Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

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PRINCIPAL ACCOUNTING POLICIES CONTINUED
V Earnings per share
Basic earnings per share are calculated on profit attributable to shareholders and on the weighted average
number of shares in issue during the year.The weighted average number excludes the shares held by the Trustee
under the Senior Executive Share Incentive Schemes. For the purpose of calculating diluted earnings per share,
the weighted average number of shares is adjusted for the number of shares which are deemed to be issued for
no consideration under the Senior Executive Share Incentive Schemes based on the average share price during
the year.
W Critical accounting estimates and assumptions
Estimates and judgements used in preparing the financial statements of the Company are continually evaluated
and are based on historical experience and other factors, including expectations of future events that are believed
to be reasonable.The resulting accounting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant effect on the carrying amount of assets and liabilities are
discussed below:
i) Impairment of assets
The Group tests annually whether goodwill or other assets that have indefinite useful lives have suffered any
impairment. Other assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset exceeds its recoverable amount.The recoverable amount of an asset or a
cash generating unit is determined based on value-in-use calculations prepared on the basis of management’s
assumptions and estimates.
ii) Property valuation
In arriving at the fair value of the properties, the independent valuers have to make assumptions and
economic estimates. Should these assumptions and estimates change, or not be met, the valuation as adopted
in the financial statements will be affected.
iii) Tangible fixed assets and depreciation
Freehold land and buildings, and the building component of owner-occupied leasehold properties are valued
every three years by independent valuers. In the intervening years the Group reviews the carrying values and
adjustment is made where there has been a material change. In arriving at the valuation of land and buildings,
assumptions and economic estimates have to be made.
Management determines the estimated useful lives and related depreciation charges for the Group’s tangible
fixed assets. Management will revise the depreciation charge where useful lives are different to previously
estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been
abandoned or sold.
iv) Income taxes
The Group is subject to income taxes in several jurisdictions. Significant judgement is required in
determining the worldwide provision for income taxes.There are many transactions and calculations for
which the ultimate tax determination is uncertain during the ordinary course of business.Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such differences will
impact the income tax and deferred tax provisions in the period in which such determination is made.
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management’s
expectation of future taxable profit that will be available against which tax losses can be utilized.The
outcome of their actual utilization may be different.
MANDARIN ORIENTAL INTERNATIONAL LIMITED