Notes to the Consolidated Financial Statements - Seylan Bank

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278 North Bound > Seylan Bank Annual Report 2011 Notes to the Consolidated Financial Statements Subsequent Costs The cost of replacing part of an item of Property, Plant & Equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within that part will flow to the Bank and its cost can be reliably measured. The carrying amount of the replaced part is derecognised. The costs of day-to-day servicing of Property, Plant & Equipment are recognised in profit or loss as incurred. Derecognition The carrying amount of an item of Property, Plant & Equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of Property, Plant & Equipment is included in Income Statement when the item is derecognised. When replacement costs are recognised in the carrying amount of an item of Property, Plant and Equipment, the remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous cost of inspections is derecognised. Depreciation Depreciation is recognised in profit or loss on straight-line basis over the estimated useful lives of each part of an item of Property & Equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the assets. Leased assets under finance leases are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows: Life Period (Years) Rate (%) Freehold Building 40 2.5 Motor Vehicles 5 20 Computer Equipment 6 16.67 Office Equipment, Furniture & Fittings 3-10 10-33 1/3 The rate of depreciation of freehold buildings was revised with effect from 01st January 1999 (from 4% to 2.5%). Freehold buildings purchased prior to 01st January 1999 have been depreciated over the remaining useful life, based on the revised depreciation rates. Freehold buildings purchased after 01st January 1999 have been depreciated, based on revised rates. Depreciation methods, useful lives and residual values are reassessed at each financial year end and adjusted appropriately. Leasehold building has been depreciated over the useful economic life as the lease period is greater than the useful life of the asset. Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised. Seylan Developments PLC Property, Plant & Equipment are recorded at cost of purchase or valuation together with any incidental expenses thereon. The assets are stated at cost or valuation, less accumulated depreciation which is provided for on the basis specified below.
North Bound > Seylan Bank Annual Report 2011 279 Depreciation of common types of assets within the Group is in line with the Group policy disclosed above. Freehold land is not depreciated. Leasehold land and buildings are depreciated over the remaining unexpired lease period. The depreciation of other assets that are unique to Seylan Developments PLC is provided on the straight-line method at varying rates per annum, based on their useful lives as follows: Useful Life (years) Depreciation Rate(%) Furniture & Fittings 10 10 Equipment 05 20 Interior Décor 02 50 Motor Cars 05 20 Motorcycles 04 25 Tools 03 33 1/3 Cutlery & Crockery 02 50 3.3.7 Intangible Assets 3.3.7.1 Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. The Group measures goodwill as the fair value of consideration transferred less the net amount of identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, the gain is recognised immediately in other income. The Group has elected to the above method for changes in ownership interest in an existing subsidiary as well. 3.3.7.2 Software Software acquired is stated at cost, less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that is available for use since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life of software is as follows: Component Useful Life (years) Seylan Bank PLC 6 Seylan Developments PLC 5 3.3.8 Capital Work-in-Progress Capital work-in-progress is stated at cost. These are expenses of a capital nature directly incurred in the construction of buildings, major plant and machinery and system development, awaiting capitalisation. 3.3.9 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset have been capitalised as part of the cost of the asset in accordance with Sri Lanka Accounting Standard 20 - ‘Borrowing Costs’. Capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are completed.
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Notes to the Consolidated Financial Statements - Seylan Bank

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