures 20% – 25%
Office equipment 20% – 33%
Motor vehicles 20%
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(h)).
Gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds
and the carrying amount of the relevant asset, and is recognized within “Other operating expenses – net” in
the income statement.
(f) Construction-in-progress
Construction-in-progress represents buildings, plant and machinery and internal use software under
construction and pending installation and is stated at historical cost, less any accumulated impairment losses.
Historical cost comprises all direct and indirect costs of acquisition or construction or installation of buildings,
plant and machinery or internal use software as well as interest expenses and exchange differences on the
related funds borrowed during the construction, installation and testing periods and prior to the date when
the assets were available for use. No depreciation or amortization is provided for on construction-in-progress.
On completion, the carrying values of the buildings, plant and machinery or internal use software are
transferred from construction-in-progress to property, plant and equipment or intangible assets.