Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

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PRINCIPAL ACCOUNTING POLICIES CONTINUED
F Tangible assets and depreciation
Freehold land and buildings, and the building component of leasehold properties are stated at valuation.
Independent valuations are performed every three years on an open market basis and, in the case of the building
component of leasehold properties, on the basis of depreciated replacement cost. Depreciated replacement cost
is used as the most reliable basis of allocating open market value to the building component. In the intervening
years, the Directors review the carrying value of properties and adjustment is made where there has been a
material change. Revaluation surpluses and deficits are dealt with in property revaluation reserves except for
movements on individual properties below depreciated cost which are dealt with in the consolidated profit and
loss account. Grants related to tangible fixed assets are deducted in arriving at the carrying amount of the assets.
Other tangible assets are stated at cost less amounts provided for depreciation.
Depreciation is calculated on the straight-line basis at annual rates estimated to write down the cost or valuation
of each asset over its estimated useful life.The residual value and the useful lives are reviewed at each balance
sheet date.The principal rates in use are as follows:
Freehold land –
Freehold and long leasehold buildings 21 years to 150 years
Properties on leases with less than 20 years over unexpired period of lease
Surface finishes and services 4 years to 30 years
Leasehold improvements 10%
Plant and machinery 6.7% – 10%
Furniture and equipment 10 – 33.3%
No depreciation is provided on freehold land as it is deemed to have an indefinite life.
Where the carrying amount of a tangible asset is greater than its estimated recoverable amount, it is written
down immediately to its recoverable amount.
The profit or loss on disposal of tangible fixed assets is recognized by reference to their carrying amount.
The cost of maintenance and repairs of the buildings is charged to the consolidated profit and loss account
as incurred.
G Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee.All other leases are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the
consolidated profit and loss account on a straight line basis over the period of the lease.When a lease is
terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty
is recognized as an expense in the year in which termination takes place.
H Loan receivables
Loan receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market.They are included in current assets, except for maturities greater than 12 months after the
balance sheet date.These are classified as non-current assets. Loan receivables are carried at amortized cost using
the effective interest method.
MANDARIN ORIENTAL INTERNATIONAL LIMITED